Case Law Details

Case Name : ITO Vs Smt. Elsa Silva (ITAT Mumbai)
Appeal Number : ITA No. 1976/MUM/2011
Date of Judgement/Order : 27/11/2015
Related Assessment Year : 2007-08
Courts : All ITAT (1730) ITAT Mumbai (489)

Brief of the Case

ITAT Mumbai held in the case ITO vs. Smt. Elsa Silva that as per the agreement , ‘Athithi Builders’ has acquired the development rights of the said property after paying separately and directly by cheque Rs.2.73 crores to the assessee, Rs.1.23 Crores to Shri D.P.Koli and Rs.0.50 crores to Shri Alex Silva. This clearly evidence that the assessee has received only Rs. 2.73 crores as her share of the consideration of Rs.4,46 cores. Further we find that Revenue has not been able to bring on record any material evidence to controvert the factual finding of the CIT (A) that the these payments has made directly by cheque to parties by ‘Athithi Builders’ cannot be treated as application of income by the assessee or as consideration received by the assessee for the purpose of computation of her share of LTCG. Hence, these payments will not be considered while calculating capital gain liability of the assessee.

Facts of the Case

The assessee filed her return of income declaring income of Rs.1,41,979/-. The case was selected for scrutiny. In the course of assessment proceedings, the AO observed that vide Agreement dated 11/12/2006 , the assessee along with others, sold development rights of the property for a consideration of Rs.4,46,00,000/- to M/s.Athithi Builders & Constructions Pvt. Ltd. The consideration was paid by cheque separately to each of the parties to the said Agreement. In the return of income , the assessee, in respect of her share of consideration of Rs.2,73,00,000/- computed the Long Term Capital Gain (LTCG) thereon as Nil after claiming indexed cost of acquisition & expenses incurred along with exemption u/s 54EC. The Assessing Officer did not accept the computation of LTCG on sale of the said property as submitted by the assessee and proceeded to re-work the assessee’s LTCG thereon at Rs.3,13,64,560 by considering total value of property assessable in the assessee’s hand u/s 50C.

Contention of the Assessee

Payment made to old developer and tenant for surrender of tenancy rights

The ld counsel of the assessee supported the findings of the CIT (A). He further submitted that CIT (A) has observed that the payments of Rs.1.23 crores to Shri D.P.Koli and Rs.0.50 crores to Shri Alex Silva as per agreement had been directly received by them by cheque from M/s. Athithi Builders & Construction Pvt. Ltd. and held that this establishes that the assessee had not received the entire consideration in the said Agreement as stated by the Assessing Officer.

Contention of the Revenue

Payment made to old developer and tenant for surrender of tenancy rights

The ld counsel of the revenue submitted that the CIT (A) had erred in allowing the expenditure on account of payment to Shri D.P. Koli of Rs.1.23 crores and to Shri Alex Silva of Rs.0.50 crores for surrender of tenancy rights, ignoring the fact that the assessee had failed to discharge the onus for establishing the claim of aforesaid expenditure with documentary evidence.

Held by CIT (A)

CIT (A) partly allowed the appeal of the assessee. The CIT (A) upheld the Assessing Officer’s action in adopting the value of the said property at Rs.4,60,73,000/- as per the provisions of section 50C, as determined by the Stamp Authorities for payment of stamp duty. The CIT (A) further held that the payments of Rs.1.32 crores to Shri D.P.Koli (the old developer) and Rs.0.50 crores to Shri Alex Silv(tenant ), paid directly by cheque by M/s. Athithi Builders & Construction Pvt. Ltd., in accordance with the terms and conditions of the said Agreement dated 11/12/2006, was to be deducted from the re-stated sale consideration of Rs.4.60 crores, while computing the LTCG of the assessee.

As far as the issue of indexed cost of acquisition was concerned, the CIT(A), following the decision of the Special Bench of ITAT, Mumbai in the case of Manjula J. Shah (2009) 126 TTJ (Mum)(SB) 145 directed the Assessing Officer to adopt the same with reference to the year in which the previous owner Mrs. Hilda D’ Souza (mother of the assessee who expired intestate on 1/11/1978) first held the asset or w.e.f. 1/4/1981. The CIT(A) also allowed the assessee’s claim for expenditure of Rs.5,00,000/- incurred on payment of Rs.2,50,000/- each to Shri Traver Bello and Shri Judo Bello for withdrawing their rights and title of any nature from the said property.

Held by ITAT

Payment made to old developer and tenant for surrender of tenancy rights

ITAT held that as per the agreement dated 11/12/2006, ‘Athithi Builders’ has acquired the development rights of the said property after paying separately and directly by cheque Rs.2.73 crores to the assessee, Rs.1.23 Crores to Shri D.P.Koli and Rs.0.50 crores to Shri Alex Silva. This clearly evidence that the assessee has received only Rs. 2.73 crores as her share of the consideration of Rs.4,46 cores. As rightly observed by the CIT(A), the Assessing Officer overlooked the fact that Shri D.P.Koli had acquired the development rights in the said property vide Agreement dated 07/04/1992 and has been in possession of the said property till 2006. In this factual matrix as discussed above, we find that before us, Revenue has not been able to bring on record any material evidence to controvert the factual finding of the CIT (A) that the payment of Rs.1.23 crores made directly by cheque to Shri D.P.Koli by ‘Athithi Builders’ cannot be treated as application of income by the assessee or as consideration received by the assessee for the purpose of computation of her share of LTCG on the sale of the said property.

Further in respect of the payment of Rs.0.50 crores to Shri Alex Silva, by cheque by ‘Athithi Builder’, the material on record evidences that he was in occupation of a shop admeasuring approximately 500 sq.ft. in the said property and was running a business in the name and style of “Santa Wines” since 1970. The CIT (A) has also observed that the Assessing Officer has disregarded the supporting evidence in this regard i.e. Form D- Registration Certificate of Establishment for Bombay Shops and Establishment Act, 1948, which establishes that Shri Alex Silva was holding tenancy rights. Hence this amount cannot be considered as part of sale consideration received by the assessee.

Accordingly appeals of the revenue dismissed.

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