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2016 (5) TMI 1033

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..... r dated 19.02.2014 of the CIT(Appeals)-III, Bangalore inter alia on various grounds, which are as under:- 1. That the order of the authorities below in so far as it is against the appellant is against the law, facts, circumstances, natural justice, equity, without jurisdiction, bad in law and all other known principles of law. 2. That the total income and total tax liability computed is hereby disputed. 3. That the AO/CIT(A) erred in treating/holding the gain arising from transfer of flat in National Co-operative Group Housing Society as Short term in nature. 4. That the AO / CIT(A) erred in not allowing the indexation as per law. 5. That the AO/CIT(A) erred in refusing the claim for deduction u/s 54 EC of the Income Tax Act. 6. The appellant denies the liability for interest u/ s. 234D of the Act. No opportunity was provided before levying interest u/ s 234D of the I T Act. 7. Without prejudice to the appellant's right of seeking waiver before appropriate authority the appellant begs for consequential relief in the levy of interest u/ s 234D of the Act. 8. For the above and other grounds and reasons which may be submitted during th .....

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..... was long term capital gain, despite the fact that physical possession of the flat was given to the assessee much later and therefore, he was entitled to deduction from such gains as per law. Reliance was also placed upon the order of Delhi Bench of the Tribunal in the case of DCIT v. Smt Sita Devi Wadhwa in ITA No.239(Del)2010, copy of the same has been placed on record. 5. The ld. counsel for the assessee further contended that since the assessee acquires the right in the immovable property from the date of allotment of shares in his favour, the period of holding the capital asset should be counted from the date of allotment of shares and not from the date of allotment of flat to him. 6. The ld. DR, besides placing reliance upon the order of CIT(Appeals), has invited our attention to the judgment of Hon ble High Court of Karnataka in the case of CIT V. Dr. V.V. Modi, 218 ITR 1, in which it has been held that the assessee having acquired a site under lease-cum-sale agreement and sold it a few months after becoming absolute owner thereof, the capital gains arising therefrom were short-term capital gains, though assessee held the property for 10 years before conveyance was secu .....

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..... uently it is a capital asset. The relevant findings of the Hon'ble jurisdictional High Court are extracted hereunder for the sake of reference:- The word 'capital asset' means property of any kind held by the assessee which does not necessarily be confined to an immovable property. Similarly, when the word 'transfer' in relation to a capital asset though includes sale, exchange or relinquishment of the asset, the said asset need not necessarily be an immovable property. The right to obtain a conveyance of immovable property falls within the expression 'property of any kind' used in s. 2(14) and consequently it is a capital asset. It is because the expression 'property of any kind' is of wide import. When this expression is read along with the expression defined in s. 2(47)(ii) i.e., 'extinguishment of any rights therein', the giving up of a right of specific performance by the assessee to get conveyance of immovable property in lieu of receiving consideration, results in the extinguishment of the right in property, thereby attracting the rigor of s. 2(14) r/w s. 2(47). Giving up of a right to claim specific-performance by conveyance .....

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..... n and in that case, the assessee was allotted a site by Town Planning Authority under lease-cum-sale agreement. He could secure conveyance in his favour after 10 years upon payment of entire sale consideration. Sale deed accordingly executed in his favour on 29.3.1982. Same brought about a merger of interest of lesser interest held by him in the bigger estate acquired by him under the sale deed upon acquiring the title. The Hon ble High Court further held that the question of assessee intending to keep the two capacities, one of leasehold rights and the other of ownership, separately does not arise. He became absolute owner on 29.3.1982 and thereafter sold the site on 27.11.1982. What he transferred was a right held by him from the date of sale in his favour and not what he held earlier to that. The Hon ble High Court accordingly held capital gain arising from transfer could only give rise to short term capital gains. 12. But, in the instant case, the assessee acquires the right to obtain a flat in the society on the allotment of share certificate in his favour. Later on, he has also made the payments to the Co-operative Group Housing Society on their demand, meaning thereby tha .....

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..... earnest money when the agreement to sell had been executed and a new residential house/new asset had been purchased by the appellants on 30th April, 2003. It is also not in dispute that there was a litigation wherein the Will of late Shri Amrit Lal had been challenged by his son and the appellants had been restrained from dealing with the house in question by a judicial order and the said judicial order had been vacated only in the month of May, 2004 and therefore, the sale deed could not be executed before the said order was vacated though the agreement to sell had been executed on 27th September, 2002. 19. If one considers the date on which it was decided to sell the property, i.e. 27th December, 2002 as the date of transfer or sale, it cannot be disputed that the appellants would be entitled to the benefit under the provisions of Section 54 of the Act because long term capital gain earned by the appellants had been used for purchase of a new asset/residential house on 30th April, 2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. 20. The question to be considered by this Court is whether the agreement to .....

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..... t filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th September, 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term transfer , one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to sell had been executed and who had .....

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..... lants to get the benefit under Section 54 of the Act. 23. Consequences of execution of the agreement to sell are also very clear and they are to the effect that the appellants could not have sold the property to someone else. In practical life, there are events when a person, even after executing an agreement to sell an immoveable property in favour of one person, tries to sell the property to another. In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. 24. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented fr .....

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..... ring the course of hearing it was contended on behalf of the assessee that the commission agents have filed the confirmation letters in response to the notices issued by the AO. The copy of return of all the commission agents were also filed before the AO in which the assessee has offered the receipt of commission as income and the same was also accepted by the Revenue authorities. 31. The copy of notices issued by the AO to commission agents, reply accepting the receipt of commission, bank statement of commission agents, return of commission agents and computation of income of commission agents are placed as page no. 199 to 440 of the compilation of the assessee. The ld. Counsel for the assessee further contended since the commission agents have accepted the receipt of commission and offered it to tax which were also accepted by the Revenue, the Revenue has no right to disallow the claim of the expenditure in the hands of payer. Therefore, the claim of payment of commission to commission agents should be allowed. 32. The ld. DR simply placed reliance on the order of the ld. CIT(A). 33. Having carefully examined the order of lower authorities and the documents ava .....

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