TMI Blog2018 (6) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the given set of facts. The purchase agreement itself specifies the existence of encumbrance. The assessee has also demonstrated that the original cost of acquisition was quite lower vis-à-vis fair market value having regard to the embedded encumbrance. CIT(A) has drawn conclusions in favour of the assessee based on tell-tale evidences. No reason to upset such conclusions of CIT(A). The order of the CIT(A) is thus well founded with regard to the cost incurred for removal of the tenancy rights. The objection of the Revenue on this score thus cannot be sustained and hence dismissed. Repairs and renovation expenses, we find some merits in the case made out by the Revenue. As against the total costs claimed to be incurred by the assessee amounting to ₹ 30,05,429/-, the outstanding has been shown at ₹ 14,30,638/- which is nearly 50% of the total claim. Most of the payments are admittedly made in cash and, at times, based on simple vouchers. Such huge outstanding and cash payments enjoin greater onus on the assessee. The assessee has not discharged the onus fully towards incurring of such expenses more particularly the whereabouts of substantial outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer (AO) u/s.143(3) of the Income Tax Act, 1961; (the Act) concerning assessment year 2010- 11. 2. As per its ground of appeal, the Revenue has challenged the act ion of the CIT(A) in reversing the additions made to the long term capital gains on account of cost of acquisition/cost of improvement. 3. Briefly stated, the assessee sold a plot of land at Ranip, Ahmedabad on 08.03.2010 for a consideration of ₹ 95 Lakhs. The assessee had earl ier purchased the aforesaid plot on 06.01.2004 for a consideration of ₹ 1,06,530/-. The assessee also purchased a new residential house at Nagar Sheth Vanda, Gheekanta, Ahmedabad for which payment of ₹ 84,13,719/- was shown by the assessee towards cost of acquisition. While computing long term capital gains (LTCG) arising on sale of plot at Ranip, the assessee claimed deduction under s.54F qua the new residential house acquired. In the course of scrutiny assessment , however, Assessing Officer disputed the cost of acquisition/cost of improvement of the new residential house. The AO noted that the original cost of purchase of house stands at ₹ 19,08,290/-. It was observed by the AO that the assessee has in additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items of cost of acquisition/cost of improvement and found merit in the claim of assessee. As regards payment made to tenant forming part of the cost of acquisition amounting to ₹ 35 Lakhs, the CIT(A) observed few sal ient features, namely; (i) The purchase deed for the purchase of new house has provided for the fact that the new house is occupied by the tenants and liability to vacate the tenant wili be on purchaser; (ii) The assessee filed legal suit for abandonment of tenancy right by tenants in favour of the assessee; (i ii) The assessee negotiated lower price with the seller due to existing encumbrance of tenancy; (iv) Payment in cash is irrelevant and is not debarred more so, on account of the fact that the payment is evidenced by detailed settlement agreement executed in writing by the tenant in favour of the assessee for surrender of tenancy right for specified consideration (Rs.35 Lakhs) before notary. The CIT(A) also took note of the fact that the market value of the new property was considerably higher than the original cost of acquisition by the assessee owing to tenancy encumbrance. The CIT(A) also simultaneously observed that the tenant was holding legal as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has also included the cost incurred towards vacating the new property from tenant amounting to ₹ 35 Lakhs as well as certain costs incurred towards repairs and renovation of the new house as part of cost of acquisition of new house in addition to original cost incurred for its purchase. The original cost of acquisition of the new house was thus increased by the assessee towards cost of removal of encumbrances and cost of repairs and renovation of new house. 6.1 As regards the cost of removal of encumbrances, we straightway find ourselves in complete agreement with the observations made by the CIT(A) dealing with issue. The CIT(A) has objectively analyzed the facts existing in the case with reference to the abandonment of tenancy right as noted in earlier paras and has come to the rightful conclusion in the given set of facts. As pointed out, the purchase agreement itself specifies the existence of encumbrance. As further noted, the assessee has also demonstrated that the original cost of acquisition was quite lower vis- -vis fair market value having regard to the embedded encumbrance. Suffice i t to say, that the CIT(A) has drawn conclusions in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
