TMI Blog2023 (8) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... as seller of the rights, therefore, the holding period of the rights is less than 36 months and thus gain arising from transfer of said rights is short term capital gain (STCG) only. Claim of the interest paid on loan for purchase of the property as part of cost of acquisition - Assessee submitted that since right in flat were acquired by way of funds borrowed from the Bank/financial institution, therefore, the interest paid towards such loan should be included in the total cost of acquisition of right - HELD THAT:- We find that the issue of interest paid on housing loan whether eligible for deduction as cost of acquisition while computing long-term capital gain hasn t decided in the case of ACIT Vs Sunil Batra [ 2015 (11) TMI 1274 - ITAT DELHI] as relied on the decision of Tata Iron and steel Co Ltd. [ 1997 (12) TMI 5 - SUPREME COURT] as held that cost of the asset and cost of raising money for purchase of the asset, are two different transactions. Though in above case, the issue was impact of fluctuation of foreign currency loan borrowed for purchase of the asset, but the same analogy apply for interest for money borrowed purposes of capital asset , which in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received and therefore, provisions of section 56(2)(vii) are not applicable in the case of the assessee in the instant assessment year. The ground of the Revenue is accordingly dismissed. Addition in respect of cash as found from the residence of the assessee - AO made the addition for the reason that no explanation regarding source of cash was made - HELD THAT:- DR could not controvert availability of cash in hand on more than Rs. 53,00,000/- in the hands of the assessee which was supported by way of income-tax return for assessment year 2016-17. Therefore, we do not find any error in the order of the Ld. CIT(A) in deleting addition. Appeal filed by the Revenue is partly allowed for statistical purposes. - Shri Aby T Varkey (Judicial Member) And Shri Om Prakash Kant (Accountant Member) For the Assessee : Mr. K. Gopal For the Revenue : Mr. Jasdeep Singh, CIT-DR ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 24.02.2022 passed by the Ld. Commissioner of Income-tax (Appeals)-54, Mumbai [in short the Ld. CIT(A) ] for assessment year 2017-18, raising following grounds: 1. On the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the fact that during the assessment proceedings the assessee had not submitted any documentary evidences to establish the source of cash found during the search at assessee's residential premises? 2. Briefly stated, facts of the case are that a search and seizure action u/s 132 of the Income-tax Act, 1961 (in short the Act ) was carried out in the case of Indiabulls Group on 13.07.2016. The assessee being a part of the said group was also searched u/s 132 of the Act. In the search action at the residential premises of the assessee located at, Delhi, cash of Rs. 2,78,000/- was found. For the year under consideration, the assessee filed return of income on 28.07.2017 declaring total income of Rs. 12,94,54,166/-. The return was selected for scrutiny and statutory notices under the Act were issued and complied with. This is the assessment year corresponding to the previous year in which search was conducted and therefore, this was abated assessment year for the purpose of section 153A of the Act. During the scrutiny proceedings, the Assessing Officer noticed long term capital gain (LTCG) of Rs. 8,98,59,373/- declared by the assessee on transfer and assignment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain on transfer of rights in said flat is LTCG or STCG. The dispute is also regarding claim of interest paid on loan taken for investment in said flat as part of cost of acquisition. 5.1 Brief facts qua the issue in dispute are that during the course of assessment, for evidence of sale of rights in flat, the assessee filed a copy of Memorandum of Understanding (MOU) dated 14/12/2016, which was executed between assessee and buyers, for transfer of rights in said flat i.e. C-3501 (a copy of which is placed on Paper Book pages 42 to 48 of the Paper Book). The Assessing Officer noted that as per MOU, the assessee vide application dated 23.04.2013 applied for a provisional reservation of residential flat No. C-3501 with the Developer of BLU Estate Club, Worli, Mumbai, i.e. Indiabulls Infra Estate Ltd. The MOU further mentions that the allotment was made against consideration value of Rs. 23,05,37,750/-, which was confirmed by the developer. The allotment of the flat was done by the developer on 31.10.2015 as recorded in the MOU dated 14.12.2016. The assessee stated to have paid an amount of Rs. 22,80,40,013/- to the developer towards the above reservation rights availed till 14.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rights for more than the period of 36 months and treated the gain on transfer of said right as LTCG, whereas the Assessing Officer has referred to the MOU dated 14.12.2016, wherein it has been mentioned that the said flat No. C-3501 has been allotted to the assessee on 31.10.2015. According to the date of allotment noted in MOU, the period of holding of the rights in the said flat is less than 36 months i.e. from 31.10.2015 to 14.12.2016, therefore, the Assessing Officer rejected the contention of the assessee of the LTCG and held the gain on transfer of the rights of the flat as STCG. The Assessing Officer also rejected the claim of interest as part of cost of acquisition. Before the Assessing Officer in absence of any further clarification, he treated the gain as STCG(short term capital gain) and also disallowed the claim interest of cost of acquisition. The STCG has been computed by the Assessing officer as under: Sale consideration 25,32,72,150 Less: Cost paid to Developer 11,33,10,868 STCG 13,99,61,282 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned @10.5% p.a. On verification of the details submitted by the appellant, it is seen that the appellant had paid Rs. 2,00,00,000/- on 23.04.2013, Rs. 4,52,55,210/- on 23.10.2013 and Rs. 4,70,16,940/- on 26.11.2014 by cheque from HDFC Bank Ltd. Further, an amount of Rs. 13,45,88,871/- was disbursed by IICL Ltd on 31.03.2015 to the developer. Indiabulls Infrastate Ltd. Thus, the total payment of Rs. 24,68,61,021/- was made by the appellant in respect of purchase of flat to the developer till 24. 12.2016. Thus, the appellant in fact has paid more amount than the amount of Rs. 22,86,49,013/- as mentioned in the MOU dated 14. 12.2016. 6.3.2 From the above facts, it is seen that Flat No. C-3501 was allotted to the appellant on 23.04.2013 and not on 31.10.2015. The appellant has paid total amount of Rs. 24,68,61,021/-, Thus, the appellant has rightly computed long term capital gain in respect or sale of flat by taking the date of allotment on 23.04.2013. In view of the above facts, the addition of Short Term Capital Gain of Rs. 13,99,61,282/- made by the AO is deleted. 5.4 Before us, the Ld. DR referred to the MOU dated 14.12.2016 for transfer of rights to the buyer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d housing loan was closed by ICCL and same could be clearly seen from the closure account annexed at Pages 55 - 58 of the additional paper book. Thus, it was contested that the entire consideration paid was only towards the said Unit C-3501, which was allotted to the assessee on 23.04.2013 and therefore, the assessee is justified in claiming the gains arising on the sale of the rights in the said unit as Long Term Capital Gains (LTCG). 5.6 Further, the ld counsel of assessee further reiterated that the assessee had made an application with Indiabulls Infraestate Ltd, for provisional allotment of the flat No. C-3501 on 23.04.2013 for an agreement value amounting to Rs. 23,05,37,750/- On the very same day itself, the assessee received a receipt from the Developer, acknowledging the receipt of Rs. 2,00,00,000/- from the assessee towards Unit No. C-3501, as well as an allotment letter dated 23/04/2013 for the said unit. According to the ld Counsel , this was first allotment letter issued by the Developer, however, the Ld. AO relied on the subsequent allotment letter dated 31.10.2015 and considered the same to be the date on which the said unit was allotted to the assessee. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bulls Infrastructure Credit Ltd-Transaction date 31.03.2015 that the 'Disbursal Amount of Rs. 13,45,88,871/- is for a property under description as under - Flat No. C-2901, 29 Floor, Tower No. C, Indiabulls BLU, GanpathraoKadam Marg, Near Worli Circle, Mumbai-400 013 (hereafter referred as C-2901), which has a carpet area of 8294** 2. However, as per the disbursement details prepared, it is seen that the loan has been sanctioned by M/s. Indiabulls Commercial Credit Ltd and not by Indiabulls Infrastructure Credit Ltd. As per this, the amount of Rs. 13,45,88,871/- has been disbursed to Indiabulls Infraestate Ltd. (hereafter referred as IFL) on 31.03.2015 as per the following details 3.1 As per the loan sanction letter dated 31.03.2015, the EMI amount of Rs. 25,84,676/-is payable every month during the loan tenure of 240 months. 4. During the assessment proceedings as well as the appellate proceedings, the assessee claims the aforesaid loan is payment towards property at C-3501, 35 Floor, Tower No. C, Indiabulls BLU, GanpathraoKadam Marg. Near Worli Circle, Mumbai-400 013 (hereafter referred as Flat No. C-3501). whereas the loan disbursal document state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loan disbursal document states that the loan was sanctioned for Flat No. C-2901. In this regard, following issues are noticed : i. No verifiable evidence has been submitted by the assessee in support of its claim that the Flat No. C-3501 was allotted on 23.04.2013, except the fact a certificate dated 23.04.2013 from IFL. It may be mentioned that the assessee is a related party of this group concern and such a self-supporting certificate is not verifiable/reliable document. ii. As regards the bank statement of assessee (HDFC Bank) evidencing payment of Rs. 2 crores vide Cheque No.876744 dated 23.04.2013 to IFL.it does not establish that this payment of Rs. 2 crores was paid for Flat No.3501 as claimed by the assessee as per the above certificate dated 23.04.2013 of IFL. It may also be noted that the source of this payment is an amount of Rs. 2 crores received by the assessee from Revati Infrastructure on 18.04.2013. Further, from the bank statement of the assessee it is also seen that the assessee has also made a similar payment of Rs. 7.5 crore to M/s. Aspire Promoters (Pvt.) Ltd. on 30.04.2013. The source of this payment is an account of credit entry of Rs. 7.5 crore o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment conditions has also been indicated in the Payment Plan CLPP - Toner 'C (Page 12 of the Application Form) of this Application Form to demonstrate that an amount of Rs. 2 crore payment was required as a pre-booking amount for booking either Flat No. C-2901 and C-3501, or this payment of Rs. 2 croreswas payment for some other purpose which has been given a colour of payment received for the booking of Flat No. C-3501. It is seen that the signature of the assessee is on two different dates (i.e. 23.04.2013 and 23.04.2016) on different pages of the same form as under raising doubt that this document was signed on 23.04.2013. (vi) Para 3 of the MOU dated 14.12.2016 in respect of the sale of Flat No. C-3501 reads as under - Simultaneously upon execution hereof the Allottee has handed over to the Purchasers the Letter of Allotment dated 31st October 2015 in original. Save and expect the Letter of Allotment the Allottee has no other document or paper in his possession or control in respect of the Premises. As per the above para, the letter of Allotment dated 31.10.2015 has been considered as the only document or paper showing possession or control in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the assessee is however that the assessee had applied for allotment of the flat on 23.04.2013 and accordingly it was allotted to him on 23.04.2013. The assessee has referred to allotment letter dated 23.04.2013 available on Paper Book Page 11 as first allotment letter. The contention of the assessee that allotment letter dated 31.10.2015 is a second or subsequent allotment letter, whereas assessee was allotted the flat No. C-3501 on 23.04.2013 and therefore date of holding of the rights in such flat should be considered as commenced from 23.04.2013. The assessee has claimed that a housing loan was sanctioned by the Indiabulls Commercial Credit Ltd., which is another entity of Indiabulls group. According to the said sanctioned letter, which is available on page 12 to 32 of the Paper Book, a loan of Rs. 25,88,87, 000/- has been sanctioned on 31.03.2015 but description of property mentioned in said sanction letter is Flat No. C-2901 in BLU Apartment, Worli i.e. same building in which flat No. C-3501 is located. Regarding the booking of Unit C-3501 and loan issued in respect of C-2901 the assessee by way of letter dated 01.12.2021 addressed to the Dy. CIT during remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the Developer is absolutely clear about the unit number. We humbly request your good-self to consider the facts of the assessee's case rationally while giving due consideration to business realities. 5.10 The assessee has also filed a letter from the India Bulls Infra Esate ltd (now known as Indiabulls Real Estate) that assessee did not hold both the units i.e. Unit No. C-2901 and Unit No. 3501 together at any given point of time and initially the assessee booked Unit No. 2901 which was later on his request changed to Unit No. C-3501. The assessee has also filed a letter from the banker i.e. Indiabulls Commercial Credit Ltd. that initially loan was sanctioned for Unit No. C-2901, however later on, the assessee informed that Unit No. C-3501 was chosen. The said loan was closed on 21.02.2017. In view of the above facts, it seems that initially the assessee had been allotted Unit No. C-2901 and later on the same has been changed to C-3501 on the request of the assessee and accordingly provisional allotment letter has been issued on 31.10.2015 for flat C-3501, which has been referred in the MOU dated 14/12/2016 for transfer of the right in the said flat. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio laid down in case laws, accordingly those case laws are distinguishable. Before the Ld. CIT(A), it was submitted that for computing the holding period for capital gain, the period should be taken from the date of the application of the flat however, we do not agree with the said contention of the assessee. The rights of the assessee arise in the said flat only on the allotment and not by way of filing application. The confirmation letter filed from the developer as well as from the bank also shows that the flat No. C-3501 was not allotted initially to the assessee though the developer has submitted a letter that assessee has not held two units in the said building at any point of time. Before us, the issue is only in respect of holding period of the right in flat No. C-3501 and therefore, we are not concerned whether the assessee had purchased both the properties i.e. C-2901 and C-3501. That might be a matter for investigation by the Assessing Officer. On appreciation of the factual evidences produced before us, we are of the view that the flat C-3501 has been allotted to the assessee on 31.10.2015 as mentioned in the MOU dated 14.12.2016, which is a document signed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot part of the cost of acquisition. He submitted that said interest payment is allowable under the head income from house property' as revenue expenditure and therefore, cannot be included as part of capital expenditure for computing cost of acquisition. 6.3 We have heard rival submission of the parties and perused the relevant material on record. We find that the issue of interest paid on housing loan whether eligible for deduction as cost of acquisition while computing long-term capital gain hasn t decided by the Tribunal Delhi bench in order dated 30/09/2015 in the case of ACIT Vs Sunil Batra in ITA No. 3644 /Del/2011 for assessment year 2007-08. The tribunal relied on the decision of the Hon ble Supreme Court in the case of CIT Vs Tata Iron and steel Co Ltd(231 ITR 285 SC) . The Hon ble Supreme Court held that cost of the asset and cost of raising money for purchase of the asset, are two different transactions. The relevant finding of the Hon ble Supreme Court is reproduced as under: We are of the view that Mr. Murthy is right in his contention on this aspect of the matter. Coming to the question raised, we find it difficult to follow how the manner of repayment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the banker or financial institution does not seem to be part of a regular practice of the bank or financial institution. In the case of the assessee the developer and the financial institution both being part of the same group, of which the assessee is part, otherwise in normal course no bank can give loan against the property which was not owned by the assessee and also will not transfer loan against one property to another property without making changes in the loan sanction letter or issuing revised sanction letter. In the case, the documents produced do not give confidence of authenticity. 6.6 Accordingly, the finding of the Ld. CIT(A) on the issue in dispute is set aside and finding that of the Assessing Officer is restored. The ground No. 1 2 of the appeal of the revenue are accordingly allowed. 7. The ground No. 3 and 4 of the appeal relate to addition of Rs. 11,33,10,868/- treated by the Assessing Officer as unexplained investment u/s 69B of the Act. 7.1 Brief fact qua the issue in dispute are that in the allotment letter dated 31.10.2015, available on Paper Book page 33, it is mentioned that against the total consideration amount of Rs. 23,05,37,750/- of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loan paid by ICCI to Developer 1837,86,057 1837,86,057 Loan repaid by the Buyer (1837,86,057) (1837,86,057) Total (A) 1452,39,144 1636,12,777 7.2.1 The assessee also contended that loan amount of Rs. 18,37,86,057 was disbursed by the Financial Institution to the developer. If we take that amount into account, the amount paid by the assessee would exceed the total agreement value of the flat. The assessee while calculating sale consideration of Rs. 25,32,72,150/- mentioned that he has received refund of Rs. 11,32,72,150/- from the developer along with premium of Rs. 14,00,00,000/- received from the buyers/purchasers. When we take into all these amount we find that figure are not reconciling with claims made before the lower authorities for claim of payments towards property. In the circumstances, we do not have any alternative except to restore this issue back to the file of the Assessing Officer with a direction to the assessee to produce all the documentary evidence in support of that payment of Rs. 24,68,81,021/-, which was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property; 8.2.1 On perusal of the above provisions it is evident that deemed income u/s 56(2)(vii) of the Act can be considered at the time of the receipt of the property in the hand of the assessee since in the year under consideration the property has not been received and therefore, provisions of section 56(2)(vii) are not applicable in the case of the assessee in the instant assessment year. The ground of the Revenue is accordingly dismissed. 9. The ground No. 6 of the appeal relates to addition of Rs. 2,78,000/- in respect of cash which was found from the residence of the assessee. The Assessing Officer made the addition for the reason that no explan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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