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2015 (10) TMI 1082 - ITAT PUNE

2015 (10) TMI 1082 - ITAT PUNE - TMI - Computation of sales consideration - determination of capital gain - expenditure incurred towards the transfer of property - settlement of claims of tenants/occupants u/s. 48 - Held that:- This is a well settled law that while determining capital gains both additions as well as deduction from the apparent value have to be given effect. In the present case, the assessee has not placed any document on record to substantiate the expenditure incurred towards th .....

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avour of revenue.

Claim of exemption u/s. 54 denied - Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in allowing exemption u/s. 54 in respect of two residential houses - AR of the assessee has stated that expression ‘a residential house’ does not mean one residential house - Held that:- The Tribunal has been consistently taking a view that ‘a residential house’ does not mean one residential house. The expression ‘a residential house’ used in the section 54 d .....

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units. Assessee is eligible to claim benefit of section 54 on both the flats in the same building.- Decided against revenue. - ITA No. 1708/PN/2013 - Dated:- 8-9-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Sunil Ganoo For The Revenue : Shri B.C. Malakar ORDER PER VIKAS AWASTHY, JM : The appeal has been filed by the Revenue impugning the order of Commissioner of Income Tax (Appeals)-II, Pune dated 13-02-2013 for the assessment year 2008-09. 2. In appeal, the Rev .....

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ct in the absence of any cogent evidence. (iii) In allowing exemption u/s. 54 of the Act in respect of two residential houses. 3. The facts of the case as emerging from the documents on record are : The assessee is an HUF. The assessee filed its return of income for the assessment year 2008-09 on 31-03-2009 declaring total income of ₹ 85,810/-. The case of the assessee was selected for scrutiny. Accordingly, notice u/s. 143(2) was issued to the assessee on 10-05-2010. An AIR information in .....

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Ventures on 03-04-2007 with respect to the said property. The Developer in lieu of transfer of development rights together with a covenant to assign, transfer and convey all rights, title, interest and claims by the owners, agreed to pay an amount of ₹ 2,75,00,000/- as consideration in a phased manner starting from 12-12-2006 to 05-07-2007. As per the terms of agreement, the developer took the responsibility and obligation to deal with the tenants/occupants and settle their claims. The sai .....

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was reduced from ₹ 2.75 Crores to ₹ 1.50 Crores. The reason for reducing sale consideration as mentioned in Deed of Rectification was, shifting of liability from vendors to vendee for getting the property vacated from various tenants/occupants and other claimants. In this regard affidavits were also executed immediately after the Registration of Sale Deed. The affidavit dated 10-08-2007 was executed by the Co-owners of the property and affidavit dated 13-09-2007 was executed on behal .....

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erved that while fixing the sale consideration at ₹ 2.75 Crores, the so called encumbrances have already been factored. The execution of Rectification Deed is an afterthought. Further, the assessee invested the amount of capital gain arising from the sale of building, for the purchase of two flats and claimed exemption u/s. 54 of the Act. The Assessing Officer partly accepted the claim and restricted the exemption u/s. 54 to one house having higher value. 4. Aggrieved by the assessment ord .....

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ted the claim of the assessee in respect of deduction u/s. 54 on both the flats. Against these findings of the Commissioner of Income Tax (Appeals), the Revenue is in appeal before the Tribunal. 5. Shri B.C. Malakar representing the Department submitted that a perusal of development agreement and sale deed would clearly show that the sale consideration in respect of property sold by assessee was fixed at ₹ 2.75 Crores. In Clause (3)(a) of the sale deed it has been clearly stated that the a .....

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elled out. In view of the categoric recital in both the documents there is no strength in the argument of the assessee that an amount of ₹ 1.25 Crores has been paid from the agreed sale consideration by the vendee for making payment to the tenants/occupants for vacating the premises. The ld. DR further submitted that the affidavits filed by the assessee stating that the sale consideration has been wrongly mentioned in the sale deed are self serving documents and an afterthought. The affida .....

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y granted by Commissioner of Income Tax (Appeals). The ld. DR vehemently supported the assessment order and prayed for setting aside the impugned order. 6. Shri Sunil Ganoo appearing on behalf of the assessee submitted that initially the consideration for sale of property was fixed at ₹ 2.75 Crores. It is an undisputed fact that the property in question was occupied by tenants/occupants and there was litigation going on between the assessee and various tenants/occupants in Civil Courts at .....

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the bank and were returned to the purchasers. The assessee executed an affidavit on 10-02-2007 for reducing the sale consideration by ₹ 1.25 Crores and transferring the liability to get the premises vacated to the developer/purchaser i.e. M/s. Chandan Ventures. Deed of rectification was also executed between the assessee and purchaser which was registered on 08-12-2010. The ld. AR of the assessee submitted that it is a well settled law that the rectification deed relates back to the date o .....

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dia and Another, 286 ITR 428 (Bom); and iv. Hira Lal Ram Dayal Vs. CIT, 122 ITR 461 (P&H). 6.1 In respect of exemption u/s. 54 claimed by the assessee, the ld. AR submitted that from the capital gain arising from the sale of building, two residential flats were purchased by the assessee in the same building. The Commissioner of Income Tax (Appeals) has given categoric findings that the two flats purchased by the assessee i.e. Flat No. 103 in Wing B1 and 107 in Wing B2 are in the same buildin .....

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the Revenue and sustaining the findings of Commissioner of Income Tax (Appeals). 7. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also considered the documents that have been placed on record by the assessee in the form of paper book, as well as, the decisions on which the ld. AR has placed reliance. To understand that factual matrix of the case, it is essential to first see the sequence of events. The sa .....

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deed. 08-12-2010 Registered Deed of Rectification of Sale Deed. 8. It is an undisputed fact that the assessee had initially entered into development agreement with M/s. Chandan Ventures in respect of property situated at Shivajinagar, Pune. The developer in consideration of transfer of exclusive development rights relating to the said property and transfer of all other rights, titles, interest and claims by the assessee had agreed to pay a consideration of ₹ 2.75 Crores. A development agre .....

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unt (Rs.) Particulars 0,05,00,000/- Paid by duly drawn crossed cheque No. 240460, dated 12.12.2006, on the Pune Peoples Co-operative Bank Ltd., Market yard Branch, Pune: 411037, to and in favuor of the Owner No.1, receipt of the amount whereof is hereby acknowledged by the Owner No.1 0,05,00,000/- Paid by duly drawn crossed cheque No. 240505, dated 02.04.2007, on the Pune Peoples Co-operative Bank Ltd., Market yard Branch, Pune: 411037, to and in favuor of the Owner No.1, receipt of the amount w .....

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reof is hereby acknowledged by the Owner No.1. 1,25,00,000/- Payable by the Purchaser to and in favour of the Vendors, on or before 19.08.2007. 25,00,000/- Payable by the Purchaser to and in favour of the Vendors, within 3 months. 2,75,00,000/- Total (Two crore Seventy Five lakh only) 9. Subsequently, a registered Deed of Rectification of Sale Deed was executed on 08-12-2010 whereby the sale consideration was reduced to ₹ 1.50 Crores, as the assessee transferred the liability to get the pr .....

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settle with the tenants and occupants of the building. A specific clause to this effect was incorporated in the development agreement. The relevant extract of Clause 5(g) of the development agreement is reproduced as under: 5 (g) however, the entire cost and expenses, responsibilities and obligations, liabilities and duties of development of the said Property, the construction of the building/s thereon, and dealing or transacting with the tenants listed in ANNEXURE-II herein, so also all the mat .....

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occupied by the occupants, claiming to be tenants or otherwise, unto and in favour of the Purchaser, the particularly or which have been separately furnished by the Vendors to the Purchaser. 10. A bare look at the sequence of events show that the time lag between the execution of registered development agreement and execution of sale deed was 4 months. In both these documents the consideration has been fixed at ₹ 2.75 Crores. Thus, it is evident that it was a conscious decision on the par .....

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al possession of the property to the purchaser at the time of execution of sale deed. 11. The ld. AR of the assessee during the course of submissions referred to the affidavit executed by the assessee and other co-owners on 10-08-2007. As per the contentions of the ld. AR, after the execution of sale deed the owners realized that they would not be able to get the premises vacated and thus, they agreed to reduce the sale consideration from ₹ 2.75 Crores to ₹ 1.50 Crores and made allow .....

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nd other co-owners was purchased on August 9, 2007 i.e. a day prior to the execution of sale deed. We are unable to understand as to how the assessee would know that some error would be committed in the execution of sale deed which has to be rectified immediately thereafter. As has been observed earlier, the assessee and other co-owners had time of 4 months between the date of execution of development agreement and the sale deed to think over the manner in which premises has to be vacated from t .....

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ectify it. Whereas, the purchaser realized the mistake after more than a month and thereafter execute affidavit on 13-09-2007 on similar lines for reducing the sale consideration in lieu of taking the responsibility to get the premises vacated. After more than 3 years of the execution of the sale deed the parties to the sale agreement execute registered Rectification Deed on 08-12-2010 to reduce the sale consideration from ₹ 2.75 Crores to ₹ 1.50 Crores and allow ₹ 1.25 Crores .....

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y evidence to show that the amount of ₹ 1.25 Crores that has been reduced from the sale consideration was at all paid to any of the tenants/occupants of the building. Except for self serving documents, there is no other document on record that can substantiate the contentions of the assessee. Mere fact that the Rectification Deed is registered it would not mean that its contents are sacrosanct and have to be taken on face value. 13.1 The ld. AR of the assessee in support of his submissions .....

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first appeal, the findings of Assessing Officer were confirmed. On further appeal, the Tribunal held that the registered sale deed was a sacrosanct document and refused to look into other material produced by the assessee to substantiate its claim that the sale transaction was a sham one. The matter travelled to the Hon'ble High Court, the Hon'ble High Court reversed the findings of the Tribunal by observing as under: It is no doubt true that the evidentiary value has to be attached to a .....

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in that case, the Tribunal has to come to the conclusion that there was no capital gain. As is apparent from the observations made in the order of the Tribunal, the Tribunal was under the misapprehension that the registered sale deed was final and, therefore, refused to look into the other material produced by the assessee with a view to prove its case that the sale transaction was a sham transaction. It is, however, a different matter that the Tribunal may not feel convinced that the sale trans .....

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n made by the assessee to show that the amount of ₹ 1.25 Crores that has been reduced from the sale consideration has actually been paid to the tenants/occupants of the building. 13.2 The ld. AR of the assessee in support of his submissions has further placed reliance on the decision of Hon'ble Supreme Court of India rendered in the case of Sunil Kumar Roy Vs. M/s. Bhowra Kankanee Collieries Ltd. & Ors. (supra). In the said case, the Hon'ble Apex Court held that any document wh .....

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t has to be registered. In the present case, no doubt the amendment to sale deed has been made by execution of registered Rectification Deed, however, it is the surrounding circumstances that raises an eye of suspicion on the motive of creating such document. 13.3 The ld. AR has also placed reliance on the decision of Hon'ble Bombay High Court rendered in the case of Sushila Shantilal Jhaveri Vs. Union of India and Another (supra). In the said case the Hon'ble High Court held that the su .....

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mmissioner to reconsider the application filed and the submissions made by the assessee on the merits in the light of the subsequent events following the principles of natural justice and keeping all rival contentions open. We find that the ratio laid down by the Hon'ble Bombay High Court in the above said case has been followed in the present case. The subsequent events which have taken place after the execution of sale deed have been duly considered. Since, the subsequent documents execute .....

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llip;….the Legislature, while using the expression "full value of consideration", in our view, has contemplated both additions to as well as deductions from the apparent value. What it means is the real and effective consideration. That apart, so far as clause (i) of section 48 is concerned, we find that the expression used by the Legislature in its wisdom is wider than the expression "for the transfer". The expression used is "the expenditure incurred wholly and .....

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effected, the amount paid for removing that encumbrance will fall under clause (i). Accordingly, we agree with the Tribunal that the sale consideration requires to be reduced by the amount of compensation. The first question is, therefore, answered in the affirmative and in favour of the assessee. This is a well settled law that while determining capital gains both additions as well as deduction from the apparent value have to be given effect. In the present case, the assessee has not placed an .....

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aser and not that of the assessee or the other co-owners. 14. Thus, in view of our above detailed findings the ground Nos. 1 to 3 raised by the Revenue in appeal are allowed. 15. The second issue raised by the Revenue in appeal is with regard to claim of exemption u/s. 54 of the Act. The Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in allowing exemption u/s. 54 in respect of two residential houses. The ld. DR has submitted that the expression used in section 54 is a .....

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arsing Gopal Patil Vs. Asst. Commissioner of Income in ITA No. 1544/PN/2012 for the assessment year 2008-09 decided on 31-05-2013. We find that this issue has been dealt by the Hon'ble High Courts and various Benches of the Tribunal. The expression a residential house used in the section 54 does not restrict the exemption for investment in one residential house. This issue has been decided by the Co-ordinate Bench of Tribunal in the case of Shri Narsing Gopal Patil Vs. Asst. Commissioner of .....

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