Amount not assessable as Assessee’s income where direct payment made to parties for surrender of tenancy rights

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.

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