TMI Blog2020 (5) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the long-term capital gain. The grounds raised by the assessee on this issue are accordingly allowed. Deduction u/s 54 - AO denied the claim of deduction u/s 54 on the ground that the assessee sold a piece of land and not a residential house - existence of any structure/fixtures on land cannot be said to be a residential house however, allowed the benefit of deduction u/s 54F - HELD THAT:- We find although the assessee challenged the action of the AO in denying the benefit u/s 54, the CIT(A) has not adjudicated the same. We find from the various details that the assessee had filed various documents before the CIT(A) to substantiate that there was a residential unit on the farm house. However, he has not given any finding on this issue. We, therefore, deem it proper to restore this issue to the file of the CIT(A) with a direction to adjudicate the issue of deduction u/s 54 which was specifically challenged before him by the assessee. CIT(A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. The second issue raised in the grounds of appeal is accordingly allowed for statistical purposes. - ITA No.665/Del/2017 - - - Dated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 199 92,504 Construction 1991-92 3,00,000 1991-92 199 11,83,417 Construction 1992-93 2,00,000 1992-93 223 7,04,036 Total 7,10,950 27,19,592 1. Division of Sales Consideration Name Gross Sales Consideration Ratio Paid to Shikhar Travels New Consideration Capt. Swadesh Kumar 2,79,95,491 45.33% 86,12,602 1,93,82,889 Mrs. Mala Kumar 3,37,64,509 54.67% 1,03,87,398 2,33,77,111 Total 6,17,60,000 100% 1,90,00,000 4,27,60,000 3. From the various details furnished by the assessee, the AO noted that the assessee along with her husband had purchased the land in F.Y. 1991-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd., is not a registered document or a notarized one and, therefore, it is only a self serving document made to serve the purpose of the assessee when the parties to the agreement are closely associated. Further, the assessee did not submit any valuation report to substantiate that the amount of ₹ 1.9 crore was in proportion to the fair market value of such structure. 4. So far as the claim of deduction u/s 54 of the IT Act is concerned, the AO held that deduction u/s 54 of the Act is available to the assessee where capital gain assessed from transfer of a residential house, the income of which is chargeable under the head Income from house property. However, in the instant case, the assessee has sold only a piece of land. If any structures/fixtures were erected on the said land at all, the same cannot be said to be a residential house by any stretch of imagination. He further noted that the assessee, vide her reply dated 15th October, 2014, has herself admitted that if the claim of the assessee u/s 54 of the Act is treated to be not available, the same should be allowed u/s 54F of the IT Act. The AO, therefore, considered the claim of the assessee u/s 54F of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and the circumstances of the case and in law in sustaining an addition to the extent of ₹ 82,82,286/- to the assessee s share in sales consideration, though not belonging to the assessee resulting in double taxation of the same. 4. The Learned CIT (Appeals) haserred on the facts and the circumstances of the case and in law in computing the taxable Long Term Capital Gains u/s 54F of the Income Tax Act, 1961 as against section 54 of the Income Tax Act, 1961. 5. The Learned CIT (Appeals) erred on the facts and the circumstances of the case and in law in disregarding the remand report of the Assessing Officer. 6. The Assessee craves leave to add, amend, alter or forego any of the above grounds of appeal at any time hereafter. 8. The ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that though the company has incurred losses in the year under consideration and has not paid any taxes, however, the fact remains that the company has considered the amount received as compensation as part of its total income under the Income-tax Act. Merely because the company has set off the same against losses does not mean that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be considered to be an expenditure incurred wholly and exclusively in connection with the transfer of the capital asset and should be allowed as a deduction u/s 48(1) of the Act. Referring to various decisions, he submitted that the amount of compensation paid to M/s Shikhar Travels (India) Pvt. Ltd., should be allowed as a deduction from the sale consideration to arrive at the correct capital gain. 11. The ld. Counsel for the assessee further submitted that the fact that the CIT(A) gave part relief and the Revenue is not in appeal before the Tribunal shows that there is need for some compensation to be paid to M/s Shikhar Travels (India) Pvt. Ltd. However, the authorities cannot put themselves in the arm chair of the assessee to determine what is reasonable and what is not. For the above proposition, he relied on the decision of the Hon ble Delhi High Court in the case of Kaushalya Devi (deceased) through legal representatives vs. CIT, vide ITA No.600/2004, order dated 20th April, 2018. He also relied on various other decisions and submitted that the words wholly and exclusively has been interpreted by the courts and held that the authorities cannot decide the commercial ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 and 31st March, 2011, copy of which is placed at page 112 of the paper book and submitted that the said company is not a loss making company. 15. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also gone through the various decisions cited before us. We find, the AO, in the instant case, denied the compensation of ₹ 1,03,87,398/- being the share of the assessee out of the total amount of ₹ 1,90,00,000/- paid to M/s Shikhar Travels (India) Pvt. Ltd. from the sale consideration on account of sale of house situated at Killa No.22, 23 and 24, Sector 52, Village Wazirpur, Pataudi Road, Gurgaon, which was sold to M/s Ramprastha Greens Private Ltd. The reason for such denial by the AO was that no valuation report was filed by the assessee to substantiate that the amount of ₹ 1.9 crore was in proportion to the fair market value of such structures. Further, the agreement is not a registered document or a notarized one. It is also his allegation that all the three parties to the agreement are closely associated. He, therefore, held that the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the current year the company has incurred some losses. However, it is seen that the return of income filed by the husband of the assessee has been accepted where such compensation was claimed as a deduction from the net sale consideration and no action u/s 147/148 has been initiated although such assessment has been completed u/s 143(1) of the Act. The provisions of section 40A(2) has also not been invoked by the AO. Therefore, we find merit in the argument of the ld. Counsel that the AO cannot sit in the arm chair of a businessman and decide how much compensation should be given for vacating the property and, thereafter, to sell the same to a third party. Since the transaction in the instant case is not doubted, therefore, merely because the parties are related or that the agreement was not registered or notarized, the same, in our opinion, cannot be a ground to deny the benefit of deduction of the compensation paid to M/s Shikhar Travels (India) Pvt. Ltd., from the net sale consideration for computing the long-term capital gain. In this view of the matter, we are of the considered opinion that the ld.CIT(A) was not justified in restricting the compensation paid to M/s Shikha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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