TMI Blog2018 (5) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 48(i) of the Act while computing the capital gain and there is no reason to interfere in the said order as the same does not suffer from any illegality. Accordingly, we affirm the order of Ld. CIT(A) by dismissing the appeal of the Revenue. - ITA No. 5423/M/2016 - - - Dated:- 15-5-2018 - Shri Saktijit Dey, Judicial Member And Shri Rajesh Kumar, Accountant Member Assessee by : Shri Anil Sathe, A.R. Revenue by : Shri V. Vidhyadhar, D.R. ORDER Per Rajesh Kumar, Accountant Member The present appeal has been preferred by the Revenue against the order dated 30.06.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. 2. The Revenue has raised following grounds of appeal: On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in directing the Assessing Officer to Compute LTCG arising on sale of nonagricultural land at Marve at ₹ 65,00,000/- holding that the payment of ₹ 85,00,000/- to M/s. Kwality Frozen Foods Pvt. Ltd. and M/s. Magnum Holdings Pvt. Ltd., is covered u/s 48(i) of the Act., without appreciating the facts that- (i) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee paid ₹ 35,00,000/- to M/s. Kwality Frozen Foods Pvt. Ltd. and ₹ 50,00,000/- to M/s. Magnum Holdings Pvt. Ltd. on the ground that the said company has partial interest in the said land which was duly created by executing an agreement dated 14.05.1991 and without their consent the said property could not have been sold. Thus the capital gain was worked out by taking the sale consideration of ₹ 65 lakhs and after reducing the index cots of ₹ 74,361/-, a long term capital gain of ₹ 64,25,639/- was calculated which was claimed as exempt under section 54F of the Act by making reinvestment in another property within one year from the date of transfer of the said property and thus the income from capital gain was shown at nil. It is pertinent to note that in 1988 the other co-owners Mr. Pradeep Ravee Sood and Mr. Shyam Dugal entered into an agreement with Ajay Verma representing M/s. Magnum Holdings Pvt. Ltd. and Mr. Mohan Thakkar for their respective 1/3 share in the said land . However, Mr. Mohan Thakkar could not pay the consideration and 1/3 share was sold in 1991 to new purchaser M/s. Kwality Frozen Foods Pvt. Ltd. Thus, the beneficial ownership wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uched does not contemplate deduction of such an amount. Reference in this regard was made to section 48 of the Act to show that the payment herein could neither be termed as expenditure incurred wholly and exclusively for the transfer or the cost of acquisition or of any improvement thereto. None had appeared on behalf of the respondentassessee. 6. In order to appreciate Dr. Balasubramanian's submission, it is desirable to refer to the provisions of section 48 which read as under. The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely. (i) expenditure incurred wholly and exclusively in connection with such transfer, (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto. 7. The section broadly contemplates three amounts for the purpose of computing income chargeable under the head Capital gains . The first is the full value of the consideration for which the capital asset has been transferred. The second is the expenditure incurred who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property in 1992, Abrar Alvi has instituted a suit in the city civil court being Suit No. 4763 of 1986, seeking an injunction restraining the assessee from selling Janki Kutir . Hence, the said amount of ₹ 8 lakhs was paid. On the facts, the Tribunal found that the amount was paid to remove the encumbrance. The Tribunal also applied the ratio of the judgment of this court in the case of CIT v. Shakuntala Kantilal [1991] 190 ITR 56, wherein it has been held that expenditure incurred in removing the encumbrances was deductible. The Tribunal found that there was an acrimonious dispute between the father and the son and the said amount was paid to effect the transfer. Hence, the Tribunal ordered ₹ 8 lakhs to be deductible. We see no reason to interfere with this finding of fact. 3. In this appeal no substantial question of law arises. Hence, the appeal is rejected. 6.4 The payment to the two companies would thus be covered u/s.48(i) In view of the fact that the other two parties had received money (compensation in lieu of their rights / interest on the land) and have offered it to tax also as capital gain, in effect, the assessee's effective sale con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely M/s. Magnum Holdings Pvt. Ltd. and M/s. Kwality Frozen Foods Pvt. Ltd. were covered under the provision of section 48(i) of the Act and therefore deserved to be affirmed. 8. We have heard the rival submissions of both the parties and perused the material on record including the impugned order. Upon perusal of the record as placed before us, we find that the assessee has sold the property for a consideration of ₹ 1,50,00,000/- ,which was purchased along with two other co-owners, entered into an agreement under which the beneficial ownership of M/s. Kwality Frozen Foods Pvt. Ltd. and M/s. Magnum Holdings Pvt. Ltd. was created in 1991. The AO doubted the said agreements between the two co-owners and these companies. The AO treated entire property as belonging to the assessee and capital gain was calculated accordingly without allowing the deduction of ₹ 85 lakhs which was paid to these two companies for the reason that without their consent the said property was not possible to be sold. In the appellate proceedings, the Ld. CIT(A) upheld that both these parties were having beneficial interest in the property and allowed the deduction of ₹ 85 lakhs paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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