TMI Blog2019 (5) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in this year. Thus, we hold that, firstly it is a transfer of a long term capital gain; and secondly, the same has to be taxed as long term capital gain. Consequently ground No. 1 to 6 is allowed. Allowability of Interest expenses - interest paid on loan borrowed to the extent of the assessee s share in the property up to the date of possession - HELD THAT:- Both the authorities have tried to co-relate the ownership of the property way back in 8.3.2006 for which he has made fully payment after taking loan from the bank. The Act which provides that any expenditure incurred wholly and exclusively in acquisition of asset or cost of any improvement therein has to be allowed by deducting from the full value consideration received or agreed as a result of transfer of the capital asset. If the capital asset has been transferred in this year , then up to the date of transfer, the cost of acquisition and improvement has to be allowed. This issue is also covered by the other decision of the Hon ble Delhi High Court in the case of CIT vs. Mithlesh Kumari [ 1973 (2) TMI 11 - DELHI HIGH COURT] wherein the Hon ble High Court has allowed the full interest paid from the period up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, Sr. DR and Shri S.S. Rana, CIT(DR) ORDER PER AMIT SHUKLA, J.M The aforesaid appeal has been filed by the assessee against impugned order dated 16.1.2019 passed by Ld. CIT(A) 27, New Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2015-16. In various grounds of appeal assesee has challenged following additions :- Addition of ₹ 7,43,44,113/- by treating the long term capital gain as short term gain; Disallowance of credit of other expenses in relation to the property amounting to ₹ 1,13,82,644/- ; and disallowance of business expense being maintenance charges of ₹ 1,69,662/- and penalty of ₹ 6,000/-. 2. The facts in brief qua the first issue are that, the assessee company had owned 50% rights in a pent house situated at 617A, the Magnolias DLF Golf Links, DLF City, Gurgaon. This was reflected in the fixed asset in the books of accounts. The said pent house was jointly owned by the assessee company with Shri Satish Batra who had 50% share in the property. The assesee has purchased the pent house from M/s. DLF, vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l asset. 3. Ld. CIT(A) too has upheld the action of the AO to treat the transaction of capital asset as long term capital gain and also directed the AO to allow the interest till date of possession at July, 2012. In addition to that he gave following directions to the AO : i. To verify the actual interest paid by the appellant on the loan borrowed for this property and rework the figures of interest disallowance, if any. ii. He directed the AO to ascertain the exact facts about borrowing of the loan before allowing the interest corresponding to the shares of the appellant. iii. Regarding the other expenses of ₹ 1,13,82,644/- and rebate of ₹ 98,62,770/- he directed the AO to look into the nature of expenses and allow them as per law. He also directed him to consider net of these expenses and rebate/discount received for the purpose of capital gain iv. Regarding expenses claimed of ₹ 7,37,462/- in profit loss account, he directed the AO to verify such expenses from the computation of income and allow accordingly the expenses leading to double addition. 4. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on allotment of flat under Self-Financing Scheme. According to it, the allottee gets title to the property on the issuance of an allotment letter and the payment of instalments is only a consequential action upon which the delivery of possession flows. He pointed out that part 2 of the aforesaid circular clearly clarifies that for the purpose of income tax act, the alottee gets the property on the issuance of allotment letter and payment is only follow up action and the delivery of possession is only a mere formality. In support of his contention he relied upon the following case laws :- a. Hon ble Punjab and Haryana High Court in the case of Vinod Kumar Jain v. CIT, Ludhiana (2012) 344 ITR 501 b. Ms. Madhu Kaul v. CIT (2014) 363 ITR 54 c. Hon ble Jurisdictional High Court of Delhi in the case of CIT v. K. Ramakrishnan (2014) 363 ITR 59 d. Hon ble Jurisdictional High Court of Delhi in the case of CIT vs. Jitendra Mohan (2007) 165 Taxman 524 (Delhi) e. Hon ble Madra High Court in the case of CIT vs. S. R. Jeyashankar (2015) 373 ITR 120 (Madras) f. Hon ble Mumbai Tribunal in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Apex Court has laid down principle that for the purpose of section 2(47) (v), the transfer of a capital asset which has been referred by way of part performance in terms of section 53-A of the Transfer of Property Act would mean that the agreement should be registered and since here in this case agreement to sell has not been registered it cannot be said that the agreement is valid and therefore, the period of agreement or allotment letter cannot be treated as determining date for acquiring the property. Thus, the treatment of short term capital gain on the fact of the present case is fully justified. 10. In the rejoinder, Shri Ajay Wadhwa submitted that the ratio and principle of Hon ble Supreme Court will not apply because the said case is applicable with regard to the date of sell wherein the Hon ble Apex Court held that sale agreement should be registered in terms of section 53-A. Here it is not in dispute that prior to 2012 the assesee had acquired the right in the property and such right is reckoned as capital asset and also falls within the ambit of definition of transfer as given in section 2(47) that right was vested in the said property right from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n treated as transfer in relation to a capital asset in terms of clause (ii) of sub-section 47 of section 2. the Hon ble Delhi High Court in the case of Gulshan Malik vs CIT (supra) after analysing the provision of section 2(14), 2(42A) and 2(47) have held that the capital asset under the act is a property of any kind which is held by the assessee and such capital asset must be transferrable. Enjoyment of immovable property, possession as well as any right or interest in any asset are all transferrable capital asset and the reference to acquisition by way of an agreement or in any arrangement or in any manner whatsoever establishes the enforceable rights for the purpose of Income Tax Act. Booking rights or rights to purchase apartment or right to obtain the title to the apartment is also a capital asset that can be transferred. Hon ble High Court held that date of agreement has to be taken as a date and not the allotment. If the ratio and principle of the Hon ble Delhi High Court is to be applied to the facts of the present case, then the assessee has acquired the capital asset on the date of buyer s agreement dated 8.3.2006. It was by virtue of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there must be contract which can be enforced in law u/s 53 of the Transfer Property Act. In absence of any registration there is no contract in the eyes of law. The object of section 2(47) (vi) was to bring within the tax net de facto transfer of any immovable property and expression enabling the enjoyment takes colour from the earlier expression transferring so that it is clear that any transaction which enables the enjoyment of immovable property must be enjoyment as a purported owner thereof. The idea is to bring within the net transactions where though title may not be transferred. In that case the Hon ble Apex Court has also held that no income has accrued to the assessee and also there was no question of taxing income as under the capital asset as the asessee did not acquire any right to receive income as much as alleged right which shall depend upon necessary permission obtained . Ostensibly the ratio and principle of this judgment would not apply on the facts of the present case, because it was never in dispute by the revenue that assesee did not had a valuable right in the property which is a capital asset under the Income Tax Act and it is this capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein has to be allowed by deducting from the full value consideration received or agreed as a result of transfer of the capital asset. If the capital asset has been transferred in this year , then up to the date of transfer, the cost of acquisition and improvement has to be allowed. This issue is also covered by the other decision of the Hon ble Delhi High Court in the case of CIT vs. Mithlesh Kumari (1973) 92 ITR 9, wherein the Hon ble High Court has allowed the full interest paid from the period up to the date of sale and therefore, the ratio will apply as binding precedence. Now there are other judgments of Hon ble High Court, wherein similar proposition has been laid down for instance CIT vs. Sri Hariram Hotels (P.) Ltd. (2010) 325 ITR 136 Karnataka; and CIT vs. K. Raja Gopala Rao(2002) 252 ITR 459 (Madras). Thus, we direct the AO to allow the interest up to the date of sale. 14. Next issue challenged by the assessee is that, AO has not given credit of other expenses of ₹ 1,13,82,644/- incurred in relation to the property. Before us Ld. Counsel for the assessee has submitted the details of expenses incurred by the assessee over the period of time which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Set-off with Timely Payment Rebate Compensation DLF Limited 01.04.2013 197,542.00 Service Tax Charged by DLF Set-off with Timely Payment Rebate Compensation DLF Homes Services Pvt. Ltd. 31,10,2013 2,000.00 Other Charges Paid vide Ch No. 000018 Total B 4,782,492.00 3. 2014-15 ANJLIKA KRIPLANI DESIGN 20.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total-C 6,504,632.24 Grand Total-A+B+C 11,382,473.24 It has been submitted by the Ld. Counsel that all these charges are clearly towards the expenses incurred on the asset which has to be allowed as cost of improvement or expenditure incurred wholly and exclusively connected with the transfer. 18. From the perusal of the above expenses, we find that certain expenses are directly related to the cost of the improvement for example Govt. Tax , cost of electric meter, cost of BTU meter, HVAC charges, service charges, stamp duty charges. However charges like maintenance charges, electricity charges and other charges cannot be held to be any expenditure incurred wholly and exclusively connected with the transfer of cost of acquisition. Therefore, AO has directed to examine these expenses and allowed the same u/s 48 in the computation of long term capital gain. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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