RASHMI M DHANANI,MUMBAI vs. ITO WD 21(3)(4), MUMBAI

Insofar as ground no.1 is concerned, the learned Authorised Representative submitted, on the instruction of the assessee, he did not want to press it. Hence, ground no.1 is dismissed as “not pressed”.

In ground no.2, assessee has challenged the decision of the Departmental Authorities in not reducing the cost of improvement of ` 10,22,492, while computing the long term capital gain.

Brief facts are, during the previous year relevant to assessment year under dispute, the assessee sold a flat owned by her being flat no.304/B, Eternia Hiranandani Garden, Powai, for ` 46.60 lakh. In the return of income filed for the impugned assessment year on 30th July 2010, though the assessee disclosed the sale of flat but she claimed long term capital loss. In the course of assessment proceedings, from the working of the long term capital gain / loss on sale of flat, it was noticed by the Assessing Officer that the assessee had declared purchase cost of flat at ` 18,39,397 in 1994 and garage space in the year 2002–03 for ` 1.60 lakh with transfer charges of ` 75,000. He noticed, after indexing the purchase price from the assessment year 1994–95 onwards, the assessee had arrived at indexed purchase price of ` 44,88,413 and after indexing garage cost from the year 2002–03 onwards the index cost of acquisition of garage was shown at ` 2,26,219, which also included transfer charges of ` 75,000. Thus, the total indexed cost of property worked out by the assessee was ` 47,89,632. He further noticed, the assessee has sold the flat at ` 46.60 lakh thereby incurring long term capital loss of ` 1,29,632. The 3 Smt. Rashmi M. Dhanani Assessing Officer, on verification of the deed for purchase of property noticed that assessee along with her husband had purchased the property at ` 7,29,750 and paid stamp duty of ` 26,300, totaling to ` 7,56,050. As against the aforesaid sale consideration paid, assessee had shown the cost at ` 18,39,397 before indexation and deduction of ` 44,88,413, was claimed after indexation. The Assessing Officer, therefore, called upon the assessee to furnish the details of cost of purchase shown by her on which indexation was claimed. In reply to the query raised by the Assessing Officer, assessee submitted that the amount of ` 9,38,250 was paid to the builder towards amenities charges on the flat. She further stated, this amount was regularly shown in the balance sheet since the year 1995. In support of such contention, assessee also submitted, the agreement entered into with the builder for amenity charges. The Assessing Officer, however, did not accept the claim of the assessee. He observed, the amenities agreement is in a plain paper without any stamp duty being paid on it. He opined while on a property worth ` 7,29,750, the assessee paid stamp duty of ` 26,300, whereas, in agreement for amenities charges of ` 9,38,250, the assessee has not paid any stamp duty even though the nature of amenities provided as per the agreement is part of construction of flat. He further observed, though, as per the amenities agreement the amount of ` 9,38,250, was required to be paid on / or 4 Smt. Rashmi M. Dhanani before 30th April 1994, the assessee did not disclose the details of payment, mode of payment with date and supporting evidence. The Assessing Officer observed, the purchase deed is a duly executed legal document, wherein it is stated that the assessee along with her husband has purchased a completely constructed flat admeasuring 695 st.ft. for ` 7,29,750 with all amenities which in other words indicates that a completely constructed flat was purchased by the assessee, hence, any further claim towards amenities is not acceptable. Accordingly, the Assessing Officer reduced the indexed purchase price of ` 18,44,879 and garage cost of ` 2,26,219 from the sale consideration of ` 46.60 lakh while determining the long term capital gain of ` 25,88,902. Being aggrieved of the assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals).

After considering the submissions of the assessee, the learned Commissioner (Appeals), however, upheld the decision of the Assessing Officer in disallowing assessee’s claim of indexed cost of acquisition in respect of amenities charges. However, the learned Commissioner (Appeals) directed the Assessing Officer to consider assessee’s claim in respect of stamp duty paid towards cost of acquisition and also the transfer charges paid to the society while

Reiterating the stand taken before the Departmental Authorities, the learned Authorised Representative submitted, the assessee on 29th March 1994, had entered two separate agreements, one with Hiranandani Lake Garden for purchase of flat and another with Lake View Developers for amenities. The learned Authorised Representative submitted, the assessee has not only disclosed the purchase cost but also the amenity cost in the balance sheet as on 31st March 1996 and up to 31st March 2009. He submitted, all the purchasers / allottees of flats have entered into similar agreements for purchase of flats as well as for amenities. He submitted, though all these facts were brought to the notice of the Departmental Authorities, they have not properly considered the same. He submitted, only because the amenities agreement was not in a stamp paper or unregistered will not make the agreement invalid or void. He submitted, when two parties have entered into contract on certain terms and conditions, the Revenue cannot substitute the terms of the contracts. For such proposition. Learned Authorised Representative relied upon the decision of the Hon'ble Supreme Court in Polymat India Pvt. Ltd. v/s National Insurance Co. Ltd., [2005] 9 SCC 174 and the decision of the Hon'ble Calcutta High Court in CIT v/s Arun Dua, [1990] 186 ITR 494 (Cal.).

Learned Departmental Representative relied upon the reasoning of the authorities below.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, at the stage of assessment itself, the assessee has brought to the notice of the Assessing Officer the fact that it has entered into two separate agreements as far as subject property is concerned, one for purchase of flat and another for amenities. It is the claim of the assessee that 7 Smt. Rashmi M. Dhanani the flat purchased was not complete in all respect and certain work was required to be done by another builder for which not only the assessee but all other flat owners of the said building entered into a separate agreement for amenities. On a perusal of the amenities agreement, a copy of which is submitted in the paper book, it is seen that the work to be done as per schedule of amenities agreement includes painting, interiors, ceramic tiles, sanitary ware, concealed copper wiring, electric fittings, phase box with circuit break, glass hardware, special water proofing in toilets / kitchen, special wood for doors / windows, facilities for escalators. In our view, these works if actually had been undertaken by the builder as per amenities agreement, would certainly need to be included in the cost of acquisition. Only because the agreement is in a plain paper or not registered would not deprive the assessee from getting the benefit of amount paid towards amenities in case the assessee has actually paid it. Moreover, if all other flat owners have entered into similar agreement for amenities and have made payment for such amenities, it will definitely prove that there was an arrangement between the builder to split the work into two different agreement for which the purchasers of flat cannot be held responsible. Therefore, when such fact was brought to the notice of the Assessing Officer, it was incumbent on his part to make enquiry and find out whether similar

In the result, assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open Court on 22.04.2016