Income Tax Appellate Tribunal - Pune
Tehmi Jimmy Cooper, Pune vs Assessee on 6 August, 2012
1
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav Judicial Member
and Shri R.K. Panda Accountant Member
ITA NO. 357/PN/2011
(Asstt.Year : 2006-07)
Tehmi Jimmy Cooper,
Flat No.8, Hermes Heaven Mangaldas Road,
Pune 411001. .. Appellant
PAN No.ACIPC 2041F
Vs.
ITO Ward 2(2),
PMT Commercial Complex, Swargate, Pune .. Respondent
Assessee by : Sri Sunil Ganoo
Respondent by : Sri Y.K. Bhaskar
Date of Hearing : 06-08-2012
Date of Pronouncement : 14-09-2012
ORDER
PER R.K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 24-01- 2011 of the CIT(A)-II, Pune relating to assessment year 2006-07.
2. Facts of the case, in brief, are that the assessee is an individual and filed the return of income on 29-07-2006 showing total income at Rs. 9,47,265/-. A revised return was filed on 26-12-2006 in which the total income was shown at Rs.1,25,745/-. The assessee had shown the capital gain from sale of property at New Delhi in the original return at Rs. 10,06,515/-; whereas in the revised return it was shown at NIL. The details are as follows :
Sale price of property as per Sale Deed dated 09-03-2006 Rs. 56,00,000 Less: Legal Expenses & Advocate fees Rs. 5,00,000 Less : indexed price Rs. 14,93,485 Less : Amount invested in NABARD Bonds U/s. 54EC Rs. 26,00,000 Long Term Capital Gain taxable Rs. 10,06,515 2 However, in the revised return the working of long term capital gain was shown as under:
Sale price of Property as per Sale Deed dated 09-03-2006 Rs. 56,00,000 Add : Damage given by Court Rs. 12,00,000 Less : Legal Expenses & Advocate fees Rs. 5,00,000 Less : Indexed price Rs. 59,19,270 Less : Amount invested in NABARD Bonds u/s. 54EC Rs.26,00,000 Long Term Capital Gain Taxable NIL 2.1 The assessee's brother Shri H.K. Mody was the original owner of the property which was sold by the assessee during the year under consideration. Shri H.K. Mody died in December 1982. Vide following release deeds, the other brother, sisters and wife of Shri H.K. Mody relinquished their rights in the said property in favour of the assessee.
Name Date of Release Deed
1. Ms. J.F. Irani (Sister of assessee) 27-04-1995
2. Mr. C.K. Mody (brother of assessee) 09-05-1995
3. Ms. Nargis J. Parakh (Sister of assessee) 15-05-1995
4. Mrs. Mani H. Mody (Wife of assessee's brother) 04-09-1997
Moreover, Shri H.K. Mody was also entitled to a compensation of Rs. 12.00 lakhs awarded by Hon'ble Delhi High Court for the unauthorised occupation of the property by one Shri K.D. Sharma, with whom, initially an agreement for sale of property was made. The sale did not materialise but Shri K.D. Sharma had taken the possession of the property on pretext of some work, and later on unauthorisedly kept possession of the property. The High Court while restoring the property back to Shri H.K. Mody has awarded the compensation.
2.2 During the course of assessment proceedings the AO asked the assessee to explain as to why the indexed cost of acquisition should not be computed with reference to the date when other successors of the property relinquished their rights in favour of the assessee. It was explained that the provision of explanation to section 48(iii) were not applicable in case of property received by succession and it is guided by section 49, which deals with the cost of transfer by certain modes of 3 acquisition, in which the question of becoming owner for the first time is not relevant. The date of death of the person to whom the property belonged is the date of becoming owner for the first time in case of the successor. Various decisions were relied upon for the above proposition. However the AO was not satisfied with the explanation given by the assessee and held that the various decisions relied upon are distinguishable and not applicable to the facts of the case of the assessee. The AO relied on the provisions of section 48(iii) as well as section 49(1) and held that the indexed cost of acquisition has to be taken from the date when the assessee became the owner of the property for the first time. For this proposition he relied on the decision in the case of DCIT Vs. Kishor Kanungo reported in 104 TTJ 560 (Mum). The AO accordingly calculated the capital gain as under :
Particulars Amount Remarks
(Rs.)
1. Cost of purchase (For Late Mr. H.K. Mody 11,91,000 As on 01-04-1981
2. Sale Consideration including compensation 68,00,000 --
3. Proportionate cost of acquisition of assessee's 2,38,200 As on 01-04-1981
part after the death of her brother Mr. H.K. Mody)
being 20% of cost of acquisition)
4. Indexed cost of acquisition to the extent 10,86,105 C11 of 1982-83 is 109
assessee's part of 20% (1/5) [(2,38,200 x 497)/109
= 10,86,105]
5. Cost of Acquisition on relinquishment of rights 12,63,901 C11 of 1995-96 is 281 by one brother & 2 sisters [3 X 2,38,200 X 497/281 = 12,63,901]
6. Cost of Acquisition on relinquishment of rights 3,57,660 C11 of 1997-98 is 331 by brother's wife (2,38,200 X 497)/331 = 3,57,660
7. Total indexed cost of acquisition 27,07,666
8. Investments in NHB Capital Gain Bonds u/s. 26,00,000 54EC of I.T. Act, 1961 260 bonds-of Rs. 10,000/-
@ 5.5% interest NHB.
9. Legal expenses & advocate fees 8,00,000 Net Long Term Capital Gain [2-(4-5-6-8-9)] 9,92,334
3. Before the CIT(A) the assessee filed detailed written submissions. Relying on a couple of decisions it was submitted that since there is no cost of acquisition, therefore, there will not be any capital gain. It was further submitted that assessee has filed the return taking the indexation as on 01-04-1981 for the entire 4 consideration on the ground that cost as on 01-04-81 pertaining to Sri H.K. Mody, the original owner has to be taken into account on the basis of the provisions of section 49(1)(iii) of the Income Tax Act read with explanation 1(b) to section 2(42A) of the Income Tax Act. For this proposition the assessee relied on various decisions including the decision of the Special Bench of the Tribunal in the case of CIT Vs. Manjula J. Saha reported in 318 ITR (AT) 417. The assessee also challenged the order of the AO in bringing to tax the compensation of Rs. 12 lakhs received by the assessee as a revenue receipt as against capital receipt treated by the assessee. Further it was submitted that the earnest money of Rs. 40,000/- received by Late Mr. H.K. Mody, the brother of the assessee is not hit by the provisions of section 51 of the Income Tax Act.
4. However, the learned CIT(A) was not convinced with the explanation given by the assessee. He held that the asset has been acquired by the assessee by way of release deed by 4 different persons. He noted that section 49(1) is applicable only to the capital asset becoming the property under a gift or a will or by succession and inheritance or devolution or distribution or on the dissolution of a firm etc. provided under this section. However, none of these is applied to relinquishing of rights by a release deed. He observed that the assessee in her submission dated 12-07-2010 has stated that the release of rights in property does not amount to a gift. He therefore held that the benefit of decision of the Special Bench of the Tribunal in the case of Manjula J. Saha is not applicable to the facts of the case. He also rejected the claim of the assessee that Rs. 12 lakhs received as compensation be excluded on the ground that the same was filed through the additional ground and therefore cannot be entertained at this juncture in view of the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd. 5
5. So far as the claim of the assessee that Rs.40,000/- received as advance money from time to time against agreement to sale be not excluded from the cost of the asset he held that the above amount is liable to be reduced from the cost of acquisition of the asset for the purpose of computation of capital gain. Accordingly he enhanced the income by Rs.1,34,500/- under section 251(1) of the Income Tax Act.
5.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds :
"1. In the facts and circumstances of the case and in law it may please be held that Long Term Capital Gains arising on sale of property at K-21, Hauz Khas Enclave New Delhi, by the assessee during the year work out to Nil and that the working made by the learned Assessing Officer as well as the learned CIT(A) in the matter be vacated/rejected.
2. The learned CIT(A) has erred in holding that release deeds executed by co- owners of the property in favour of the assessee are not covered within the meaning and definition of devolution as provided under the provisions of Section 29(1)(iii)(a) of the I.T. Act, 1961. It may please be held that the release deeds executed in favour of the assessee by co-owners on various dates are covered within the meaning and provision of Section 49(1)(iii)(a) of the I.T. Act 1961 and all the consequential reliefs be granted to the assessee while computing the Capital Gains.
3. Without prejudice to Ground No. 2 above and by way of an alternate submission the assessee submits that the release deeds executed by co-owners of the property in favour of the assessee amount to gift within the meaning and provisions of section 47(iii) of the I.T. Act 1961 and all the consequential reliefs be granted to the assessee while computing the Capital Gains.
4. It may please be held that while computing the Long Term Capital Gains on sale of property at K-21, Hauz Khas Enclave New Delhi, the indexed cost of acquisition of the property be calculated by taking the value of the property as on 01-04-1981.
5. In the facts and circumstances of the case and in law, it may please be held that alleged earnest money of Rs. 40,000/- received by Late Mr. H.K. Mody, the brother of the assessee under the agreement of sale of property at K-21, Hauz Khas Enclave New Delhi, executed in Oct 1971 is not hit by the provisions of Section 51 of the I.T. Act 1961 and all the consequential reliefs be granted to the assessee while computing the Capital Gains.
6. In the facts and circumstances of the case and in law, the learned CIT(A) erred in enhancing the income from Capital gains by an amount of Rs. 1,34,500/- by holding that the said amount was received as an earnest money by Late Mr. H.K. Mody, the brother of the assessee under the agreement of sale of property at K-21, Hauz Khas Enclave New Delhi, executed in Oct 1971 and the same was hit by the provisions of section 51 of the I.T. Act 1961. The said finding/conclusion (including the enhancement) drawn by the learned CIT(A) being arbitrary, patently illegal, perverse, devoid of merits and being unsustainable the same may please be vacated.
7. The learned CIT(A) has erred in not admitting the additional ground of appeal raised by the assessee that the compensation of Rs. 12,00,000/- received by the assessee from Mr. Sharma for unauthorised and illegal occupation of property at K-21, Hauz Khas Enclave New Delhi was a Capital Receipt not liable to be taxed.6
8. It may please be held that the compensation of Rs. 12,00,000/- received by the assessee from Mr. Sharma, for unauthorised and illegal occupation of property at K-21, Hauz Khas Enclave New Delhi is a Capital Receipt not liable to be taxed.
9. The assessee be awarded cost of the present appeal u/s. 254 (2B) of the I.T. Act, 1961.
10. The assessee craves the permission to add, amend, modify, alter, revise, substitute delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.
6. The learned counsel for the assessee submitted that the issue relates to computation of long term capital gain on account of sale of a Bungalow at New Delhi which was purchased by the brother of the assessee Sri H.K. Mody on 26- 06-1965. He submitted that Sri H.K. Mody was a Parsi and his wife was alive when he died. He submitted that vide two sale deeds dated 09-03-2006 the property was sold for a consideration Rs. 56 lakhs. Referring to Page 31 of the Paper Book the learned counsel for the assessee submitted that after the death of Sri H.K. Mody on 29-12-1982 and the death of his father and mother on 15-05- 1983 and 12-06-1984 respectively the following persons were legal heirs :
1. Mrs. T.J. Cooper (assessee)
2. Mr. C.K. Mody( Brother of assessee)
3. Mrs. Nergish J. Parakh (Sister of assessee)
4. Dr. Mrs. J.F. Irani (Sister of assessee)
5. Mrs. Mani H. Mody (Wife of assessee's brother) He submitted that vide release deed dated 27-04-1995 Dr. Mrs. J.F. Irani relinquished her rights in the property in favour of Mrs. T.J. Cooper. Similarly vide release deed dated 09-09-95 Sri C.K. Mody relinquished his rights in favour of Mrs. T.J. Cooper. Vide release deed dated 15-05-95 Mr. Nergish J. Parakh relinquished her eights in favour of Mrs. T.J. Cooper. Vide release deed dated 04-
09-97 Mrs. M.H. Mody relinquished her rights in the property in favour of Mrs. T.J. Cooper.
7. Referring to the book "Conveyancing and other instruments" by D'souza (12th economy edition) the learned counsel for the submitted that " release is an 7 instrument whereby a person renounces a claim upon another or against any specified property which he has or may be entitled to enforce. It may be a deed poll or an indenture. It cannot, however, be a substitute for assignment of a claim or transfer of any property". Referring to the book "Practical Guide to Deeds and Documents" by G.M. Divekar he submitted that "release is also a specie of transfer of property. A release in fact may amount to a conveyance or a gift or an exchange. If a person releases his vested right or interest in a property for a consideration, it is nothing but a conveyance or sale. If he releases his vested interest without consideration but only for natural love and affection it will amount to a gift". Referring to the decision of Hon'ble Supreme Court in the case of Kuppuswamy Chettiar Vs. ASPA Armugam Chettiar and another reported in 1967- (001)-SCR-0275-SC he submitted that the Hon'ble Supreme Court in the said decision has held that transfer of a property by a release deed without any consideration is a gift. Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Manjuala J. Saha (Supra) he submitted that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. He submitted that since Mr H.K. Mody had held the property since 1965 and since after his death the other co- owners vide respective release deeds had relinquished their rights in the property to the assessee, which amounts to gift, therefore, in view of the decision cited above the fair market value of the property should be taken as on 01-04-1981 and indexation benefit should be granted to the assessee. He submitted that the case of the assessee falls u/s.49(1)(ii). He submitted that because of ignorance of law the assessee had taken a contrary stand before the CIT(A) for which he had held that there is inconsistency in the stand of the assessee. However, for the purpose of 8 taxation correct law has to be applied and therefore indexation benefit should be given to the assessee w.e.f., 01-04-1981.
8. So far as the taxing of compensation of Rs. 12 lakhs is concerned he submitted that it was an erroneous calculation by the AO. Referring to Page Nos. 79 to 92 of the Paper Book he submitted that Sri H.K. Mody had filed a suit against Sri K.D. Sharma for recovery of compensation against property No.K-22, Hauz Khas Enclave, New Delhi which is in the nature of mesne profit. The matter travelled upto Hon'ble Supreme Court and the Hon'ble Supreme Court vide Civil Appeal No.5469/1999 order dated 10-02-2005 upheld the interim order passed by the Single Judge trying the suit on the original side according to which the Hon'ble Court vide its order dated 08-01-1998 had fixed the mesne profits @ Rs. 10,000/- per month w.e.f. 16-12-1993. Referring to the decision of Special Bench of the Tribunal in the case of Narang Overseas (P) Ltd. Vs. ACIT reported in 111 ITD 1 (SB) he submitted that the Hon'ble Special Bench has held that mesne profits awarded under decree by way of compensation for wrongful possession of property after termination of leave and licence agreement is capital receipt not chargeable to tax.
9. So far as the issue relating to tax on earnest money is concerned, the learned counsel for the assessee referred to the decision of the Hon'ble Supreme Court in the case of Hanuman Cotton Mills and Others Vs. Tata Air Craft Ltd. reported in 1970-(003)-AIR-1986-SC and drew the attention of the Bench to para 21 of the said order and submitted that the same is not taxable.
10. So far as Ground of appeal No.9 is concerned regarding award of cost he submitted that the assessee being an old lady be suitably compensated by way of cost since she was harassed mentally due to the prolonged litigation by the Revenue.
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11. The learned DR on the other hand heavily relied on the order of the AO and CIT(A). So far as the calculation of capital gain by indexation on the basis of the dates of release deed he submitted that the same is just and proper under the facts and circumstances of the case. As regards the compensation of Rs.12 lakhs is concerned he submitted that the assessee herself had offered to tax and accepted the same. There was no ground before the learned CIT(A) on this issue. Therefore, the assessee now cannot raise this ground before the Tribunal. As regards taxing of the earnest money is concerned, he submitted that the learned CIT(A) was justified in reducing the earnest money from the cost of the asset.
12. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the first ground is concerned the same being general in nature is dismissed. Before going to Ground of appeal No. 2 we would like to decide the Grounds of appeal No. 3 and 4 first, according to which the release deeds executed by co- owners of the property in favour of the assessee amounts to "gift" and therefore the indexed cost of acquisition of the property should be calculated by taking the value of the entire property as on 01-04-1981. From the various details furnished by the assessee in the Paper Book we find Sri H.K. Mody, brother of the assessee had purchased the property on 26-05-1965. Sri H.K. Mody was a Parsi and died on 29-12-1982 leaving his wife. Father of Sri H.K. Mody died on 15-05-1983 and mother Smt. M.K. Mody died on 12-06-1984. After the death of Sri H.K Mody as per Parsi Act the following persons were the legal heirs :
1. Mrs. T.J. Cooper
2. Mr. C.K. Mody
3. Mrs. Nergish J. Parakh
4. Dr. Mrs. J.F. Irani
5. Mrs. Mani H. Mody 10
13. From the various details furnished by the assessee we find the persons mentioned at Sl.No. 2 to 5 vide release deeds of separate dates relinquished the rights in the undivided share of the property, i.e. property situated at Hauz Khas Enclave, New Delhi in favour of Mrs. T.J. Cooper due to love and affection. According to the learned counsel for the assessee such relinquishment of right by release deeds on account of love and affection amounts to gift. We find the Hon'ble Supreme Court in the case of Kuppuswamy Shettiar Vs. A.S.P.A. Arumugam Chettiar and Another reported in 1967-(001)-SCR-0275-SC has held as under :
"Counsel next submitted that Ex.B-1 being a release deed could not operate as a conveyance. Exhibit B-1 was styled a deed of release. The Paper Book does not show whether it was stamped as a release or as a conveyance. After reciting that Kannammal was the owner of the properties and she died leaving the appellant as her heir, the operative part of the deed stated :
"I hereby execute a release deed in your favour to the effect that I do not claim any huq or right whatever in the immovable properties mentioned hereunder valued at about Rs.12,000/- and in the outstandings to the tune of Rs.8,000/- due by others in all Rs.20,000/- (twenty thousand) and all the rights that have been accrued to me under the Hindu law. You yourself shall hold and enjoy undisputedly with absolute rights under the huq release deed executed by me the entire movable and immovable properties belonging to the aforesaid kannammal and all the outstanding due to her from outsiders. I have not received any consideration whatever for the said release deed".
The question is whether Ex.B-1 on its true construction conveyed properties to the respondents. In T. Mammo v. K. Ramunni (A.I.R. 1966 S.C. 337, 340): this Court held :
" a registered instrument styled a release deed releasing the right, title and interest of the executants in any property in favour of the releasee for valuable consideration may operate as a conveyance, if the document clearly discloses an intention to effect a transfer".
In the present case, the release was without any consideration. But property may be transferred without consideration. Such a transfer is a gift. Under s.123 of the Transfer of Property Act, 1882, a gift may be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. Consequently, a registered instrument releasing the right, title and interest of the releasor without consideration may operate as a transfer by way of a gift, if the document clearly shows an intention to effect the transfer and is signed by or on behalf of the releasor and attested by at least two witnesses. Exhibit B-1 stated that the releasor was the owner of the properties. It showed an intention to transfer his title and its operative words sufficiently conveyed the title. The instrument, on its true construction, took effect as a gift. The gift was effectively made by a registered instrument signed by the donor and attested by more than two witnesses."
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14. In view of the above decision of the Hon'ble Supreme Court cited (Supra) it has to be held that the transfer of the property by the respective co-owners in favour of the assessee through the release deeds in pursuance of love and affection which were duly attested by a notary in presence of witnesses before him amounts to transfer of the property through gift.
15. We find as per the provisions of Section 49 where the capital asset became the property of the assessee under a gift or by succession, inheritance or devolution, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee as the case may be. Therefore, once the transfer of the property through release deeds are held as transfer of the property by the respective co-owners through gift then the cost of acquisition of the asset shall be deemed to be the cost to the original co-owners.
16. The Hon'ble Bombay High Court in the case of CIT Vs. Manjula Saha reported in (2011) 16 Taxmann.com 42 (Bombay) at Para 20 to 24 of the order has held as under :
"20. To accept the contention of the revenue that the words used in clause (iii) of the Explanation to Section 48 of the Act has to be read by ignoring the provisions contained in Section 2 of the Act runs counter to the entire scheme of the Act. Section 2 of the Act expressly provides that unless the context otherwise requires, the provisions of the Act have to be construed as provided under Section 2 of the Act. In Section 48 of the Act, the expression 'asset held by the assessee' is not defined and, therefore, in the absence of any intention to the contrary the expression 'asset held by the assessee' in clause (iii) of the Explanation to Section 48 of the Act has to be construed in consonance with the meaning given in Section 2(42A) of the Act. If the meaning given in Section 2(42A) is not adopted in construing the words used in Section 48 of the Act, then the gains arising on transfer of a capital asset acquired under a gift or will by outside the purview of the capital gains tax which is not intended by a legislature. Therefore, the argument of the revenue which runs counter to the legislative intent cannot be accepted.
21. Apart from the above, Section 55(1)(b)(2)(ii) of the Act provides that where the capital asset became the property of the assessee by any of the modes specified under Section 49(1) of the Act, not only the cost of improvement incurred by the assessee but also the cost of improvement incurred by the previous owner shall be deducted from the total consideration received by the assessee while computing the capital gains under Section 48 of the Act. The question of deducting the cost of improvement incurred by the previous owner is included in determining the period for which the asset was held by the 12 assessee. Therefore, it is reasonable to hold that in the case of an assessee covered under Section 49(1) of the Act, the capital gains liability has to be computed by considering that the assessee held the said asset from the date it was held by the previous owner and the same analogy has also to be applied in determining the indexed cost of acquisition.
22. The object of giving relief to an assessee by allowing indexation is within a view to offset the effect of inflation. As per the CBDT Circular No. 636 dated 31/8/1992 [see 198 ITR 1 (St) a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the long term capital gains. If indexation is linked to the period of holding the asset and in the case of an assessee covered under Section 49(1) of the Act, the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee.
23. Since the assessee in the present case is held liable for long term capital gains tax by treating the period for which the capital asset in question was held by the previous owner as the period for which the said asset was held by the assessee, the indexed cost of acquisition has also to be determined on the very same basis.
24. In the result, we hold that the ITAT was justified in holding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the first".
17. Since Mr. Mody had held the property since 1968 and since the co-owners by release deeds in pursuance of love and affection to the assessee had relinquished their right in the property in favour of the assessee which has already been held as gift, therefore, in view of the decision of the Hon'ble Bombay High Court cited (Supra) we find merit in the submission of the learned counsel for the assessee that the cost of acquisition of the property should be calculated by taking the value of the property as on 01-04-1981. Ground of appeal Nos. 3 and 4 by the assessee are accordingly allowed. Since the assessee succeeds in Ground of appeal Nos. 3 and 4, the Ground of appeal No. 2 in this appeal becomes infructuous and therefore the same is not being decided.
18. So far as the Ground of appeal Nos. 5 and 6 relating to deduction of earnest money from cost of the capital asset are concerned we find the provision of section 51 reads as under :
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"Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition."
Since Late Sri H.K.Mody had received an amount of Rs. 40,000/- as earnest money, therefore, in view of the clear cut provisions of section 51 the earnest money of Rs. 40,000/- has to be deducted from the cost of the asset while calculating the capital gain. The decision in the case of Hanuman Cotton Mills and Others Vs. Tata Air Craft Ltd. cited (Supra) by the learned counsel for the assessee will not be of any use to her because the same was on different sets of facts and for different proposition and does not relate to computation of capital gain when advance money is received on account of any capital asset which has been transferred. Ground of Appeal Nos. 5 and 6 are accordingly dismissed.
19. So far as Ground of appeal Nos. 7 and 8 relating to the compensation of Rs.12 lakhs are concerned we find the same was received by the assessee from Mr. Sharma for unauthorised and illegal occupation of the property at Hauz Khas Enclave, New Delhi as per direction of the court. We find the issue has to be decided in favour of the assessee in view of the decision of the Special Bench of the Tribunal in the case of Narang Overseas Pvt. Ltd., (Supra) wherein it has been held that "mesne profits awarded under decree by way of compensation for wrongful possession of property after termination of leave and licence agreement is capital receipt not chargeable to tax". Ground of Appeal Nos. 7 and 8 are accordingly allowed in favour of the assessee.
20. So far as the ground relating to award of costs we do not find any merit in the above ground raised by the assessee. Accordingly, the same is dismissed. 14
21. In the result, the appeal filed by the assessee is partly allowed.
Pronounced in the open court on this the 14th day of September 2012 Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 14th September 2012
satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. CCIT, Pune
4. CIT(A)- II Pune
5. The D.R, "B" Pune Bench
6. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune