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2016 (5) TMI 767 - ITAT HYDERABAD

2016 (5) TMI 767 - ITAT HYDERABAD - TMI - Sale consideration received - ‘Income from Other Sources’ instead of ‘Income from Long Term Capital Gains’ - deductions claimed u/s. 54EC and 54F denied - Held that:- Assessee being the 4th plaintiff, did not claim any ownership of the property. Therefore, we are of the opinion that both the authorities are correct in rejecting assessee as owner of the property. Even the rectification deed placed on record no where confers any ownership on assessee excep .....

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extent.

Therefore, since the ownership on the property is not established to be that of assessee, either at 1/4th or fully, we are of the opinion that the authorities are justified in treating the consideration received by assessee as ‘income from other sources’ and denying the deductions claimed u/s. 54EC and 54F which are applicable only when there is capital gains. - Decided against assessee - I.T.A. No. 1424/HYD/2015 - Dated:- 7-4-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND .....

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ead of Income from Long Term Capital Gains . 2. Briefly stated, assessee is an individual and has offered capital gains claiming deduction u/s. 54EC & 54F of the Income Tax Act [Act]. The assessment u/s. 143(3) was completed on 29-12-2011 by accepting the returned income of ₹ 2,57,230/-. Ld. CIT(A)-4, Hyderabad noticed that the said order u/s. 143(3) is erroneous and prejudicial to the interest of Revenue and accordingly initiated the proceedings u/s. 263 and set aside the assessment o .....

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r, this property was registered by Smt. K. Janamma in the names of Shri N. Chandra Sekhar Rao, R. Madhusudhan and N.R. Murali Krishna vide the registered deed dt. 27-03-1995. Subsequently, those three parties along with assessee have entered into an agreement of development with M/s. Team One Builders, a partnership firm and accordingly received an amount of ₹ 1,60,00,000/- by way of cheque ie ₹ 40 lakhs each and constructed area to an extent of ₹ 6050 sq. ft., for each one of .....

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ccordingly invoked the proceedings u/s. 263 and set aside the assessment with the following observations: 3.2 Thus, it can be seen from the above that the assessee is not a owner of the property under consideration but he received ₹ 1,00,00,000/- from M/s. Team One Builders as per the receipt issued by the assessee to M/s. Team One Builders, along with his three brothers, which is available on record. Since the assessee is not the owner of the property as per the sale deed, the amount of & .....

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d ₹ 40 Lakhs as per his own admission, is entitled to a constructed area of worth of ₹ 60 lakhs, this receipt of money and constructed areas does not pre-suppose that assessee was having interest/title over the property along with his brothers. There may be umpteen reasons for payment of money and for giving constructed area to assessee by the developer. But the fact remains that the assessee received ₹ 1 crore from the developer though he is not owner of the property. In the l .....

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idering assessee s submissions was of the view that assessee being not a owner of the property, cannot claim capital gains and further exemptions thereon and treated the amount received as income from other sources . Thus, entire ₹ 1 Crore stated to have been received by assessee was brought to tax as income from other sources . 4. In the appeal before the Ld. CIT(A), assessee submitted as under: "The assessee, Mr. N.R. Krishna Murthy s/o Sri Late N.Rajaiah, N. Chandrasekhar Rao s/o S .....

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y S/o Sri Late N. Rajaiah on 4th day of July 1994. At the outset we would like to certify the title rights of the assessee on the property in connection with the doubt expressed by Hon'ble CIT-IV. That the assessee Mr. N.RKrishna Murthy s/o Sri Late N. Rajaiah, N. Chandrasekhar Rao s/o Sri Late N. Rajaiah, Sri R Madhusudan s/p Sri Late N. RAjaiah, Sri N.RMurali Krishna s/o Sri Late N. Rajaiah are four brothers owners of the propertlj(only a propertq) of 2.07 guntas situated at forming part o .....

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establish the ownership of the assessee on the property. We are herewith enclosing a copy of order passed by the Hon'ble Court of Addl.Dist & Session Judge, R.R.Dist. In case of N.R. Krishna Murthy has not considered as plaintiff, it may become contempt of the court. Subsequently, Kotha janamma registered the same land by executing the "sale deed" on 27th day of March 1995 to NChandrasekhar Rao s/o Sri Late N Rajaiah, Sri R. Madhusudan sip Sri Late N Rajaiah, Sri N.R.Murali Kri .....

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linquished their rights in favour of M/s Team One Builders and agreed to receive ₹ 4crores as consideration. As a part of the said settlement an amount of ₹ 1,60,00,000/- paid by M/s Team One Builders by way by Cheque No. 116226, 116227, 116228, 116229 each of ₹ 40,00,000/received by all the four brothers from INC Vyshya Bank Ltd., Himayatnagar Branch, Hyderabad. All the four brothers were having interest/title in the said property through sale agreement dated 04-07-1994 and sa .....

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laimed the exemption u/e 54EC & 54F. The observation made by your good office "that the entire capital gain of ₹ 92,40,479/arising out of the transaction is assessable in assessee's hands" is not correct as Mr. NR. Krishna Murthy's share is only 1/4tlt of the total transaction of ₹ 4 crares i.e., ₹ 1 crore only (Rs. 40,00,000/- by cash + ₹ 60,00,000/- in constructed area 6,050 sq. feet). The assessee claimed the total capital gain on the receipt of & .....

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side the AO is accepting undisputedly that the assessee has received a consideration of ₹ 1 crore and other side not accepting the assessee as a owner of the property which is totally wrong. Assessing the assessee's income as "Income from other sources" instead of "Income from Capital Gains" is not correct. HIGHLIGHTS: 1. That the land of 2.07 guntas belongs to four brothers and not Mr. N.R. Krishna Murthy alone. 2. The AO has examined all the documents and debated .....

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ns and dismissed the appeal by stating as under: 4. I have carefully considered the facts of the case, assessment order and the submissions of the appellant. In this case, the entire capital gain is of ₹ 92,40,479/- arising out of the transaction. The appellant's share is only 1/4th of the total transaction of ₹ 4.0 crores ie., ₹ 1 crore only (Rs. 40,00,000 by cash + ₹ 60,00,000 in constructed area 6,050 sq. feet). The appellant claimed the total capital gain received .....

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considered as owner. The appellant, has not explained how it establishes the ownership of the appellant on the property as the sale deed was registered in favour of appellant's three brothers and the appellant is not a party to the sale deed. But as per the receipt enclosed along with sale deed copy dated 27-03-1995 which was also relied upon by the Assessing Officer, the appellant also received the amount along with other three brothers. Since this is a fact that the appellant has received .....

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was confirmed. Hence, all the submissions made by the appellant are rejected . 6. Before us, Ld. Counsel referring to the Paper Book filed in this regard and submissions made before the AO and CIT(A) submitted that it was Mr. Krishna Murthy, who originally entered into an oral agreement of sale and also became a plaintiff in the proceedings before the Addl. District & Session Judge, indicating that assessee is owner of the property. It was further submitted that the Hon'ble High Court al .....

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the head other sources . 7. Ld. DR however, supported the orders of the authorities. 8. We have considered the issue and perused the rival contentions. As can be seen from the documents placed on record, the original sale deed by Smt. K. Janamma is in the name of three persons as stated above in which assessee s name is not there. The said deed was registered for a value of ₹ 1,80,000/- in 1995 and assessee has not placed any evidence on record that the said sale consideration (purchase co .....

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. O-7 R-1&2 CPC filed by the plaintiffs praying this court to declare that the plaintiffs 1 to 3 are absolute owners and possessors of suit schedule property and consequently by way of injunction, direct the defendants, their agents, their henchmen and their assignees etc., not to interfere in the suit schedule property. (or) To direct the defendant No. 1 to execute the regular registered sale deed by receiving the balance sale consideration of ₹ 3,30,760/-, in the event of this Hon .....

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suit . Thus, as can be seen from the above, the prayer before the court was only to declare plaintiffs 1 to 3 i.e., i. N. Chandra Sekhar Rao; ii. R. Madhusudhan; and iii. N.R. Murali Krishna; as absolute owners and possessors of suit schedule property. This also indicates that assessee being the 4th plaintiff, did not claim any ownership of the property. Therefore, we are of the opinion that both the authorities are correct in rejecting assessee as owner of the property. Even the rectification .....

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