TMI Blog1993 (7) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ards of land with sheds. The assessee has claimed in the computation of capital accounts (1) an amount of Rs. 7,51,000 paid to mortgagee; stamp duty of Rs. 3,12,372, registration charges of Rs. 21,090, legal fees of Rs. 51,180, brokerage at Rs. 42,180, and (2) and deduction of Rs. 9,38,000 being the estimated market value of the property as on 1st Jan., 1964 as per the valuation report of M/s Bhavesh M. Desai dt. 16th April, 1985. The deduction of the estimated market value was in lieu of the cost of the property at Rs. 4,00,000. 4. The Assessing Officer has quoted from page 2 of the sale deed dt. 16th July, 1984 as under "the vendor herein (therein referred to as "the purchaser") of the third part and registered with the sub-registrar of assurances at Bombay under No. 2217 of Book No. 1 on 13th Feb., 1964 for the consideration of Rs. 3,50,000 paid by the vendor herein to the original owner, the original owner did thereby assign and the confirming party did thereby confirm unto the vendor herein as per purchaser......." This was with buildings and structure standing thereon admeasuring 5004.67 sq. yds. consisting of two portions (i) 4443.12 sq. yds. and another consisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the redemption to the mortgage and the capital gains go hand in hand. Payment of mortgage and interest, according to the assessment order, is a payment de hors sale. The assessment order also stated that all the deductions allowable in respect of capital gains are mentioned in s. 48 of the IT Act and such a deduction as is claimed by the assessee is not mentioned therein. Further, the ITO also relied on the decision in (i) K.U. Idiculla vs. ITO (1985) 22 TTJ (Coch) 23 : (1985) 13 ITD 81 (Coch) (ii) Ambat Echukutty Menon vs. CIT 1977 CTR (Ker) 307 : (1978) 111 ITR 880 (Ker) (iii) M.K. Bros. Pvt. Ltd. vs. CIT 1975 CTR (SC) 357 : (1972) 86 ITR 38 (SC) to support his view that the assessee is not entitled to the said claim. 5. In so far as the value of the property as on 1st Jan., 1964 is concerned the assessment order stated that the assessee has declared in her WT returns the value of the entire property at Rs. 3,50,000 as on 31st March, 1963, at Rs. 3,75,000 as on 31st March, 1965, at Rs. 4 lakhs in subsequent years. The cost of acquisition was explained by the assessee as Rs. 3,00,000 being the purchase price paid when the property was purchased on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 18 CTR (Guj) 390 :(1980) 126 ITR 669 (Guj) Thus the claim of the assessee was upheld by the CIT(A) on this issue. 7. The CIT(A) also considered the plea of the assessee that the fair market value of the property as on 1st Jan., 1964 under s. 55(2) of the IT Act has to be as per the choice of the assessee. Merely because while filing the WT returns, the cost of improvement and the factors causing increase in the value in the cost of the property were not taken into consideration the opinion of the valuer should not be ignored. The learned CIT(A) stated that since the registered valuer is also a technician and actuary his opinion should not be disregarded without valid reason and the ITO's order did not show any infirmity in the valuer's opinion. Smt. S.S. Patil's contention on this point is accepted. Of course the learned CIT(A) stated in passing that the valuation report merely construed an evidence and it does not bind either the Revenue or the taxpayer by referring to CIT vs. Ganesh Builders (1979) 116 ITR 911 (Bom) but nevertheless upheld the assessee's contention. 8. Aggrieved by the order of the CIT(A) the Revenue presently dispute it before the Tribunal. Three grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovements is the cost of improvement allowable as deduction under s. 48. As the property was subject to a mortgage redeeming the property on the mortgage by paying the aggregate amount and the accrued interest constitutes improvements to the property. There are two types of properties : General property and each and every right in property. If X - Y is equal to property any expenditure to improve the property by making it 'X' constitute cost of improvement. Support for such a view can be derived from Attilinarayana Rao vs. ITO, Kanti Swaroop Sharma vs. ITO (1992) 41 ITD 246 (All), CIT vs. Shakuntala Kantilal (1991) 190 ITR 56 (Bom), CIT vs. Daksha Ramanlal (1992) 105 CTR (Guj) 207 : (1992) 197 ITR 123 (Guj). When the transferor agreed to sell the property free of encumbrances the expenditure incurred on removing the encumbrances is cost of improvement. Even when interest is paid to the bank in respect of liability relating to the property that constitutes improvement as per CIT vs. Sakunthala Rajeshwari (1986) 53 CTR (Del) 82 : (1986) 160 ITR 840 (Del), where the amounts paid for the purpose of freeing the property from tenancy rights were allowed as a deduction. 11. For a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or conveyance, etc. The Vendor agreed to deliver within a week from the execution of the agreement to the purchaser's advocate all the title deeds relating to the property agreed to be sold for the purpose of investigating the Vendor's title to the said property. Para 4 of the agreement states that the vendor declares that the property agreed to be sold to the purchasers is subject to the recited mortgages dt. 24th Dec., 1960, and further first, second, third and fourth charges dt. 21st April, 1961, 8th March, 1963, 15th March, 1963 and 29th April, 1965 respectively and that the principal amount of rupees four lakhs and interest amounting to Rs. 3,38,500 upto 28th Feb., 1992 and further interest till payment of mortgage amount as outstanding and the vendor has agreed to pay to the said mortgage claim on or before the completion of sale hereunder on getting necessary amount from the purchaser for such payment out of the purchase price payable to the vendor and to obtain conveyance of the said property. 14. The facts narrated above indicate that the mortgage money and the principal amount were due from the vendor to the mortgagee as on the date of sale agreement entered into o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vements to the capital asset that was originally purchased by the previous owner. The Kerala High Court also pointed out that having regard with the definition of "cost of improvement" contained in s. 55(1)(b) in order to entitle the assessee to claim a deduction in respect of the cost of any improvement, the expenditure should have been incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner. In the third case reported in (1979) 119 ITR 837 (Mad), the Madras High Court held in the case where the assessee acquired property as a result of gift of the property by her father and as a result of suit by a third party claiming title to the property there was a compromise resulting in payment of money by the assessee to the third party, that the amount paid is not cost of acquisition to the previous owner and it is not cost of improvement of asset and the improvement of title to the asset is different from improvement to asset itself. In this case also reference was made to s. 49(8)(ii) and s. 55(1)(b) containing the definition of the Expression "cost of any improvement". The Madras High Court reiterated the cost of any im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth-tax purposes should be the basis. The learned counsel for the assessee contended that the declaration in the WT returns is not binding on her, in so far as the computation of capital gains is concerned. Reliance is placed on Mrs. Indira Bai vs. ITO (1992) 42 ITD 397 (Mad). In that decision the Tribunal held that there is no estoppel in law against parties in taxation matters and what determination of the value for wealth-tax purposes was made is a matter of routine and when evidence is available regarding sale of adjacent property in April, 1964, that can be taken into consideration and the value of the property as on 1st Jan., 1964 should be estimated on that basis. 18. In the instant appeal before the Tribunal the facts are different. The assessee has filed a valuation report which is more than 20 years later, i.e., on 16th April, 1985 and claimed that the value as on 1st Jan., 1964 is Rs. 9,38,000. Assuming that there is no estoppel in tax matters the assessee is not free from the obligation to establish the correctness of the value claimed by her to the value as on 1st Jan., 1964. In the absence of details one cannot go back to 20 years in time, rely on a valuation r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
