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Rama Vohra Versus Income-Tax Officer

[2017] 57 ITR (Trib) 694 - Disallowance of the cost of acquisition/cost of improvement - amount paid to the sister in law of the appellant as per the decree of the court - Held that:- When the assessee was to step into the shoes of her vendor, Ajit Vohra for all intents and purposes she could not have acquired a better title than Ajit Vohra had, the cost of acquisition of the property in question is required to be taken accordingly. So, merely deciding the issue on the basis of recital in the sa .....

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lready been decided in the case titled as ITO v. Taj Services P. Ltd. [2011 (9)1140 - ITAT MUMBAI] wherein it was decided that "where compensation paid to a party for surrendering its pre- existing rights in property in question was inextricably connected with transfer of property as one of the conditions for sale of such property, such compensation was deductible from the sale consideration." - Decided in favour of assessee - Exemption under section 54 - investment from the sale proceeds of .....

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H COURT ], Thus we are of the considered view that the assessee is entitled for exemption under section 54(1) of the Act qua two residential houses i.e. built up plot No. 59, Block-A, Sector-52, Noida, jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra of ₹ 86,70,991 and Flat No. 407, Tower-2, Sector-9, Vaishali Extn., Ghaziabad of ₹ 52,87,200. So, grounds determined in favour of the assessee. - Exemption qua vacant residential plot purchased for the purpo .....

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magadda (2013 (5)74 - ITAT Hyderabad ) is applicable to the facts of this case. So, the Assessing Officer is directed to allow the exemption claimed by the assessee for the year under assessment and the Assessing Officer is further directed to verify whether the assessee has offered the capital gain for taxation at the end of the period of three years from the date of transfer of the original assets and in case the assessee's claim found to be incorrect then the Assessing Officer is to bring the .....

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ppeal sought to set aside the order dated May 3, 2016 passed by the Commissioner of Income-tax (Appeals)-19, New Delhi qua the assessment year 2012-13 on the grounds inter alia that : "1. That the additions/disallowances made by the Assessing Officer ("AO") and upheld by the Commissioner of Income-tax (Appeals) are illegal and bad in law. 2. That in view of the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) has erred on facts and in law in uph .....

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usive domain of the civil court. 4. That without prejudice, the Assessing Officer and the Commissioner of Income-tax (Appeals) has failed to appreciate that the said amount of ₹ 1,20,00,000 belong to the sister in law of the appellant and due to an overriding title it is diverted at the source itself and never reached the appellant as her income. 5. That in view of the facts and in the circumstances of the case the Commissioner of Income-tax (Appeals) has erred in facts and in law in disal .....

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which is invested in a residential plot purchased for the purpose of constructing a residential house. 8. That the disallowances made and the observations made are unjust, unlawful and based on mere surmises and conjectures. The additions/disallowances made cannot be justified by any material on record and in any case they are excessive. 9. That the explanation given and the evidence produced, material placed and available on record has not been properly considered and judicially interpreted an .....

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acts in charging interest under sections 234A, 234B, 234C, and 244A of the Income-tax Act. The Assessing Officer has failed to appreciate the evidence and documents placed on record by the assessee." 2. Briefly stated the facts necessary for adjudication of the controversy at the hand are : during the scrutiny proceedings, the Assessing Officer noticed that the assessee has disposed of property No. B-135, Preet Vihar, Delhi for a sale consideration of ₹ 4,00,00,000 declaring a long-te .....

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eetal Girdhar by the assessee. However, the Assessing Officer, being dissatisfied with the explanation furnished by the assessee, proceeded to conclude that at no point of time, ownership of the property was in question and was validly transferred to the assessee with a recital that the property is free from all encumbrances and as such, payment of ₹ 1,20,00,000 cannot be treated as part of the acquisition and thereby added the same to the income of the assessee under the head "long-t .....

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Ghaziabad ₹ 3,73,23,740 2. Residential built up plot No. 59, Block A, Sector 52, Noida (jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra) ₹ 86,70,991 3. Flat No. 407, Tower 2, Sector 9, Vaishali Extn., Ghaziabad. ₹ 52,87,200 ₹ 2,74,47,305 4. The Assessing Officer, however, proceeded to conclude that the assessee is entitled to claim exemption under section 54 of the Act in respect of only one residential property of his choice. So, the assessee .....

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r section 54 of the Act as under : Long-term capital gain as worked out as per discussion in paragraph A ₹ 3,73,23,740 Less : Allowable exemption under section 54 ₹ 52,87,200 Net long-term capital gain chargeable to tax ₹ 3,20,36,540 Penalty proceeding under section 271(1)(c) read with section 274 have been initiated separately for concealment of income and furnishing in accurate particulars of income With these remarks the income of the assessee is computed as under : Return i .....

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up before the Tribunal by way of filing the present appeal. 6. We have heard the learned authorised representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the Revenue authorities below in the light of the facts and circumstances of the case. Ground No. 1 7. Ground No. 1 is general in nature, hence needs no adjudication. Grounds Nos. 2, 3, 4, 8, 9, and 10 8. From the grounds of appeal, the order passed by the authorities below and the arguments .....

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utedly, the property in question was originally owned, by Shri O. P. Vohra. Shri Ajit Vohra, husband of the assessee inherited the property in question form his father, namely, Shri O. P. Vohra by virtue of the will dated September 6, 2000. It is also not in dispute that one of the sisters of Shri Ajit Vohra, beneficiary of the will dated September 6, 2000 executed her relinquishment deed in his (Ajit Vohra) favour. It is also not in dispute that one of the sisters of Shri Ajit Vohra challenged .....

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. 11. No doubt in the sale deed dated September 26, 2006 executed by Shri Ajit Kumar in favour of the assessee, recital is there that, "the property in question is free from all encumbrances, such as, burden of sale, decree, mortgage, will, gift, loan, lien, family dispute, charges, court injunctions, suit, order, etc." but these recitals cannot bar the other legal heir of Shri O. P. Vohra from challenging the will dated September 6, 2000 on the basis of which Ajit Vohra claimed himsel .....

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6, 2006 executed in favour of the assessee and his sister, namely, Sheetal Girdhar, pending in the civil court. 12. The assessee in order to prove the fact that Sheetal Girdhar was held to be the owner of property in question to the extent of one-third share, brought on record a copy of civil suit bearing No. 505/2009 filed by Sheetal Girdhar for declaring the sale deed dated September 26, 2006 invalid, copy of another suit filed by Sheetal Vohra for grant of probate of will dated February 1, 20 .....

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he statement of the parties to the probate case No. 122 of 2008 and the certificate of Shri Sanjay Dhawan, advocate regarding compromise between the parties (copy of aforesaid all documents available at pages 126 to 283 of the paper book filed by the assessee). 13. From the bare perusal of aforesaid documents brought on record by the assessee, it is proved on record that the sale deed dated September 26, 2000 qua the property in question in favour of the assessee was a subject matter of Civil Su .....

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husband of assessee and the assessee entered into a compromise under Order 23, rule 3 of the Code of Civil Procedure with Sheetal Girdhar and thereby agreed to transfer 30 per cent. share of the property in question to Sheetal Girdhar, value of which was assessed at ₹ 1,20,00,000 after considering the stamp duty etc. 15. When the assessee along with her husband Ajit Vohra who had executed sale deed dated September 26, 2009 have paid 30 per cent. of the sale proceeds to Sheetal Girdhar qua .....

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scrutiny in the face of the will dated February 1, 2002 which is later in date in favour of his sisters, namely, Smt. Sheetal Girdhar and Smt. Indu, the sale deed dated September 26, 2009 in favour of the assessee would have been declared illegal, null and void and consequently, the assessee would have got no right, title or interest in the property in question. 16. When the assessee was to step into the shoes of her vendor, Ajit Vohra for all intents and purposes she could not have acquired a b .....

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amount of ₹ 1,20,00,000 belonged to the sister-in-law of the assessee, namely, Sheetal Girdhar for the purpose of computing the long-term capital gain. 17. Identical issue has already been decided by the co-ordinate Bench in the case titled as ITO v. Taj Services P. Ltd. [2012] 24 taxmann.com 83 (Mum- Trib.) (available at pages 31 to 43 of the paper book) wherein it was decided that "where compensation paid to a party for surrendering its pre- existing rights in property in question w .....

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s under partnership agreement is deductible for determining the assessee's income." 19. Similarly, the hon'ble High Court of Gujarat in the case of CIT v. Daksha Ramanlal [1992] 197 ITR 123 (Guj) ; [1992] 65 Taxman 83 (Guj) (available at pages 26 to 30 of the paper book) while dealing with the identical issue also held that "or purpose of calculating the capital gains, deduction of amount paid by the assessee to the mortgagee is to be treated as cost of acquisition of interest .....

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ant residential plot No. B-73, Kaushambi, Ghaziabad. ₹ 3,73,23,740 2. Residential built up plot No. 59, Block A, Sector 52, Noida (jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra and Sh. Punit Vohra) ₹ 86,70,991 3. Flat No. 407, Tower 2, Sector.9, Vaishali Extn., Ghaziabad. ₹ 52,87,200 ₹ 2,74,47,305 However, the learned Commissioner of Income-tax (Appeals) allowed exemption under section 54 of the Act qua properties bearing plot No. 59, Block A, Sector 52, Noida am .....

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as under See [2014] 365 ITR (St.) 183 : "Capital gains exemption in case of investment in a residential house property The existing provisions contained in sub-section (1) of section 54, inter alia, provide that where capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, and the assessee within a period one year before or two years after the date of transfer, purchases, or within a period of three yea .....

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or within a period of three years after the date of transfer constructs, a residential house then the portion of capital gains in the ratio of cost of new asset to the net consideration received on transfer is not chargeable to tax. The benefit was intended for investment in one residential house within India. Accordingly, it is proposed to amend the aforesaid sub- section (1) of section 54 so as to provide that the rollover relief under the said section is available if the investment is made i .....

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ailable if the investment is made in "one residential house" situated in India and earlier the expression used was "a residential house". The amended provisions contained under section 54(1) of the Act have been interpreted in favour of the assessee by the hon'ble High Court of Karnataka in the case of CIT v. Khoobchand M. Makhija [2014] 43 taxmann.com 143 (Karn) (available at pages 45 to 52 of the paper book), operative part of which is reproduced as under : "17. It .....

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text, which is used, should not be construed as meaning singular, but being a indefinite article, the said expression should be read in consonance with the other words buildings and lands' and therefore, the singular 'a residential house' also permits use of plural by virtue of section 13(2) of the General Clauses Act. 18. Therefore, we are of the view, in the facts and circumstances of this case, the acquisition of two residential houses by the assessee out of the capital gains fall .....

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es of this case, we answer the first substantial question of law raised in favour of the assessee and against the Revenue." 25. The co-ordinate Bench of the Tribunal in the case of Laxman Singh Rawat v. Asst. CIT (I. T. A. No. l668/Delhi/2013 dated August 22, 2014) (available at pages 53 to 65 of the paper book) also decided the identical issue in favour of the assessee in paragraph 6.1 of the order which is reproduced as under : "6.1 Further, we find that amendment has been brought in .....

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sessment year 2011-12, and in view of the decision rendered by the hon'ble High Court of Karnataka in the case of CIT v. Khoobchand M. Makhija (supra) and the decision rendered by the co-ordinate Bench in case of Laxman Singh Rawat v. Asst. CIT (supra), we are of the considered view that the assessee is entitled for exemption under section 54(1) of the Act qua two residential houses i.e. built up plot No. 59, Block-A, Sector-52, Noida, jointly in the name of Smt. Rama Vohra, Sh. Ajit Vohra a .....

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allowance made by the Assessing Officer on the ground that the assessee has failed to produce any evidence of his intention to construct a house on a plot of land. 28. The learned authorised representative for the assessee contended that the assessee has invested all the entire sale proceeds of ₹ 2,80,00,000 but due to change in policy could not construct the house and further contended that if at all the capital gain is to be made taxable, it will be taxable only at the end of three years .....

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