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2016 (2) TMI 507 - ITAT DELHI

2016 (2) TMI 507 - ITAT DELHI - TMI - Disallowance of exemption of Capital Gains u/s 54 - exemption with respect to advance received as per the agreement to sell - sale deed was executed during the subsequent year - Held that:- We reject the conclusion of the ld. CIT (A) that agreement to sell is a mere start of the sale and cannot become the act of sale for section 54 of the Act. Moreover, it needs to be appreciated here that a hyper technical approach cannot be adopted to an incentive granting .....

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on‘ble Apex Court in Sanjeev lal & Anr. Vs. CIT & Anr. (2014 (7) TMI 99 - SUPREME COURT ) has held as above. - Decided in favour of assessee

Exemption claimed u/s 54 in respect of cost of construction of the new house in finishing the house - Held that:- Having regard to the evidence and payment having been made to discharge the said bill, in the absence of any evidence to the contrary, there is no justification to restrict the claim to ₹ 4 lakhs on estimate basis. In Saleem Faz .....

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lso relied on the Order of the Ahmedabad Bench in the case of Shri Srinivasa R. Desai [2014 (1) TMI 883 - ITAT AHMEDABAD]. The assessee after purchasing the flat has incurred further cost which are in the nature of cost of construction and it has been held that the cost so incurred will form an integral part of the qualifying investment under section 54 of the Act. In the light of the aforesaid case laws, the claim of the assessee stands allowed and we order accordingly. - Decided in favour of a .....

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passed by the Hon'ble CIT(A) is bad in law, wrong on facts and against the principles of natural justice. 2 (a) The Ld CIT(A) has erred in confirming the disallowance of exemption of Capital Gains u/s 54 of the Income Tax Act made by the Ld. AO amounting to ₹ 20,40,600/- claimed by the appellant in respect of investment in new residential house on 04.08.2005 which is within one year of sale of her share in residential house on 16.04.2006 instead considering the date of sale as 05.09.20 .....

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cs was paid by Sh. Ramesh Chand Kalra to the applicant Smt. Shashi Gupta who were nominees of Sh. Ramesh Chand Kalra pursuant to agreement dt.16.4.2006. 3 (a) The Ld CIT(A) has erred in concluding that the exemption u/s 54 in respect of amount of ₹ 933950/- representing cost of construction of the new house in finishing the house cannot be allowed as the house was purchased beyond the period of one year before the sale of the old house." 3. Ground No.1 is not pressed so dismissed. 4. .....

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8377; 20,40,600/- under section 54 of the Act on the ground that she has purchased a new house property at Ramprastha, Ghaziabad. The AO, however, observed that the said property which was purchased was on 04.10.2005 i.e. before a period of one year, which is before the date of sale of her share in the residential property i.e. 05.09.2005. The assessee in respect of the above observation of the AO contended that she had entered into an agreement to sell dated 06.04.2006 and, therefore, the claim .....

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to meet the valid objections raised by the AO. 6. Before us, the ld. AR filed a Synopsis wherein he has submitted as under :- "(a) The assessee namely-Shashi Gupta was married in the reputed family of Shri Om Prakash Gupta in the year 05.02.1972 with one of Shri Narendra Prakash Gupta who had died on 27.06.1998. (b) Smt. Kiran Devi w/o Shri Om Prakash Gupta purchased property at Plot No. 30, Block-B, Lok Sewak Co-operative House Building Society Ltd at Village Begumpur (Geetanjali Enclave) .....

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Late Smt. Kiran Devi the legal heirs relinquished/released all their rights, titles, interests, claims and share in the said property in favour of Shri Om Prakash Gupta, Shri Mahendra Prakash Gupta, Shri Narendra Prakash Gupta, Shri Shiv Prakash Gupta and Shri Ram Prakash Gupta the other legal heirs on 05.02.1990. There after the said property mutated, transferred and substituted in join name of Shri Om Prash Gupta, Shri Mahendra Prakash Gupta, Shri Narendra Prakash Gupta, Shri Shiv Prakash Gupt .....

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upta, Smt Suman Gupta (Daughters) and Smt. Shashi Gupta (Daughter-in law [wife of predeceased son Shri Narendra Prakash Gupta)], Mr. Shailendra Gupta, Mr. Nitin Gupta (Grand-Sons) and Ms. Seema Gupta (Grand-Daughter) the legal heirs. (e) Mr. Shailendra Gupta, Mr. Nitin Gupta, and Ms. Seema Gupta relinquished/released all their rights, titles, interests, claims and shares in the said property in favour of their mother Smt. Shashi Gupta on 29.03.2000. (f) Smt Pushpa Aggarwal, Smt Phool Gupta, Smt .....

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ll the four Co-owner having equal share agreed to sell the said property to Shri Ramesh Chandra Kalra s/o Shri K. L. Kalra, B-49, Shivalik Colony, New Delhi and Shri Ashish Rajpal s/o Shri G. D. Rajpal, B-1/53, Malviya Nagar, New Delhi-17 for a sum of ₹ 1.98 Crores and as per the terms and conditions mentioned in agreement dated 16.04.2006 copy of the same at page 77 to 79 of the paper Book. The relevant para of the agreement is reproduced here as under:- "WHEREAS the second party pai .....

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by Sh. Ramesh Chander Kalra in favour of Sh. Shiv Prakash Gupta. Rs.3,50,000/- vide cheque No.759208 and dated 16.01.2005 drawn on ICICI Bank, Saket, New Delhi by Sh. Ramesh Chander Kalra, in favour of Sh. Mahendra Prakash Gupta. Rs.3,50,000/- vide cheque No.759209 and dated 16.01.2005 drawn on ICICI Bank, Saket, New Delhi, by Sh. Ramesh Chander Kalra, in favour of Sh. Ram Prakash Gupta. And whereas the balance sale consideration has been agreed to be paid by the second party to the first party .....

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kash Gupta Rs.46 lacs 3. Shri Ram Prakash Gupta Rs.46 lacs 4. Smt. Shashi Gupta Rs.29.5 lacs 2. That the sale transaction shall be concluded on/or before 01.10.06 by that time, second party shall pay the remaining consideration amount of ₹ 1 Crores 67 Lacs 50 thousands to the first party and the first party shall simultaneously execute the sale deed with respect to the said property in favour of the second party or his nominee(s) and shall also handover the vacant and peaceful % balance po .....

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ly dispute and the balance consideration could not be received. The assessee had purchased a new residential house property B- 195, Ramprastha Surya Nagar, Gaziabad for ₹ 20,00,000/- + 40600/- vide registered deed dated 04.08.2005. Therefore the money received from Sh. Ramesh Chandra Kalra as part sale consideration was invested in purchase of new house property B-195, Ramprasta Surya Nagar, Gaziabad. (k) As already mentioned above, vide agreement dated 16.04.2006 all the family member (Fo .....

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alance amount of ₹ 29,50,000/-will be paid on or before 6 months from 16.04.2006 and/or on registered deed in favour of the Sh. Ramesh Chander Kalra and Sh Ashish Rajpal or their nominee(s) whichever is earlier. (m) On 4.09.2006 the assessee had received the balance amount of ₹ 29,50,000/- i.e. ₹ 19,50,000/- vide pay orders No.039172 dated 04.09.2006 and ₹ 10,00,000/- vide bankers cheque No. 394334 dated 04.09.2006 and signed the registered deed on S.09 2006 which is regi .....

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oint holders of the property B-30, Geetanjali Enclave, New Delhi and Sh. Ramesh Chander Kalra and Sh Ashish Rajpal the purchaser of the property. In this agreement and Mr. Ramesh Chandra Kalra assured the assessee to pay balance amount for her share in the property ie the effective date of sale of share in the property of the assessee. (iii) Thirdly, the registered sale deed was signed on 05.09.2006 and the assessee has received the balance sale consideration amount of ₹ 29,50,000/-. There .....

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rty B-195, Ramprastha Surya Nagar, Ghazibad for ₹ 20,40,600/- vide registered deed dated 04.08.2005. However, the above purchase of residential house is held to be not entitled to exemption under section 54 of the Act, on the ground that such purchase of property at Ghaziabad happened one year prior to the sale of her share in the residential property at B-30, Geetanjali Enclave, New Delhi - 110 030. The assessee, however, supported the claim on the basis of an agreement for sale dated 16. .....

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pparent that substantial consideration was received by the assessee even 15 months prior to the agreement of sale dated 06.04.2006. Moreover, the agreement dated 16.04.2006 is signed by all the four co-owners and the Vendee, Shri Ramesh Kalra and also is duly witnessed. The agreement further specifically states as under :- "And whereas the balance sale consideration has been agreed to be paid by the second party to the first party. Time to time or at the time of sale transaction within six .....

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Gupta ₹ 46 Lacs 4. Smt. Shashi Gupta ₹ 29.5 Lacs 2. That the sale transaction shall be concluded on or before 01.10.06 By that time, second party shall pay the remaining consideration amount of Rs.l Crores 67 Lacs 50 thousands to the first party and the first party shall simultaneously execute the sale deed with respect to the property in favour of the second party or his nominee(s) and shall also handover the vacant and peaceful ¾ balance possession of the said property to t .....

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e possession regarding 1/4th share of the assessee has been taken possession or not, thus the factum that such an arrangement has any meaning or not is irrelevant. It was for the purchaser to satisfy and having so accepted by the vendee, it cannot be suggested validly that the possession has not been handed over, more particularly when in an affidavit the Vendee has specifically affirmed as under :- "I. R.C. Kalra S/o K.L. Kalra R/o B-49, Shivalik Colony, Malviya Nagar, New Delhi do hereby .....

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ent." The observation of CIT (A) that in the sale deed, the possession of the property was taken on 05.09.2006 cannot be seen in isolation because in the agreement to sale on 16.04.2006 suggested by the affidavit of the Vendee clearly buttress the claim of the assessee, that she has handed over her share of the property to Vendee. Having regard to the above factual position, we are of the opinion that possession of the property stood handed over on 16.04.2006. Furthermore on facts of the ca .....

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such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the t .....

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t; is as under: "2(47) "transfer", in relation to a capital asset, includes,- .... (ii) the extinguishment of any rights therein; or………" Now in the light of definition of "transfer" as defined under Section 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset." Having regard to the above binding precedent, we .....

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he ground that the sale is in September 2006. According to the Revenue, had the sale deed be executed in August 2006, everything will be in order. We do not subscribe to such a pedantic application of the incentive provision. It was on account of such an approach, the Hon ble Apex Court in Sanjeev lal & Anr. Vs. CIT & Anr. (supra) has held as above. Thus, in view of the aforesaid, we allow the ground raised by the assessee. 9. Ground No.3 relates to exemption claimed by the assessee u/s .....

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t of investment of ₹ 9,33,950/- should be given. Since entitlement of exemption u/s 54 has already been denied; this ground of appeal is discussed on merits only as an alternative scenario; in case, benefit of section 54 is allowed to the assessee for any reason. The A.O. has mentioned the nature of work done in the assessment order itself on page 5. I find that many aspects for example, marble flooring, part of wood work, POP work, part of wall finishing etc. may not be treated as "n .....

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us assessee will get a part relief. However, since, as of now, no exemption u/s 54 is available; this ground of appeal is treated as rejected." 11. We have heard both the parties and perused the material. We have already held herein above while disposing off ground no.2 that the assessee is entitled to exemption under section 54 of the Act in respect to purchase of property at Ghaziabad . Thus, all expenses incurred for purchase of the house and renovation of the house to make it habitable .....

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ny, Ram Prastha Colony, Ghaziabad stand rejected. However, its allowabllity also needs to be discussed, independently from the observation made above in Para 2.4. The assessee has claimed ₹ 9,33,950/- as cost of repair & renovation, as per Bill dated 16.04.2006 of M/s Madhukar Promoters & Developers Pvt. Ltd. The perusal of the bill 16.04.2009 show that the payments have been made for the work performed as under:- S.No. Description Amount (in Rs.) Finishing work at Ground Floor &am .....

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