Judgment:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 6,16,250/- made by AO under head long term capital gains on the ground that the expenses claimed is admissible in nature within the meaning of Section 48(1) of the IT Act, 1961, ignoring the fact that the contribution made by the assessee to the Anita Cooperative Housing society ltd was "voluntary contribution towards the repairs fund of the society and the charity is not admissible under Section 48(1) of the IT Act.
2. On the facts and in the circumstances of the case and in law the CIT(A) erred allowing the above disallowance made by AO ignoring the fact that Section 49(1) deals with computation of long term capital gains by deducting from the value of consideration or acquiring by expenditure incurred wholly or exclusively or acquisition or cost of improvement of property and does not deals with charity" 2. During the year under consideration, the assessee sold a house property. While computing the capital gain, the assessee deducted a sum of Rs. 6,16,250/-, which was paid by the assessee to the Society in connection with the transfer. The AO disallowed the claim. It was held that the voluntary contribution towards repair funds of the said amount could not be regarded as transfer fee. The transfer fee was taxable in the hands of the Co-operative Housing Society. The object of the payment was not for the transfer of the capital asset, since the assessee had failed to give any documentary evidence to support the claim. On appeal, the learned CIT(A) directed deletion of the said disallowance. Aggrieved, the department is in appeal before us.
3. Supporting the order of the AO, the learned DR has submitted before us that the application of income in question in this case is not covered under Section 48 of the Income Tax Act, 1961. The learned CIT(A) has erred in deleting the disallowance made by the AO. He has gone wrong in not observing that the contribution made by the assessee to the co-operative housing society was voluntary contribution made towards the repair fund of the society. Such voluntary contributions are not admissible under the provisions of Section 48(1) of the Act.
Further, Section 48(1) pertains to computation of long term capital gains by deducting from the full value of the consideration received or accruing, the expenditure incurred wholly or exclusively on acquisition or cost of improvement of property. It does not deal with charity or voluntary contribution as made by the assessee towards the repair fund of the Cooperative Housing Society. The learned DR has further submitted that the case laws relied on by the CIT(A) to decide the issue in favour of the assessee, are not applicable. Rather, the following decisions, which are in favour of the department, apply to the present case : Lastly, it has been submitted by the learned DR that the learned CIT(A) has not discussed any thing in his order, for which reason, it needs to be cancelled and that of the AO is required to be restored.
4. On the other hand, supporting the order of the learned CIT(A), the learned counsel for the assessee has submitted that the transfer of the house was not possible if the payment in question had not been made and this position has not been denied by the department. Undisputedly, in any transfer like the one under consideration, some transfer payment /charges is inevitable. The terminology used is not decisive, regarding the allow- ability of the expenditure incurred, if the incurring of the expenditure is wholly and exclusively in connection with the transfer.
The learned CIT(A) has rightly, inter alia, relied on the decision of the Hon'ble Bombay high Court in the case of "CIT v. Shakuntala Kantilal", (190 ITR 56) (Bom), wherein, it was held that expression the "in connection with such transfer" is wider than the the expression "for the transfer". Any amount paid which is absolutely necessary to effect the transfer is an admissible expenditure within the meaning of Section 48(1) of the Act. The learned counsel for the assessee has further submitted that even otherwise, the assessee, who was to transfer the property, for that very reason, would not have voluntarily contributed or parted with the amount of over Rs. 6 lakhs. It was only because of the stated compulsion involving the transfer that such contribution was made. It is further submitted that the learned CIT(A) has rightly held that since the Cooperative Housing Society is not a charitable institution, the payment is taxable in the hands of the society, irrespective of the nomenclature employed. The learned counsel for the assessee has, therefore, requested that the order of the learned CIT(A) being a valid one, it needs to be maintained while dismissing the appeal.
5. Section 48 of the Act, which deals with the mode of computation of the income from capital gains, reads as under: 48. The income chargeable under the head "Capital gains " shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :-- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: Provided that in the case of an assessee, who is a nonresident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company : Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of an Indian company referred to in the first proviso, the provisions of Clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted: [Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government:] 6. Thus, as per this section, the income chargeable under the head "capital gain" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, expenditure incurred wholly and exclusively in connection with such transfer, the cost of acquisition of the asset and the cost of any improvement to it.
7. The case of the department is that the voluntary contribution of Rs. 6,16,250/- made by the assessee towards the repair fund of the Cooperative Housing Society, is not admissible under the provisions of Section 48 (1) of the Act. The transfer of the capital asset itself could not have come about in the absence of such payment, irrespective of the nomenclature being given to such payment. It is definitely an allowable expenditure incurred by the assessee wholly and exclusively in connection with such transfer and this payment should be deducted while computing the income from capital gains in accordance with Section 48(1) of the Act.
8. In "Escorts ltd v. CIT", (supra), the facts were that when the assessment of that assessee for assessment year 1968-69 was completed, it was held that an amount of Rs. 3,01,634 was still payable as tax.
This demand was reduced to Rs. 29,393/-, on rectification. In appeal, relief of Rs. 3,07,022/- was granted to the assessee. The appellate authority directed the AO to carry out the directions contained in his order regarding the assessee's claim under Sections 80G and 80I. Since the assessee was able to provide evidence only in bits and pieces, the AO, vide order dated 29.8.1977 computed the assessee's total income at Rs. 41,28,437/-. Pursuant thereto, the assessee become entitled to a refund of Rs. 457055, which was made available on the same date.
However, the assessee was held not entitled to interest under Section 244(1) on the refund amount from 1.2.1976 to 29.8.1977. The appellate authority allowed the interest for this period also. The Tribunal held that the delay was attributable to the assessee itself. The Hon'ble High Court, on a reference, held that the refund was not to be made by the reason of the order of the appellate authority, which order was to be given effect to on evidence to be furnished by the assessee. The order of refund was passed as and when the evidence was furnished by the assessee and that to that extent , there was no delay in making a refund of the amount which the assessee was entitled to. The AO could not be blamed for completing the assessment in the absence of any evidence furnished by the assessee. So, the refund became payable on 29.8.1977, i.e., the date of passing of the order of assessment.
Therefore, the assessee had rightly been held to be not entitled to interest on the refund by the Tribunal.
9. A perusal of the above facts shows that this decision does not have any bearing on the present case. Here what we are concerned with is the voluntary contribution made by the assessee to the Co-operative Housing Society, sans which, the transfer of the capital asset was impossible, as per the assessee.
10. In "CIT v. Orrisa Cement Ltd", (supra), the assessee had borrowed capital and was advancing interest-free loans to its subsidiary companies. The Hon'ble Delhi High Court held that the disallowance of interest in such a case was justified. Again, we do not find the facts of "CIT v. Orrisa Cement Ltd", (supra) to be at parity with those present here.. As such, "Orissa Cement" is also not applicable hereto.
11. In "CIT v. CCC Holdings",(supra), it was held, inter alia, that in a taxing statute there cannot be any presumption as to the facts. The person claiming the benefits has to prove before the authorities, his entitlement thereto, by placing proper and sufficient evidence to that effect. In the absence of such material no relief can be granted based on presumption. That the ratio in "CIT v. CCC Holdings", (supra), is the law, cannot be denied. However, in that case, the assessee was an importer of timber. Interest paid to foreign bank without deduction of tax at source on the ground that money was lent outside India, was disallowed as business expenditure. Though in appeal, it was stated that the expenditure debited as the interest was finance charges to the bank, such contention was not supported by evidence to show the nature of the transaction the assessee had with the foreign exporter. The Hon'ble High Court held that the Tribunal was wrong in presuming that the bank got reimbursement from the assessee of the bill amount along with the interest which the bank paid to the foreign exporter.
12. Clearly, the said ratio was laid down by Hon'ble Madras High Court considering the facts of the case before them. These facts, we find are again at variance with the facts in the present case. Here, it is not at all the case of the department that the transfer of the capital asset in question would have taken place or could have taken place if the amount of Rs. 6,16,250/- had not been paid by the assessee.
Moreover, it would also be against common behavior of the assessee to make unnecessary payment of such huge amount, if it was not under compulsion to do so, so that the transfer may be effected. In such facts, the ratio in "CCC Holding" cannot at all be said to be applicable. The facts being self speaking and it being an un-rebutted practice that amounts are to be disbursed for effective transfer of a house, the assessee could not have produced evidence in support of its stand.
13. On the other hand, in "H.J. Thakker v. 5th ITO", 34 TTJ (Bom) 53, which has been relied by the assessee, it was, inter alia, held that the amount of donation to society and the amounts which were given /spent for acquiring, should be taken into account in determining the cost of acquisition of the property.
14. In "Ketan Bolinjkar v. ACIT", (2004) 2 SOI 868,(MUM), it was held, inter alia, that the assessees were entitled to reduce the amount paid to the sisters in their respect hands. The assessees had sold their ownership rights in a property and had claimed deduction of certain amounts paid to their sisters for vacating the portion of the property occupied by them peacefully.
15. In view of the above discussion, finding no error with the order of the learned CIT(A), we uphold the same.