INDU BALA,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 60(1), NEW DELHI

Compensation Rs. 20,83,903/- (As per sale deed not received and also not receivable) Development charges Rs.1,02,51,250/- Lease rent Rs. 12,33,515/- Freehold charge Rs. 2,46,703/- _____________ Total Rs.1,38,15,371/- ===========

Date Purchase Indexed factor Indexed cost amount 30.03.1987 5,00,000 140 38,60,714 07.02.2013 1,17,32,000 852 1,48,85,319 20.10.2015 4,61,43,000 1081 4,61,43,000 25.11.2014 9,67,500 1024 10,21,355 Total 6,59,10,388 8. The compensation amount for the acquisition of land in 1984 was finally determined at Rs.20,83,903/- as against Rs. 5,00,000/- considered as on 30.03.1987 in the chart above.

Date of Sale 20.10.2015 Rs. Rs. Sale Consideration Received 20,91,00,000 Value for stamp purpose (50C) 26,29,88,000 Sale consideration for capital gain purpose 26,29,88,000 LESS : Cost of acquisition (25.11.2014) As discussed in para 5 above 1,47,93,403 Short Term Capital Gain 24,81,94,597 11. AO rejected the whole claim of the assessee on long term capital gain and also rejected the cost of improvement as well as exemption claimed by the assessee under section 54EC of the Act of Rs.50,00,000/-.

1. That the order of learned Commissioner of Income Tax (Appeals) is bad in law as well as on the facts and in the circumstances of the case.

2. That the learned Commissioner of Income Tax (Appeals), has erred in rejecting the Contention of the appellant that adequate opportunity of being heard was not provided by the ld. AO.

3. That the learned Commissioner of Income Tax (Appeals), has erred in upholding the decision of the assessing officer of treating the long term capital gain as short term capital gain by wrongly considering the year of acquisition as FY 2014-15 instead of 15.03.2002 i.e., the date confirming the order of allotment of the land in question vide order no. 2793/9- AA-3- 96/45 LA90 dated 16.07. 1996 against a compensation of Rs.20,83,903/-.

4. That the learned Commissioner of Income Tax (Appeals), has erred in confirming the disallowance of Rs.4,61,43,000/- M/s. Meenal Housing Pvt. Ltd. towards cancellation agreement dated 20.10.2015 of MOU dated 08.04.2013 for purchase of land in question by M/s. Meenal Housing Pvt. Ltd by holding that the appellant has failed to establish that the said amount paid to M/s. Meenal Housing Pvt. Ltd had any connection with the transfer of said land from GDA to the appellant.

5. That the learned Commissioner of Income Tax (Appeals), has erred in upholding the decision of the assessing officer of not allowing the complete claim of cost of acquisition and improvement of Rs.5,93,42,500/- (before indexation) and not allowing indexation benefit on the same.

6. That the learned Commissioner of Income Tax (Appeals), has erred in relying on judgements which are not relevant to the facts of the case of the appellant.

7. That the learned Commissioner of Income Tax (Appeals), has erred in upholding the decision of the assessing officer of not allowing the claim of transfer charges amounting to Rs.15,00,000/-.

15. On merits, ld. AR for the assessee brought to our notice findings of ld. CIT (A) which are given below :-  Letter dated 17.01.2013 was issued by GDA with regard to transfer of said land subject to payment of Rs. 1,17,31,468.36 towards development fee, lease rent and freehold charges.

Letter dated 17.06.2014 was issued by GDA requesting for payment and stating that transfer will take place once the fee is cleared.  Complete right of the assessee existed only after execution of sale deed on 25.11.2024 and the title of the property is bestowed only on execution of sale deed.  Property sold before 36 months i.e., 20.10.2015  Thus the assessee is not eligible for claim of indexation and the sale shall be categorized under STCG.  Regarding claim of Rs. 5,00,000/- for purchase of land by assessee’s husband – No reply furnished to ld. AO & appellate proceedings.  Regarding compensation of Rs. 20,83,903/-, this amount was not in existence till 25.11.2014. As per the deed the same is adjusted in cost of the plot and cost is taken on 25.11.2014 and not 15.03.2002. No evidence filed to show that it is cost as on 2002.  Regarding Rs.4,61,43,000/- paid to M/s. Meenal Housing Pvt. Ltd. (MHPL) – MOU was entered into by the assessee with MHPL on 08.04.2013 and MHPL paid Rs. 3,47,32,000/- as advance which included Rs. 1,17,32,000/- directly paid to GDA. The MOU was cancelled at a settlement amount of Rs. 8,08,75,000/- and assessee paid Rs. 4,61,43,000/- to MHPL which it claimed as cost of improvement which is not acceptable as it is not related to acquisition or improvement of land. This payment has no connection / direct nexus with transfer of said land from GDA to assessee.

The section 48(i) of the Income Tax Act clearly says that the expenditure incurred should be wholly and exclusively be in connection with such transfer. The reliance is placed on decision of the Hon’ble Apex court while following its decision in the case of RM. Arunachalam (supra) held that “where the mortgage is created by the assessee himself, then the expenditure incurred by the assessee to repay the mortgage debt cannot be held to be the cost of acquisition or cost of improvement allowable under section 48(ii) of the income-tax Act.”  And on the decision of the Hon’ble ITAT Ahmedabad in Maradia Wire Rods Ltd. v. Income-tax Officer, Ward-4(4), Ahmedabad “Section 48, read with section 55, of the Income- tax Act, 1961 - Capital gains – Computation of - Assessment year 1999-2000 - Assessee was allotted two industrial plots by GIDC –During relevant assessment year, assessee sold those plots -Assessee's claim was that penalty paid to GIDC for non- use of industrial plots was to be deducted while computing capital gains on transfer of those plots - Revenue authorities rejected assessee's claim - Whether in view of fact that amount of penalty was paid only to protect title and possession of plots, it could not be held to be wholly and exclusively in connection with transfer of two industrial plots . Whether, further, payment of penalty by way of non-usage charges of industrial plots within stipulated time could not be held to be towards addition or alteration of capital asset viz. , land and, consequently and, thus, it did not fall within definition of cost of improvement in terms of provisions of section 55(1) (b) (2). Whether in view of

 Hence the assessee had got the right in the property on 15.03.2002.  There was no obligation on the assessee to pay the amount of Rs. 20,83,903/- and this fact is confirmed from letters dated 17.01.2013 and 17.06.2014 of GDA and also the stamp of the registering authority on the back of first page of stamp paper Rs. 1,17,32,000/- which does not include the amount of Rs. 20,83,903/-.  The right in land having been acquired on 15.03.2002 at the notional value determined by GDA of Rs.20,83,903/- may at best be considered as the cost of acquisition as on 15.03.2002 and the indexed cost of the same of Rs. 52,88,026/- ( cost index adjustment 1081/426) may be taken for the purposes of computation of the capital gain. The assessee in the return has claimed the indexed cost of Rs. 38,60,714/-. The ld. AO has erred in considering the cost (compensation) as on 25.11.2014 of Rs. 20,83,903/- and without providing for indexation. Since the right of the assessee became absolute on 15.03.2002 due to a government order passed on that date, the indexed cost of acquisition of the land is Rs.52,88,026/-.  The amount of Rs.1,17,32,000/- paid on 07.02.2013 is the cost of improvement of such land and the indexed cost of the same is Rs. 1,48,85,319/- (cost index adjustment 1081/852).  Amount of Rs. 9,67,500/- has been paid as stamp duty and the indexed cost of the same is Rs. 10,21,355/- (cost index adjustment 1081/1024).  The assessee had entered into an MOU on 08.04.2013 with M/s. Meenal Housing Pvt. Ltd. in respect of the plot no. HS1 in Kaushambi earmarked vide letter dated 17.01.2013 against a consideration of Rs. 14,76,76,450/- plus development expenses and other expenses and the assessee had received Rs.3,47,32,000/- (including Rs. 1,17,32,000/-paid directly to GDA by M/s. Meenal Housing Pvt. Ltd. vide pay order no. 729032 dated 21.01.2013). The said MOU was cancelled vide 20.10.2015 wherein the net settlement money of Rs.4,61,43,000/- (8,08,75,000/- minus 3,47,32,000/-) was paid to M/s Meenal Housing P. Ltd. for the purposes of improvement in the right and title of the land in question which is allowable towards the cost of acquisition. The copies of the MOU and the Agreement alongwith the receipt issued by Meenal Housing Pvt. Ltd. were filed before the Ld. AO.  The MOU was cancelled on 20.10.2015 just before the execution of the sale deed to M/s Royce Developers P. Ltd.  The Hon’ble Delhi High Court in the case of Kaushalya Devi Vs. CIT (2018) 92 Taxmann.com 335 (Delhi) in para 26 and 27 of the order has held that “26. Looking at the totality of the aforesaid circumstances and on the basis of findings recorded by the Tribunal, we would hold that there was a close nexus and connect between the payment of Rs.25,00,000/- and the transfer of the property to the purchaser resulting in income by way of capital gains. There was proximate link and the expenditure incurred was in furtherance and to effectuate the transfer/sale of the property and was not remote and unconnected. Expenditure of Rs.25,00,000/-, therefore, has to be treated as expense incurred wholly and exclusively in connection with the transfer of immovable property and, hence, allowable as a deduction under clause (i) of Section 48 of the Act. However, we would like to clarify that Rs.7,50,000/-which was paid by Anil Kumar Sharma and subsequently refunded, cannot be allowed as a double deduction. In other words, refund of Rs.7,50,000/-would Anil Kumar Sharma was squared off. The assessee had in fact incurred expenditure of Rs.25,00,000/-which was paid to Anil Kumar Sharma to forego and give up his right under the agreement to sell dated 10th April, 1989.

The facts of the said judgements quoted by the ld. CIT(A) are different from the case of the assessee. Both the cases are concerned with dues of the assessee i.e., estate duty paid n penalty for non-use of lands which do not affect the title of the assessee but in the present case the amount is paid to M/s. Meenal Housing Pvt. Ltd. on cancellation of MOU wherein the net settlement money of Rs.4,61,43,000/- was paid for improvement in the right and title of the land in question which is allowable towards the cost of acquisition.  The assessee had claimed transfer charges of Rs.15 lakhs incurred by her which have not been allowed by the ld. Assessing Officer on the ground that as per clause 9 & 10 of page 9 of the sale deed dated 20.10.2015 all the transfer expenses have been borne by the vendee. It is submitted that the claim of transfer charges represents other miscellaneous expenses incurred by the assessee which are not covered under clause 9 & 10 of the sale deed.

18. Considered the rival submissions and material placed on record. We observed that the original lands were owned by late husband of the assessee, Ram Prakash Goel in Kaushambi area of Ghaziabad. It is a fact on record that abovesaid lands were acquired by Ghaziabad Development Authority in the year 1984. It is also fact on record that because of acquisition of abovesaid lands, GDA was to grant equivalent piece of land in Kaushambi vide Government Order No.2793/9-A-3-96-45 L.A./90 dated 16.07.1996. The abovesaid order of 1996 was a subject matter of dispute and finally on 15.03.2002, late husband of the assessee was allotted land at Kaushambi which was 56% equivalent of the total lands acquired by the GDA vide Government Order No.809/9-A-3-2202- 45 L.A./90 dated 15.03.2002 issued by the Chief Secretary, Government of Uttar Pradesh. As per the abovesaid allotment letter, late husband of the assessee entitled to the land admeasuring 3474.74 sq. mtrs. In Kaushambi which was acknowledged by GDA vide letter No.174/12/L.A.A./2012 dated 17.01.2013 against the payment of development fee of Rs.1,02,51,250/-, lease rent of Rs.12,33,515.30 and freehold charges of Rs.2,46,703.06 and the total comes to Rs.1,17,31,468.36. As per the record submitted before us, it shows that assessee is not in a position to make such payment, accordingly a MOU was entered by the assessee with Meenal Housing Pvt. Ltd. and a Rs.14,76,76,450/- plus development expenses and other expenses. Against the abovesaid MOU, Meenal Housing Pvt. Ltd. paid the above charges to GDA directly on behalf of the assessee and also paid to the assessee an amount of Rs.3,47,32,000/-. From the above facts on record, it is clear that assessee being the legal heir of late husband, Ram Prakash Goel was holding a lien on the land owned by late Ram Prakash Goel and only because of the lien held by the assessee through her late husband, the GDA has allotted the land admeasuring 3475sq.mts. on payment of development fees, lease rent and freehold charges. The above facts are demonstrated by the assessee by filing the relevant letters and communications with the GDA in the form of paper book. It is clear that the assessee has owned lands which were acquired by the GDA in the year 1984. The GDA has merely acknowledged and finally transferred the title of the property only on 25.04.2014 and handed over the property title to the assessee on 25.11.2014. It does not mean that assessee has acquired the property only on 25.11.2014. It clearly shows that the assessee held the right of lien on the lands not physically but originally claimed with the GDA. Therefore, in our considered view, assessee held the right on the land from the date of original purchase date of the property which was acquired by the GDA in the year 1984. Therefore, the property was transferred by the assessee for development M/s. Royce Developers Pvt. Ltd. during the current assessment year. Therefore, we hold that the lands transferred by the assessee are a long term assets.

by the assessee are allowed.

20. With regard to exemption claimed by the assessee u/s 54EC of the Act, since the issue under consideration is already addressed by ld. CIT (A) by remitting the issue back to the file of AO to verify the relevant bonds and allow the same after verification. Therefore, we do not see any reason to disturb the same. We direct AO accordingly.

21. Coming to the next ground of appeal on claim of expenditure on transfer charges amounting to Rs.15,00,000/-, the assessee has not filed any evidence before the AO and relied on Clauses 8, 9 and 10 of the Sale Deed. However, AO observed that the above stated clauses were borne by the vendee. Accordingly, he rejected the plea of the assessee. The same was sustained by ld. CIT (A).

22. At the time of hearing, ld. AR for the assessee has not made any fresh submission by bringing any material to substantiate its claim. Accordingly, ground no.7 raised by the assessee is dismissed.