TMI Blog2023 (6) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 45 r.w.s 2(47) (v) or not? - HELD THAT:- The nomenclature of the service tax paid in this case may not be correct but its germane of sale consideration which was later on offered as part of total capital gain, therefore, if will not allow the deduction of said amount which is otherwise deposited in Govt. Account, then the same shall not only amounts to double jeopardy but shall also cause injustice. Consequently Assessee s claim qua expenditure is allowable, not being service tax paid for rendering the consultancy services as claimed but not substantiated, but infact being originated from the sale consideration which was ultimately offered to tax as LTCG by the Assessee and therefore can be construed part of total sale consideration and is allowable as deduction under section 48(i) - Ground raised by the Revenue Department is also dismissed. - I.T.A. No. 8520/Del/2019 - - - Dated:- 20-6-2023 - Shri Anil Chaturvedi, AM And Shri N. K. Choudhry, JM For the Appellant : Shri Harpal Singh Kharab, Sr. DR For the Respondent : Shri Ajay Wadhwa, Adv. And Ms. Ragini handa, CA ORDER PER N. K. CHOUDHRY, JUDICIAL MEMBER: The Revenue Department/Appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid companies have agreed to share entire constructed area between themselves and as per agreement, agreed to pay to the Assessee a sum of Rs. 30,50,36,525/- in total as consideration amount. The entire land is developed and constructed by Janapriya Engineers Syndicate Ltd. and therefore, it is evident that the sum of Rs. 30,50,36,525/- paid/payable to the Assessee is only for the transfer of the land. Consequently, the AO vide letter dated 22.10.2010 asked the Assessee to explain, as to why the amount of Rs. 30,50,36,525/- should not be treated as sale consideration of the plot of land and brought to tax under the head Long Term Capital Gain (in short LTCG ) while applying the provisions of section 2(47(v), 45 and 53 of the Act. 3.2 In response to the aforesaid letter dated 22.10.2010, the Assessee vide letter dated 29.10.2010 replied/claimed as under: The Assessee as per the terms of Agreement-cum- GPA dated 21.09.2007, initially received Rs. 13.50 Crores and handed over the possession of the land to the said concerns. The said companies also issued post dated cheques of the remaining amount along with Bank Guarantee to the Assessee. Consequent to Agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.04.1981. The Joint Sub-Registrar-1, Hyderabad (South) vide his letter dated 20.11.2010 has intimated that the Market Value of the land as on 01.04.1981 was at Rs. 60 per sq. yard, which is accepted to determine the FMV of the entire land on 01.04.1981 for the purpose of computation of Capital Gain. 3.4 The AO consequently, considered the sale value of the land as Rs. 30,50,36,525/-and adopted the FMV of the land 60/- per sq. yards on the basis of report of Joint Sub- Registrar, Hyderabad (South) {wherein the Market Value of the land was intimated @ Rs. 60/- per sq. yard} and determined the FMV at Rs. 40,69,440/- {67,824 sq. yards. X Rs. 60/- per sq. yard), which resulted into indexation cost of acquisition to the tune of Rs. 2,24,22,614/- (40,69,440/- X 551/100). 3.5 Resultantly , the AO computed the LTCG to the tune of Rs. 28,25,77,386/- and also rejected the alleged claim of deduction of service tax of Rs. 187,40,000/- paid in Govt. Department and made the addition of Rs. 2,53,601/- on account of excess set off of losses. 4. The Assessee being aggrieved, in addition to challenging the other addition on account of excess set off of losses made by the AO which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted the enquiry related to FMV made from Joint Sub-Registrar, Hyderabad, nor offered any comment on the valuation report dated 27.10.2010 submitted by the Assessee and therefore, the Assessee after adopting the cost of acquisition as on 01.04.1981 at Rs. 150 per sq. yard, consequently calculated the LTCG at Rs. 23,04,03,464/-. 7. The Ld. Commissioner by considering the peculiar facts and circumstances observed as under: That the AO has conducted the enquiry and obtained the report from Joint Sub-Register, Hyderabad but has not confronted the said report to the Assessee. On examining the assessment record, the report dated 20-11-2020 which was relied upon by the AO, could not be found and therefore the remand report was called from the AO by calling the report from DDIT (Inv.) and to enquire about the authenticity of the certificate/report dated 27-10-2010 submitted by the Assessee as well. The AO has not offered any comment on the valuation report submitted by the Assessee. There are two reports available from the same authorities in respect of the FMV of the property as on 01.04.1981 and the AO has not brought any evidence on record to prove that valuation certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the contrary, the Assessee refuted the claim of the Revenue/Department and vehemently supported the decision of Ld. Commissioner in adopting the FMV @ Rs. 150/- per sq. Yard. The Assessee further stated that for ascertaining the FMV of the capital asset for the purpose of computation of Income from Capital Gain, the AO can make further valuation of capital asset by referring to a Valuation Officer, in case there is a variation in the FMV adopted by the Assessee in accordance with the estimate made by the registered valuer. In any other case, if the FMV of the asset exceeds the value of the asset as claimed by the Assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf or that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do so. Therefore, in the provisions of section 55A of the Act, the parameters for determining the FMV of the capital asset, are prescribed. Consequently the AO is not empowered to call for the report directly from the Joint Sub-Registrar, Hyderabad (South) as done in this case, as per the dictum laid down by the Hon ble Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effects that the AO in the remand report neither disputed nor offered any comment on the valuation report submitted by the Assessee report dated 27.10.2010 (supra) wherein as on 01.04.1981 the FMV of the land was intimated @ Rs. 150 per sq. yard, and also not confronted the enquiry related to FMV made from the Joint Sub-Registrar, Hyderabad (South) and also made no reference under section 55A of the Act to the Valuation Officer for ascertaining the FMV of the capital asset under consideration, adopted the FMV value @ Rs. 150 on the basis of Report/letter dated 27.10.2010 (supra) filed by the Assessee. We also observe that even otherwise nothing reflects from the orders passed by the authorities below that before considering the Valuation Report dated 20.11.2010 as relied upon by the AO, the same was either confronted by giving any opportunity to the Assessee. On the aforesaid analyazations, we do not have any hesitation to hold that the Ld. Commissioner before coming to conclusion not only thoroughly considered the peculiar facts and circumstances of the case but also taken into account the rival claims of the Assessee and the AO qua Valuation Reports of Joint Sub-Registrar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land on the ground that a service tax has been paid in connection with the deals relating to the plot of land. The Assessee s argument has been considered and is found to be not acceptable on the ground that while computing the capital gain u/s 48 of IT Act only two kinds of expenditure is allowed to be deducted from the full value of sale consideration:- 1. Expenditure incurred wholly and exclusively in connection with such transfer. 2. The cost of acquisition of the asset and the cost of any improvement thereto. The Service Tax paid by the Assessee is not an expenditure. The Assessee has collected it from the developers and deposited in Government account which is in no way related to the transfer of the capital asset. The service tax was collected on a c of alleged rendering of some kind of services and consideration received on a/c of the services has been credited in the P L a/c as other income and not as capital gain. Hence, the claim of the Assessee is rejected. 13. The Assessee also challenged the said disallowance in first appeal before the Ld. Commissioner, who by considering the copy of challan in support of payment made to Govt. Account and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challan dated 26.03.2008 (pages no. 84 85 of Paper Book) deposited the said amount of Rs. 1,87,40,000/- in Govt. account , which strengthen the claim of the Assessee for rendering the consultancy/advisory services. The Ld. AR further claimed that without paying the service tax in the Government Department, the completion of the agreement was not possible and if the Assessee would not have paid the Govt. dues in the form of service tax then the agreement executed between the parties would not have been acted upon. The Ld. AR further claimed that in view of the judgment (278 ITR 240 123 ITR 94) wherein the Hon ble Court allowed the deduction of litigation expenses and liquidity damages, therefore the expenses claimed in this case is also allowable. 16. We have given thoughtful consideration to the peculiar facts and circumstances and rival claims of the parties. The Assessee, claimed to has provided consultancy services and consequently raising the invoice of Rs. 15,00,000,00/- along with Service tax of Rs. 1,87,40,000/-. We during the course of argument of this case asked the Assessee specifically, as to what kind of consultancy/ advisory services, the Assessee has rendered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciously deposited the same in the Govt. Account, hence, the same cannot be segregated from the total capital gain. In our considered view, the nomenclature of the service tax paid in this case may not be correct but its germane of sale consideration of Rs. 15 Crores, which was later on offered as part of total capital gain, therefore, if will not allow the deduction of said amount of Rs. 1,87,40,000/- which is otherwise deposited in Govt. Account, then the same shall not only amounts to double jeopardy but shall also cause injustice. Consequently in our considered opinion, the Assessee s claim qua expenditure of Rs. 1,87,40,000/- is allowable, not being service tax paid for rendering the consultancy services as claimed but not substantiated, but infact being originated from the sale consideration of Rs. 15 Crores, which was ultimately offered to tax as LTCG by the Assessee and therefore can be construed part of total sale consideration and is allowable as deduction under section 48(i) of the Act. Resultantly, Ground no. 2 raised by the Revenue Department is also dismissed. 17. In the result, appeal filed by the Revenue Department stands dismissed. Orders pronounced in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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