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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal filed by the assessee is arising out of the order passed by the Commissioner of Income Tax-3, Mumbai [in short CIT(A)], in appeal No.20-THN/15-16, dated 02.02.2017. The Assessment was framed by the Income Tax Officer, Ward-2(4), Mumbai (in short ‘ITO/ AO’) for the A.Y. 2012-13 vide order dated 23.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) upholding the action of the AO in taking the cost of acquisition of property known as Portion No. 3,U.No.198 Sheet No. 83, Section-7-B, Ulhasnagar-1 admeasuring 16666, 6/9 sq. Yards of Industrial plot as on 16.05.1993 ignoring the provisions of section 49(1)(iii)(b) of the Act, whereas, actually, the date of acquisition is 12.01.1976. For this assessee has raised the following three grounds: -
“1. On the facts and in the circumstances of the case and in law the Commissioner of Income tax- (Appeals) - 3, Thane (hereinafter referred to as CIT(A) erred in upholding the additions of Rs. 93,88,746/- made by the assessing officer in respect of L.T Gain on sale of land by ignoring the provisions of section 49(1) (iii) (b) and without bringing on record any material that partnership was net existence since 12/01/1976.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the additions of Rs. 93,88,746/- made by the assessing officer by ignoring the fact that the property was held by the appellant from 12/01/1976 and intention of the parties for acquiring and transferring the property.
3. On the facts and in the circumstances of the case and in law the CIT(A) erred in upholding the order of assessing officer by denying the cost of acquisition being FMV as on 01/04/1981 and indexation from the period of holding starting from 01/04/1981 to the date of transfer."
We have heard the rival contentions and gone through the facts and circumstances of the case. The facts of the case are that the assessee sold the property bearing No. Portion No. 3.4. No.198 Sheet No. 83, Section-7-B, Ulhasnagar-1 admeasuring 16666 6/9 sq. Yards, during the year under consideration for a total consideration of Rs. 95.11 lakhs. The assessee worked out long term capital loss of Rs. 34,41,500/-. The AO noticed the computation of capital gains of the assessee and required the assessee to explain how there is capital loss in the above property. The assessee explained that this property was acquired by him by entering into partnership with Sardar Jogendra Singh and Smt. Nirmala B. Kaur, vide agreement dated 12.01.1976 in which, the assessee partner has contributed a sum of Rs. 2,000/-. Accordingly, the cost of indexation should be taken from 01.04.1981 and the value as on 01.04.1981 should be ascertained and long term capital gain should be computed. The assessee took the value as on 01.04.1 of ₹ 16.50 lakhs and by indexing the same. The indexed cost of acquisition was computed at Rs. 1,29,52,500/- as against the sale consideration received on 29.08.2011 at Rs. 95.11 lakhs. The AO rejected the computation of the assessee and recomputed the long term capital gain by noting that the assessee became owner of this property with effect from 21.05.1993 in view of the letter issued by office of the administrator Ulhasnagar dated 21.05.1993 and from that date the property was transferred in the name of the assessee due to partnership deed dated 13.08.1984 executed by the assessee with original CD holders vide No. 1196 dated 11.08.1984.
The relevant letter of office of administrator Ulhasnagar township dated 21.05.1993 is enclosed in assessee’s paper book at page 82. Accordingly, the AO computed the long term capital gain by taking the initial value of 38,000/- and indexing the same by taking base year as financial year 1993-94 and estimated the cost of acquisition at Rs. 1,22,254/- and therefore the assessee’s net taxable capital gain was computed at Rs. 93,88,746/-. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the action of the AO by observing in Para 6.1 as under: -
“6.1. In view of the above stated facts, the argument made by the AR of the appellant is not acceptable and also, the provisions of section 49(1)(iii)(b) of the Act are also not applicable because a) the partnership never came into existence, but only remain on paper as the purpose to carry on the business was never fulfilled b) the partnerships deeds were not registered at all ci As discussed in Para v above, the appellant had legitimately acquired the property on 13.08.1984 as the aforesaid property was officially purchased by the original owners on 20.07.1983 from the President of India and appellant got it transferred in the records of the Administration 21.05.1993. d). Vide transfer agreement dtd.13.08.1984, the cost of acquisition has been arrived at Rs. 38,000/- as the same was agreed upon by the original First Party and the Second party(Appellant). e). It is not a case that, the cost of the aforesaid property is not ascertainable and also, the property was Government's property till it was transferred to the original owners and the ownership to sale the property has been ascertained only in 1984 and the same was sold/transferred to the appellant in 2011.
In view of the above stated facts, the appeal of the appellant is dismissed and the addition made by the AO is confirmed.”
Aggrieved, now assessee is in second appeal before Tribunal.
The facts of the case are that the assessee during the year under consideration sold landed property bearing portion No.3, U no 198, Sheet No.83, Section 7B, Ulhasnagar-1 for a sum of ₹ 95,11,000/- vide sale deed dated 29th August, 2011. The assessee acquired this property by entering into agreement on 12.01.1976 with the original owners of the property. In pursuance to agreement dated 12.01.1976, and a partnership dated 12.01.1986 was entered into between the assessee and other party namely Sardar Jogendra Singh and Smt. Nirmala B. Kaur. Thereafter, another partnership deed in pursuance to agreement dated 10.01.1986 was entered into between the assessee and other party namely Sardar Jogendra Singh and Smt. Nirmala B. Kaur vide dated 13.08.1984. The relevant copy of partnership deed dated 13.08.1984 is enclosed at assessee’s paper book at pages 57-69 whereby the assessee became the owner of this property by introducing the amount of Rs. 36 lacs, which was credited in the books of accounts. It is to be mentioned that only amount of Rs. 2,000/- was introduced in agreement entered into on 12.01.1976. In essence as admitted by CIT(A) in its order, which is reproduced in the above Para 3 clearly admitted that the assessee legitimately acquire this property on 13.08.1984 by the original owners on 20.07.1983 but got it transferred in the revenue records of the administration of Ulhasnagar only on 21.05.1993. It means that the property has actually been acquired by the assessee only on 13.08.1984 and this property actually devolved on the assessee as on dissolution of partnership dated 31.01.1985. It means finally the property was acquired for a sum of Rs. 38 lacs as on 13.08.1984. In view of the above facts and circumstances we are of the view that the lower authorities have erred in proceeding on the wrong facts of the case and hence, we reverse the findings of the lower authorities. We direct the AO to take value as on 13.08.1984 i.e. cost acquisition for the purpose of computation of long term capital gain and determine the fair market value of the property as on 13.08.1984 by taking the investment as on 12.01.1976 at ₹ 38 lacs either through registered valuer or by referring the same to DVO (Departmental Valuation Officer). The AO will consequentially allow indexation on the fair market value determined as on 13.08.1984 and hence, this issue for the assessee’s appeal is decided accordingly and matter remanded back to the file of the AO.
The next issue in this appeal is against the order of CIT(A) confirming the action of the AO in disallowing the interest paid on secured loans without establishing inter connection between borrowed funds and amount advanced. For this assessee has raised the following ground No 4 as under: -
“4. On the facts and in the circumstances of the case and in law the CIT (A) erred in upholding the addition of Rs. 59,204 towards disallowance of interest without establishing inter connection and inter linking between amount borrowed and advanced.” 6. At the outset, the learned Counsel for the assessee submitted that he has got instructions from the assessee that the assessee is not interested in prosecuting this ground and hence, the same is dismissed as not pressed.
In the result, the appeal of assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 26-09-2018.