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M/s Sundaram Theatre Versus The Asstt. Commissioner of Income-Tax And Vica-Versa

2016 (2) TMI 661 - ITAT CHENNAI

Disallowance of commission payment on sale of property - Held that:- In this case, the claim of the assessee is that payment of ₹ 3,12,000/- towards brokerage on sale of M/s Sundaram Theatre. The said payment has been made to four persons viz. (i)R. Muthu Kamatchi, (ii)K. Ganesan, (iii)K Muthiah and (iv) M. Selvam. The Department summoned them by issuing notice u/s 131 of the Act. However, all the letters issued to the above persons returned unserved by the postal authorities with an endor .....

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nion, the assessee has not discharged the initial burden cast upon it first to prove the genuineness of payment. Therefore, the CIT(A) is justified in disallowing the payment of brokerage to three persons. Accordingly, we have no hesitation to confirm the order of the CIT(A) on this issue.

Disallowance of payment being the amount paid for enabling the lessee to vacate the premises and handover vacant possession to the buyer of the property - Held that:- As rightly pointed out by the l .....

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assessee in respect of payment of electricity dues to the Electricity Board - Held that:- In the present case, in respect of giving repeated opportunity to the assessee by the lower authorities to place necessary evidence for bearing that expenditure by the assessee itself, the assessee failed and at all times given a very evasive reply. In such circumstances, we are not in a position to allow the claim of the assessee by following the above judgment. This ground of the assessee is also rejecte .....

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goodwill and the claim of the assessee has to be considered on examination of records relating to the payment of goodwill. Accordingly, this ground is remitted back to the file of the Assessing Officer for reconsideration of the issue of payment towards goodwill and decide in accordance with law after giving a reasonable opportunity of hearing to the assessee. - ITA No. 2156/Mds/2012, ITA No. 2187/Mds/2012 - Dated:- 11-12-2015 - Chandra Poojari, AM And G. Pavan Kumar, JM For the Appellant : Shri .....

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perty for a consideration of ₹ 1.56 crores and said to be paid brokerage of ₹ 3,12,000/-. The assessee has not produced any details regarding the name and address of the person to whom the brokerage has been paid. In the absence of proof of payment, the Assessing Officer disallowed the entire brokerage of ₹ 3,12,000/-. On appeal before the CIT(A), the assessee stated that the brokerage was paid to four persons viz. (i)R. Muthu Kamatchi, (ii)K. Ganesan, (iii)K Muthiah and (iv) M .....

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. Thereafter, an inspector of the Department was deputed to verify whether the persons concerned reside in the given address. It was revealed that no such persons or address were existed. In view of the above, the existence of the persons and claim of the expenses were found to be non-genuine by the Assessing Officer. Later, a copy of the remand report was forwarded to the assessee by the CIT(A) vide letter dated 23.1.2012. Once again, the assessee vide letter dated Nil submitted on 22.2.2012 re .....

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claim, summon u/s 131 was issued to the witness and statement u/s 131(1)(b) was recorded from Shri K. Ganesan. Initially he was questioned about the non-availability at Door No.10, Kumaran Street, Sadhasivam Nagar, Madurai, during the enquiry made on 29.5.2011, Shri Ganesan replied that during the year 2002-03, he resided in No.10, Kumaran Street, Sadasivam Nagar, Madurai. Later on, he shifted his residence to 5/447 Kumaran Street, Sadasiva Nagar Madurai and then shifted to 5/1/779, Maraimalai A .....

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ax. He replied that he was not assessed to tax as his income was below taxable limit. On the basis of the above, the CIT(A) allowed the claim of ₹ 80,000/- towards brokerage payment and disallowed the balance amount of ₹ 2,32,000/-. Against this, the assessee is in appeal before us. 4. The ld. Authorized Representative submitted that the initial burden cast upon the assessee was discharged by the assessee and the enquiry was made after a long time subsequent to the payment of brokera .....

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than Shri Ganesan who has confirmed the receipt of ₹ 80,000/- as brokerage. Considering the factual position, the CIT(A) is justified in allowing the payment of ₹ 80,000/- as brokerage and disallowing the balance payment. He submitted that no interference in the order of the CIT(A) is called for. 6. We have considered the rival submissions and perused the material available on record. In this case, the claim of the assessee is that payment of ₹ 3,12,000/- towards brokerage on .....

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allowed by the Department. The other three persons cannot be traced and there is no iota of evidence to show that payments towards brokerage were made to them. The assessee is not able to place any material to show that the other three persons actually rendered service to the assessee in the sale of Sundaram Theatre. Being so, in our opinion, the assessee has not discharged the initial burden cast upon it first to prove the genuineness of payment. Therefore, the CIT(A) is justified in disallowi .....

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e property. Before the Assessing Officer, the assessee filed a copy of affidavit filed before the court saying that the amount of ₹ 10 lakhs is to be paid to the lessee for handing over possession of the property and it has claimed as cost of transfer u/s 48 of the Act. The Assessing Officer disallowed the same. On appeal, the CIT(A) observed that there was no clause in the sale deed to the effect that a sum of ₹ 10 lakhs was to be paid by the buyer to the lessee Shri Rajan on behalf .....

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for peaceful handing over the possession of the property the assessee was forced to pay ₹ 10 lakhs to Shri Rajan and it should be considered as a cost of transfer to be allowed as deduction while computing the capital gains. 10. On the other hand, the ld. DR submitted that there is no evidence of payment of ₹ 10 lakhs to the lessee, Shri Rajan. Further there is also no clause in the sale deed for payment of ₹ 10 lakhs for the purpose of vacating the premises. Being so, it canno .....

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ith such transfer (ii) The cost of acquisition of the asset and the cost of any improvement thereto. The contention of the assessee's representative is that the payment to Shri Rajan is an expenditure incurred wholly and exclusively in connection with the transfer of capital asset. However, as rightly pointed out by the ld. DR, the assessee is not able to point out any specific condition in the sale deed of the property to suggest the payment of ₹ 10 lakhs to Shri Rajan for vacating an .....

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377; 12.50 lakhs towards electricity charges to the Electricity Board out of the sale consideration received on sale of property, Sundaram Theatre. The same was disallowed by the lower authorities. Before the CIT(A), the assessee stated that a sum of ₹ 24 lakhs was withheld by the buyer towards probable dues. The assessee filed a copy of the court order. As per the court order, Shri Sheik Dawood has paid ₹ 10 lakhs and for the balance amount of ₹ 8,60,000/- the court has direct .....

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ven by the Department, he did not appear. Based on the material evidence on the file, the CIT(A) came to the conclusion that there was no evidence to suggest that ₹ 24 lakhs was withheld by Shri Sheik Dawood. Later, he called for the remand report from the Assessing Officer. The Assessing Officer submitted his report to the CIT(A) vide his letter dated 22.6.2012 as under: "Payment of electricity dues: To verify the above claim letter dated 2.4.2002 was addressed to the bank manager, d .....

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dated 7.4.2011 to verify the claim of assessee's representative that ₹ 24,00,000/- was withheld from the full sale consideration of ₹ 1,56,00,000/- towards probable dues like EB payment. Since full sale value has been considered for capital gain working purpose, assessee claimed that its liabilities towards payment of EB dues as per court order should also be considered for arriving at correct taxable income. The buyer of the property Mr Shiek Dawood was summoned on 16.8.2011 th .....

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e notices on both the occasions, failed to appear. Despite the telephonic reminders given by the inspector, he did not appear. Based on the material available in the file, there is no evidence to suggest that ₹ 24,00,000/- was withheld by Mr. Sheik Dawood. The Commissioner of Income Tax (Appeals) again directed the Assessing Officer through letter dated 22.2.2012 to personally examine Mr. Sheikh Dawood on the issues - status of deposit with Central Bank of India. Summons u/s 131 dated 21.3 .....

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id to the assessee, the entire sale consideration has to be considered for computation of capital gains. It was stated that the payment of ₹ 12.50 lakhs was paid to Shri Sheik Dawood towards electricity charges. However, there was no evidence that the assessee has not received the full consideration of ₹ 1.56 crores. Therefore, the CIT(A) disallowed the claim of the assessee. Against this the assessee is in appeal before us. 15. The ld. A.R reiterated that the amount of ₹ 24 la .....

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e clause in the sale deed which authorizes Shri Sheik Dawood to withheld an amount of ₹ 12.50 lakhs towards payment of electricity charges to the electricity board. There may be outstanding amount towards electricity charges on the said property but there is no clause specifying that the assessee has to pay that dues. In such circumstances, it is not possible to hold that the assessee has not received full value of sale consideration from the purchaser. Being so, we are not in a position t .....

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capital gain, the amount reimbursed by purchaser to assessee towards such claim constituted part of sale consideration but deductible while computing capital gains. We are fully in agreement with the above decision of the Jurisdictional High Court. If a precondition is in the sale deed to bear any expenditure relating to the transfer or any outstanding amount which was annexed to the property then payment of that amount has to be considered as cost incurred in relation to transfer of the said pr .....

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to the Revenue's appeal I.T.A.No. 2187/ Mds/2012, the Revenue raised a ground that the CIT(A) erred in granting indexation claimed by the assessee on the goodwill while determining the capital gains. 21. Facts of this issue are that the assessee stated that goodwill has been acquired during the year 1985-86 for ₹ 9 lakhs and cost of indexation was worked out at ₹ 30,18,045/-. The Assessing Officer was of the opinion that goodwill being self-generated asset, there cannot be any i .....

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