TMI Blog2016 (9) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect. Further, with the insertion of these provisions, it becomes clear that earlier the law was not like this. Thus, for the year before us, i.e. A.Y. 2010-11, the then existing provisions of section 51 shall be applicable which clearly provides that the amount of advance received should be reduced from the cost of acquisition of asset. Thus, we reinforce the direction of the Ld. CIT(A) and direct the Assessing Officer to reduce the cost of acquisition of the property by the amount of ₹ 3.74 crores on sale of the said property at the time of computation of capital gains as may be arising on account of sale of the said property. The action of Ld. CIT(A) in directing the Assessing Officer to delete the addition which was made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged interalia in the business of construction of properties. During the course of assessment proceedings, the AO noted that there was a liability of ₹ 3,74,00,000/- as shown in the balance sheet of the assessee, in the name of M/s Dawat-E-Hadiyah Trust. The said liability was created in the year 1995, when the assessee had received the said amount from the said trust as an advance for sale of assessee's property. The AO conducted enquiries from M/s Dawat-E-Hadiyah Trust, who vide their letter dated 29.11.2012 replied that the liability had been written off in the year under consideration on account of donations received from individual donors. But, AO was of the view that there was cessation of liability of the assessee of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the AO added the amount of ₹ 3.74 crores u/s 41(1) of the Act. 4. Being aggrieved, the assessee filed appeal before Ld. CIT(A) and made detailed submissions. It was submitted that the impugned amount was received by the assessee with regard to sale of property located at Chennai. Under these circumstances, no addition could have been made u/s 41(1) of the Act. This amount was not received in any manner as part of any business transaction. The provisions of section 41(1) are not applicable here at all. It was submitted that it was wrong on the part of the AO to observe that the assessee had not substantiated the fact of property transaction with any evidence. It was also wrong on the part of the AO to hold that the advance receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as orders passed by lower authorities. The admitted facts on record are that assessee has been showing its rental income from its properties, including the impugned property located at Madras and the same has been assessed by the Assessing Officer also under the head Income from house property. These properties have been undoubtedly shown as capital assets in the balance-sheet and never have been declared as stock-in-trade. This position has all along been accepted by the revenue. Further, as far as the assessee is concerned, the liability of ₹ 3.74 crores is still outstanding in the name of aforesaid party. The Ld. CIT(A) has recorded a clear and categorical finding that correspondence between the assessee company and said part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the cost for which the asset was acquired or the written value or the fair market value, as the case may be, in computing the acquisition.] 7. A perusal of the main portion of section 51 clearly reveals that in case any advance is received towards sale of a capital asset and if the same is retained by the assessee, then it shall be deducted from the cost of said asset for computing cost of acquisition. The provisions becomes further clear on perusal of proviso to this section which has been introduced with effect from 01-04-2015 wherein it has been clarified that if the amount of advance received was treated as income in pursuance of section 56(2)(ix), then no deduction shall be done in computing the cost of acquisition with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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