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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Per Pramod Kumar, Vice President:
This appeal, filed by the assessee, is directed against the order dated 30th 1. October 2014 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2010-11.
Grievances of the assessee, as summarised in the concise grounds of appal, are as follows:-
“1. The Ld. CIT (A)-XX, Ahmedabad has erred in law and in facts by confirming the disallowance of transfer fees of Rs. 51,00,000/- claimed by the Appellant while computing the cost of acquisition of the Capital Gains on the new property.
The disallowance of Rs. 51,00,000/- by way of deduction while computing the cost of acquisition of the new property is absolutely illegal, unlawful, contrary to the facts and evidence on record and against the principles of law, equity and justice and deserves to be quashed and set aside.”
Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee
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has shown capital gain of Rs.29,06,53,644/- on sale of a property at Mumbai. In the computation of capital gains, the assessee had claimed Rs.51,00,000/- paid on account of transfer fees as part of cost of acquisition of the property. This claim was, however, declined by the Assessing Officer by observing as follows:-
“The assessee was required to furnish supporting evidences of expenses incurred of Transfer fee of Rs.51,00,000/- and Legal charges of Rs.349034/-. However the assessee completely failed to file these evidences. Vide order sheet dated 11.03.2013 also, the assessee was again allowed opportunity to file these evidences but till day she could not file any evidence. It is to be mentioned here that the property under consideration was situated in The New India Cooperative Housing Society, Juhu Ville Parle, Mumbai and the said Co-operative Society placed few conditions on the owner of the property Shri M M Shah including the conditions that Shri M M Shah will pay Rs.1,00,000/- as transfer fee to the Co-Operative Society and also he transferees will pay a donation of Rs.50,00,000/- to the Co-Operative Society. It appears that the assessee has considered this 51,00,000/- as cost of acquisition of this property. However it cannot be considered as cost of acquisition in the hands of the assessee for the reasons that Rs. 1,00,000/- was to be paid by the previous owner of the property i.e. Shri M M Shah and Rs.50,00,000/- was required as donation to the Co-Operative Society therefore the same also cannot be considered as cost of the acquisition of the property in the hands of the assessee. Further no any evidence of any kind has been furnished by the assessee in support of any payment. After considering all these facts the cost of acquisition of the property is being considered after reducing the amount of Rs.51,00,000/-.”
Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. In his rather detailed order, setting out the related facts and arguments of the assessee as also his analysis, learned CIT(A) observed as follows:-
“With regard to ground Nos. 1, 3, 4, 6, 7, 8, 9 & 10, the allowability of the payment of Rs.51 lakhs to the society namely the New India Co.Op. [lousing Society Ltd. as deduction it has been observed by the A.O. that Rs. 1 lakh was the payment to be made by the seller of the property namely Shri M. M. Shah from whom appellant purchased the property which is evident from the copy of the Setter of the aforesaid society dtd. 12.8.1999 addressed to the seller namely Shri MM. Shah which reads as under:-
“Mr. M. M. Shah Aug.12, 1999 Husman, Plot 26, NS Road 11, JVPD Scheme Mumbai 400049
Dear Mr.Shah,
Ref:- A) 5 shares of Rs.50/- each numbered from 121 to125 in your name – share certificate no.25
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B) Indecture of lease made on 6th Jan, 66 with the New India Co. Op. Hsg. Soc. Ltd. – the lessor- for plot no.26 in the Society
You have advised the Managing Committee of the Society of your desire to transfer the above \hares together with your lease rights on the above plot to Mr. & Mrs. Anilbhai Virani of Mumbai for a consideration ofRs.720 lakhs,
This society has no objection to such a transfer on your complying with the statutory formalities and subject to
a) Your arranging to produce a letter from the transferees stating that they intend to construct a bunglow on this property for their own stay.
b) Your paying a transfer fee of Rs. 1 lac to Society. c) Your transferees paying the donation amount of Rs.50 lakhs at the time of completion of sale.
This Society has no objection to the transferees constructing their own family dwelling home (plans of which shall be subject to prior approval by the Society) upon the above plot after demolition of the existing building/structure aftercompletion of the sale.
Sincerely yours, For NEW INDIA CO.OP.HSG.SOC.LTD. Sd/- (Mohan Patel D. Sc.) Hon. Secretary"
The column Clause-B of the aforesaid letter the society has directed Shri M.M. Shah to pay Rs. 1 lakh to the society as a transfer fee. Thus it was the liability to make the payment of the transfer fee by the seller and not by the appellant as a purchaser. Therefore the allowability of such payment as deduction cannot be considered in the hands of the appellant. Even otherwise also the appellant has not given any details of payment of Rs. 1 lakh to the society made by it and also the details of her responsibility/obligation to make such payment to the society as the terms and condition in the letter of the society referred above. Even from the purchase deed dtd. 25.11.1999 the appellant has not pointed out any terms and conditions stating the liability of the appellant to make the payment of the transfer fee to the society over and above to the purchase consideration. Further the society has asked the seller namely Shri MM Shah to make the payment of a transfer fee and not to the appellant. Since it was not the liability/obligation of the appellant to make the payment of Rs. 1 lakh towards the transfer fee therefore no liability arose in the hand of the appellant to make such a payment to the society and therefore the deduction of such payment as a cost of acquisition is not allowed. In other words the payment made by appellant for and on behalf of Shri VI. M Shah is not a part of her cost of acquisition and the same is not deductible as part of cost for arriving at the long term capital gain.
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3.12. Further with regard to the payment of Rs.50 lakhs by the appellant to the aforesaid society it has been seen that as per the clause-C of the letter of the aforesaid society dtd. 12.8.1999 as referred above also this has been mentioned as under:-
"C Your/transferees paying the donation amount of Rs.50 lakhs at the time of completion of the sale"
Further in the purchase deed dt. 25.11.1999 the relevant clause is reproduced as under:- "14. The Society has by its letter dated 12th August, 1999 granted its no objection for the sale /assignment of the said property in favour of the Assignees and to enable the Assignees to construct their own dwelling house thereupon, a copy of the said letter is hereto annexed and marked Annexure 'B'.
From the above clause in the letter of the society addressed to the seller namely Shri MM Shah it was clear that the society wanted the donation of Rs.50 lakhs either from the seller Shri M M Shah or the transferee i.e. appellant. But the appellant could not give the details/proof stating that the liability to make the payment of Rs.50 lakhs laid on the appellant. Even in the purchase deed dtd, 25.11.1999 there was no such clause stating any terms and conditions pointed out by the appellant that the payment of Rs.50 lakhs was to be made by the appellant over and above to the purchase consideration as mentioned in the aforesaid deed. Therefore no liability / responsibility / obligation had been upon the appellant to make the payment of the donation.
Even otherwise also it was the payment of donation to the society for Rs. 50 lakhs and the purpose of payment has not been specified with regard to transfer of the property in the name of appellant. Further the donation cannot be the part of the cost of acquisition in view of the provisions of Section 48 of I.T. Act. As per the clause (ii) of Section 48 the allowability of the deduction was in respect of the cost of acquisition of asset and the cost of any improvement thereto. Since the donation has been paid by the appellant to the society which was never been accordingly to any terms and conditions of the sale deed and therefore the same cannot be said to be part of cost of acquisition of the assets purchased and therefore no deduction of such payments is allowed. In this regard, AO's action for denial of the deduction of the donation of Rs.50 lakhs as part of cost of acquisition is found correct and justified and the grounds of appeal are dismissed.”
The assessee is not satisfied and is in further appeal before us.
We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We find that there is no, and there cannot be any, dispute about the position that the assessee had actually paid Rs.50,00,000/- to New India Cooperative
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Housing Society Ltd. The copies of bankers’ cheques dated 25.11.1999 are placed on record, and these cheques are of the same date as the date of transfer. The terms of society’s permission to transfer ownership of the property also indicate that the payment of Rs.50,00,000/- was a sine qua non for transfer of ownership of property to the assessee, of course, its nomenclature was ‘donation’ but that’s not really material to decide its character in the hands of the assessee. The nature of this payment, so far as assessee was concerned, was a payment for transfer of ownership in records of society. Clearly, therefore, it was part of the cost of acquisition of property whether the payment of Rs.50 lakhs for transfer of ownership in the records of society was a part of the terms and condition of sale deed or not, the fact remains that the payment of Rs.50 lakhs to society was a condition precedent to the transfer of property in favour of the assessee. In our considered view, therefore, the impugned amount of Rs.50,00,000/- was part of the cost of acquisition of property in the hands of the assessee. 8. In view of the above discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee to the above extent. As we do so, we make it clear that no arguments were advanced about Rs.1 lakh paid to the society, and, to this extent, we treat the grievance as not pressed. The relief will therefore be confirmed to the extent of Rs.50 lakhs payment by the assessee as discussed above. The Assessing Officer is directed to modify the computation of capital gains accordingly. 9. In the result, the appeal is partly allowed. Pronounced in the open court today on the 11th June, 2019 Sd/- Sd/-
Ms. Madhumita Roy Pramod Kumar (Judicial Member) (Vice President) Ahmedabad, the 11th day of June, 2019 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad 1. Date of dictation:..order prepared as per 4 pages manuscripts of Hon’ble VP-attached.11.6.19. 2. Date on which the typed draft is placed before the Dictating Member: ...11.06.2019.... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: …11.06.2019... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .... 11.06.2019... 5. Date on which the file goes to the Bench Clerk : . ……. 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......