Commissioner of Income-tax-6, Hyderabad v. Jeehangir M. Jehangir
[Citation -2014-LL-1210-89]

Citation 2014-LL-1210-89
Appellant Name Commissioner of Income-tax-6, Hyderabad
Respondent Name Jeehangir M. Jehangir
Relevant Act Income-tax
Date of Order 10/12/2014
Assessment Year 1995-96
Judgment View Judgment
Keyword Tags expenditure incurred • cost of construction • cost of acquisition • sale consideration • advertisement • capital gain • market value • cost of land

THE HONOURABLE SRI JUSTICE L. NARASIMHA REDDY and * HON BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.No.96 of 2002 % 10.12.2014 #Commissioner of Income Tax-6, Hyderabad. . Appellant Vs. $ Dr. Jeehangir M. Jehangir, hyderabad. . Respondent ! Counsel for Appellant: Sri S.R. Ashok, Senior S.C for Income TAx Counsel for Respondent: Sri P. Murali Krishna Head Note: ? Cases referred: HON BLE SRI JUSTICE L.NARASIMHA REDDY AND HON BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.96 of 2004 JUDGMENT: (per Hon ble Sri Justice L.Narasimha Reddy) Revenue preferred this appeal feeling aggrieved by order dated 26.02.2004 passed by Hyderabad Bench B of Income Tax Appellate Tribunal (for short Tribunal ) in I.T.A.No.443/Hyd/1999. respondent is NRI. He inherited 1/4th share in item of immovable property. He sold his share in financial year 1994-95. In returns filed by him under Income Tax Act, 1961 (for short Act ) for Assessment Year 1995-96, he has shown income in form of sale proceeds as Rs.6,45,142/-. capital gain component was shown as Rs.3,84,567/-. Assessing Officer processed return and passed order dated 15.01.1997 accepting facts and figures furnished by respondent. jurisdictional Commissioner selected case of respondent for suo-motu review under Section 263 of Act. show cause notice was issued directing respondent to explain as to why order of assessment dated 15.01.1997, be not set aside. He opined that market value of property was taken as Rs.600/- per square yard by Assessing Officer, whereas information furnished by Sub-Registrar discloses that it is only Rs.40/- per square yard. respondent submitted explanation stating that certificate issued by Sub-Registrar is to effect that value of property is Rs.40/- per square foot for residential area and Rs.70/- per square foot for commercial area and not Rs.40/- per square yard. Not satisfied with explanation offered by respondent, jurisdictional Commissioner passed order dated 19.03.1999 revising taxable income on basis that market value of property to be taken into account under clause (ii) of Section 48 of Act shall be Rs.40/- per square yard and not Rs.600/- per square yard, as allowed by Assessing Officer. Consequential order was also passed by Income Tax Officer. respondent carried matter in appeal before Tribunal by filing I.T.A.No.443/Hyd/1999 and same was allowed. Heard Sri S.R. Ashok, learned Senior Standing Counsel for appellant and Sri P. Murali Krishna, learned counsel for respondent. Section 48 of Act provides for procedure to be followed in computation of income, chargeable as Capital gains . As first step, consideration that is fetched in transfer of property is to be ascertained and from that amount, two components, namely, a) expenditure incurred wholly and exclusively in connection with such transfer and b) cost of acquisition of asset and cost of any improvement thereto, must be deducted. further details are furnished in form of provisos. Explanation is devoted to define various expressions, that are used in Section. second component, namely, cost of acquisition of asset would become important. That would cut into sale consideration and thereby, bring down amount, which is liable to be taxed as capital gain. following illustration would make it clear. a. plot of 500 square yards was sold in year referable to Assessment Year 1995-96 at rate of Rs.2,000/- per square yard and it fetched Rs.10,00,000/-. b. owner of plot incurred expenditure of Rs.1,00,000/- towards advertisement, documentation and legal opinion. c. property was purchased in year 1985-86 for consideration of Rs.500/- per square yard. d. Over period, sum of Rs.2,00,000/- was spent for construction of compound wall, watchman shed and providing electricity. sum of Rs.1,00,000/- incurred for advertisement etc., comes under clause (i) of Section 48 of Act. amount representing consideration for purchase, namely, Rs.2,50,000/-, and cost of construction of compound wall of Rs.1,00,000/-, aggregating to Rs.3,50,000/- would come under clause (ii). amount falling into both heads which aggregates to Rs.4,50,000/- is to be deducted from total consideration of Rs.10,00,000/-. resultant figure, namely, Rs.5,50,000/- would become capital gain , subject, however, to further revision depending on nature of assessee and nature of transactions. From above illustration, it becomes clear that any fluctuation, in cost of acquisition, would have its own bearing upon capital gain. In instant case, respondent stated that cost of acquisition is Rs.600/- per square yard and same was accepted by Assessing Officer, after verification, and passed order of assessment dated 15.01.1997. sole basis for jurisdictional Commissioner to revise order of assessment was that cost of acquisition of property would be only Rs.40/- per square yard and accordingly, he pointed out difference of Rs.560/- per square yard. In his explanation, respondent categorically stated that in letter addressed by Sub Registrar, cost was mentioned as Rs.40/- per square foot, obviously, for constructed area, and same was mistaken by Commissioner to be cost of land per square yard. perusal of order passed by Commissioner discloses that he got another letter from Sub Registrar, Banjara Hills, wherein he is said to have informed that cost of Rs.40/- mentioned by him in his earlier letter, is per square yard of land and he mistakenly mentioned it as square foot of constructed area. difference was bound to be phenomenal. If Rs.40/- is cost in respect of square feet of constructed area, in terms of square yards, it would not only be nine times that figure, but also subject to addition of cost of land, be it one, on which building was constructed or proportionate open land. When such is devastating effect of treating of figure vis- -vis square yard in stead of square feet , it was basic and fundamental duty of Commissioner to have shared that information with respondent and to take his view point in this behalf, into account. However, he straightaway proceeded to pass order. What happened at stage of appeal is of some curiosity and interest. Noticing that sole basis for Commissioner to revise order passed by Assessing Officer was information said to have been received by him from Sub Registrar, Tribunal asked departmental representative to furnish copy of same to it for verification. representative expressed his inability and it ultimately emerged that copy thereof was not furnished even to department. Tribunal, naturally, was not at all convinced about procedure adopted by Commissioner and accordingly, allowed appeal. Learned counsel for appellant is not able to point out as to how order passed by Tribunal suffers from any factual or legal error. appeal is accordingly dismissed. There shall be no order as to costs. miscellaneous petitions filed in this appeal shall also stand disposed of. L.NARASIMHA REDDY, J Date: 10.12.2014 CHALLA KODANDA RAM, J Note: L.R Copy to be marked B/o va Commissioner of Income-tax-6, Hyderabad v. Jeehangir M. Jehangir
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