TMI Blog2018 (10) TMI 1581X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Mrs.June Perrett vs ITO [2007 (11) TMI 86 - KARNATAKA HIGH COURT] held that Payment to evict an unauthorized occupant can be treated as cost of improvement. CIT(A) is not justified in confirming the addition of ₹ 5.00 lacs which we direct to delete. - Decided in favour of assessee. Expenses claimed against the interest income shown under the head Income from other sources - Held that:- The assessee during the course of assessment proceeding submitted all these details filed before the AO who has made the addition of ₹ 8,02,854/-. CIT(A) has confirmed the action of the AO. From the available records before us, it is noted that the assessee has utilized the borrowed funds to purchase the agricultural land. As regards interest payment to Raj Kumari Agarwal and Aparjita Saini, it is noted that there were opening balances of the amounts in their accounts. Further the assessee has earned interest on the advances made to M/s. Feathertouch Polychem (P) Ltd. of ₹ 6,17,757/-. It is important to note that during the year the assessee has earned interest income of ₹ 13,95,012/- and paid the interest of ₹ 8,02,854/-. In view of these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10% of the sale consideration shall be given to them for vacating the possessions. Accordingly, after sale of the said plot, a sum equal to 10% of the sale consideration of ₹ 1,00,00,000/-i.e. ₹ 10 Lakh was paid to both of them and thus net sale consideration arrived at ₹ 90 lakhs only of which the 50% share i.e. ₹ 45 Lakhs has been correctly shown by the assessee to compute the capital gains. Reliance was placed by the A.R. on case of CIT vs Miss Piroja C Patel (2000) 242 ITR 582 (Bom.) and Mrs. June Perrett vs ITO (2008) 298 ITR 268 (Kar.) and Naozar Chenoy vs CIT (1998) 234 ITR 95 (AP). The AO discussed and distinguished all the three cases in the case of Miss. Piroja C Patel, the assessee had sold land to the BMC which was having hutments over there. In that case giving vacant possession of the land to BMC was a condition precedent under the terms of the negotiation-cumacquisition agreement. Hence, the compensation paid to the hutment dwellers were allowed as cost of improvement by the Hon'ble High Court. However, in the case of there is no material to suggest that the prospective buyer had insisted on handing over the vacant possession of plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he copy of the legal notice issued to Shri Babu Lal Meena and Shri Phool Chand Jha. Copy of Ikrarnama entered into with Shri Babu Lal Meena and Shri Phool Chand Jha was also filed. The assessee also submitted the ID Proof of these persons in support of his contentions. 3.3 On the other hand, the ld. DR supported the order of the lower authorities. 3.4 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the assessee during the year under consideration the assessee along with Shri Dilip Agarwal had sold a Plot No. 549, Uday Marg, Raja Park, Jaipur to Shri Suresh Punjabi and Sunder Ganga Ram Punjabi for a consideration of ₹ 1.00 crore. While computing the capital gain the assessee had declared consideration of ₹ 45.00 lacs only for his 50% share in the said plot instead of ₹ 50.00 lacs. When asked for showing the less consideration, it has been submitted that there was encroachment on the said plot by two persons namely Shri Babu Lal and Shri Phool Chand. The assessee served them a legal notice through Advocate and made efforts to evacuate the Plot through Police also (PBP-16). Since these effor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had requested the AO to make enquiry if he has any doubt about the illegal possession of the premises by these two persons PBP 45). However, the AO had not given any adverse findings thereon. It is noted from the sale agreement made between the assessee wherein the assessee had received the amount of ₹ 45.00 lacs through cheque, the details of which are available at PBP 36 of sale agreement. The assessee had taken only ₹ 45.00 lacs through banking channel and ₹ 10.00 lacs was received by cash which was due to the reason that these illegal possession holder wanted the amount in cash. To this effect, the assessee has relied on the decisions of various Hon'ble High Courts. Hon'ble Karnataka High Court in the case of Mrs.June Perrett vs ITO (2008), 298 ITR 268 held that payment to execute an order of eviction and to evict an unauthorized occupant can be treated as cost of improvement. The relevant observation of the Court is as under:- Then the last question to be considered by us is, whether the amount spent by the executors to secure an order of eviction to evict unauthorised occupant has to be treated as expenditure in connection with the transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated would certainly amount to cost of improvement. Accordingly, the above question is answered in the affirmative, i.e., in favour of the assessee and against the Department. The reference accordingly stands disposed of with no order as to costs. Issuance of certified copy expedited. In the case of Naozar Chenoy vs CIT (1998), 234 ITR 95, the Hon'ble Andhra Pradesh High Court held as under:- ..As regards the expenditure incurred by the assessee towards payment of the amount to the tenants for vacating the premises, which is the subject matter of the sale transaction, we are of the view that it has nexus with the transaction as without the tenants vacating the premises, the building cannot be sold. Therefore we are of the view that the said expenditure was incurred for effecting the transaction and therefore he is entitled for deduction of the amounts incurred towards vacation of the tenants, in computing the capital gain of the building sold. It follows from the above that the assessee is entitled to the deduction of ₹ 43,107, ₹ 34,200, ₹ 60,000 and ₹ 3,800 because these amounts relate to the expenditure incurred for the purpose of getting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o nexus for the loan funds from HDFC bank. As regards the amount of ₹ 25 lakhs on 07- 07-2012 to Shri Sunil Tiwari, the same is only for 3 days and returned on 10-07-2012. As regards loan to M/s. Feathertouch Polychm P. Ltd. M/s. Laxmi Builders Developers and M/s. Swadeshi Developersssss, all are opening balances and no amounts are extended during the year. Further the HDFC bank account, the opening balance is only ₹ 9000/- approximately, thus no loans are reflected therein. Similarly only interest is being credited to the accounts of Aparajit Sen and Raj Kumari Agarwal the same are opening balances and interest is credited. Further the main issue is that the A.R. himself is agreeing that almost ₹ 80 lakhs have been used for purpose of agricultural land and major part of interest amount is used for these. Thus the interest bearing loans have been utilized for a personal asset. The contention of the assessee that since capital gain is offered on the land in the subsequent year also cannot be accepted as the claim of the interest has been made under section 57 wherein it has to relate to the loans given and the interst earned thereon. In view of the discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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