Shri Sachinder Mohan Mehta vs Assistant Commissioner Of Income ...
2014 Latest Caselaw 6408 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                         Judgment reserved on November 25, 2014
                        Judgment delivered on December 03, 2014
+                         ITA 655/2014
SHRI SACHINDER MOHAN MEHTA                                     ..... Appellant
                          Through:     Mr.Manu K.Giri, Adv.
                          versus
ASSISTANT COMMISSIONER OF INCOME TAX                        .....Respondent
                          Through:     Ms.Suruchi Aggarwal, Sr.Standing
                                       Counsel
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.

1. This appeal under Section 260-A of the Income Tax Act, 1961

(„Act‟, in short) has been filed by the appellant-assessee against the order

dated April 04, 2014 passed by the Income Tax Appellate Tribunal,

Delhi Bench („Tribunal‟, in short) dismissing the appeal ITA

No.839/Del./2013 filed by the assessee for the Assessment Year 2009-

10.

2. The brief facts are, the assessee, an Architect by profession,

purchased a floor of property being E-215, East of Kailash, New Delhi

in the month of July 1997, in terms of an unregistered agreement of sale

for Rs. 18 lakhs. According to the appellant-assessee, the following

amounts were debited from his bank account:

 28.06.1997                     Rs.14,00,000/-
07.07.1997                     Rs. 8,50,000/-
08.07.1997                     Rs. 7,50,000/-
________________________________
Total                          Rs.30,00,000/-

--------------------------------------------------

3. Between the period 23.12.1998 and 25.01.1999, four registered

sale deeds were executed for 1/4th share of the residential floor in

question, each deed showing a consideration of Rs. 4.50 lakh. Suffice to

state, no sale deed was registered for the fixtures and fittings for which

an amount of Rs.12 lakhs was paid. It is also noted that there is no

mention of Rs. 12 lakhs in the four sale deeds.

4. On April 09, 2008, the appellant assessee sold the property in

question in the form of two sale deeds for Rs.90 lakhs as front portion

and rear portion. The assessee, in his computation of capital gain,

deducted an amount of Rs.12 lakhs, which he claimed to have spent on

fixtures and fittings from the consideration received at the time of sale.

Rs.12 lac was treated as cost of acquisition/improvement.

5. During the assessment proceedings, the appellant assessee had

taken the stand of having entered into two agreements, one for purchase

of bare shell floor for Rs.18 lakhs and for purchase of fixtures and

fittings for Rs.12 lakhs respectively. A total amount of Rs. 30,00,000/-

needs to be reduced from the sale consideration for computing long term

capital gains. In the Assessment Order, it is noted that only a paper bill

was submitted as a justification for reducing Rs. 12 lakhs. In this regard,

the assessee vide order sheet entry dated November 23, 2011, was asked

to explain the position. The assessee explained vide his reply dated

November 28, 2011. Apart from the facts narrated above, it was also his

case that in common parlance, a residential house denotes/means a

habitable place. A house cannot be habitable without windows,

wardrobes, geysers, electricity fans, lights etc. According to the assessee,

all these items are necessary to make a house habitable. All the aforesaid

items, although removable in the same manner as the house which is,

breakable, but till the time, house remains, these attachment remains, for

any house to be habitable. In the inventory details of purchases, the loose

items were only two, cotton rugs of size 2" X 2" and two Pooja Stools,

the cost of which would not have been more than Rs.5000/-.

6. The Assessing officer did not agree with the stand taken by the

assessee and as such, did not allow the deduction at Rs.12 lakhs from the

sale consideration holding such items as „furniture‟ covered under the

definition of „personal asset‟. The Assessing Officer was of the view

that the appellant assessee had purchased the aforementioned property

through four registered sale deeds of Rs.4.50 lakhs each and in all the

sale deeds, nowhere, mention that there was a separate agreement for

fixtures and furniture. According to him, when a property was sold, it

was sold with all doors, windows, cupboards, fixed in the house.

Nowhere, windows and doors were sold separately from the sale of the

house. Nowhere, the basic house was sold separately and furniture was

sold separately. According to him, the furniture were personal effects

which were not covered under the head „capital asset‟ as per the

provisions of Section 2(14) of the Act. He also held that the payment for

acquisition of property could be ascertained only from the registered sale

deeds. Only on the basis of a bill, it cannot be assumed that payment

was for acquisition of the house property and therefore, Rs.12 lacs

cannot be added to the cost of acquisition. He held, apart from the cost of

acquisition, only expenses on transfer and cost of improvement can be

deducted from the sale consideration. Other payments can be deducted

from the sale consideration for the purpose of computing capital gain

specially, when payments were not mentioned in the registered sale

deeds. The Assessing officer allowed the cost of improvement of

Rs.9,62,107/-. In the last, he computed the long term capital gain as

Rs.18,19,945/-.

7. The appellant assessee filed four appeals before the Commissioner

of Income Tax (Appeals). In the first appeal, the appellant-assessee had

claimed that the Assessing Officer erred in not considering the amount of

Rs.12 lakhs as cost of acquisition thereby increasing the taxable long

term capital gain. In the second appeal, it was the case of the

appellant-assessee that the Assessing Officer erred in holding the

amount as „cost of furniture‟ and as „personal asset‟ under Section 2(14)

of the Act, ignoring the nature and the fact that it was the part of the

gross sale consideration. It may be noted here, the assessee has also

claimed the amount as „Cost of Purchase/Improvement‟. The appellant

assessee also claimed that property in question sold in two parts (rear

and front) by him in terms of the sale deeds executed in 2008 for Rs.45

lakhs each with fittings and fixtures, which are essential for making the

house habitable. The Commissioner of Income Tax (Appeals), after

noting the reasons given by the Assessing Officer in rejecting the claim

of the assessee, has held as under:

"After considering the grounds raised by the appellant and the facts of the case and the opinion of the assessing officer, I find that only on the basis of a bill which is for furniture, it cannot be assumed that the payment is for acquisition of the house property and should be added to the cost of acquisition. In the facts and circumstances of the case, I hold that the Assessing Officer has correctly reduced the payment made for acquisition of furniture from the cost of acquisition. The capital gain worked out by the assessing officer after reducing the cost of furniture from the cost of acquisition is correct and there is no need to interfere with that. The grounds raised on the issue are dismissed".

8. The issues raised in the third and fourth appeals are not subject

matter of this appeal and hence are not referred to.

9. The appellant assessee filed an appeal before the Tribunal, raising

only two grounds, which are reproduced as under:

"1. That Ld Assessing Officer has grossly erred in not considering 12,00,000/- as part of cost of acquisition of residential property purchased in F.Y. 1997-98 and thus erred in increasing the taxable long term capital gain on sale thereof in financial year 2008-09 which finding is against the specific provisions of section 2(47)(v) of the Act and therefore is bad in law and on facts on the case.

2. That the Id Assessing Officer/CIT(A) in first instance erred in holding that 12,00,0.00/- was not the capital cost of acquisition of house but was the cost of furniture thus a personal assessee as per section 2(14) of the Act, without considering the nature of the said capital expenses as per the inventory detail of such purchases. However, without prejudice even if such cost is so considered by the Ld Assessing Officer, they further erred in not deducting its market value as on date of sale from the sale consideration of the hose since the gross sale consideration included the sale of such items and therefore is bad in law and on facts of the case".

10. The Tribunal, after noting Section 48 of the Act, which relates to

the aspect of capital gain, was of the view that the sale deeds by which,

the assessee had sold the property in question, does not mention the fact

about the sale of furniture and fixtures and other fittings. The Tribunal

also noted the fact that the sale deed by which, the assessee has

purchased the property, also do not reflect the fact of the assessee having

purchased the furniture and fixtures. From these two facts, the Tribunal

drew a conclusion that the assessee did not sell the furniture items.

11. The Tribunal also rejected the basis on which, the assessee has

claimed deduction at Rs. 12 lakhs on the ground that the description of

items indicates that the same consisted of removable wood work.

According to the Tribunal, it was possible that the assessee might have

sold the items separately through a separate agreement as he had done at

the time of purchase. The Tribunal also holds that the furniture and

fixtures are personal effects which have been specifically excluded from

the definition of capital asset as contained in Section 2(14) of the Act.

12. Mr. Manu K. Giri, learned counsel appearing for the appellant

assessee would largely reiterate the stand taken by the assessee before

the authorities below. He would state that when the assessee had

purchased the property along with the furniture, even though, does not

form part of the sale deeds, the said furniture must be construed to have

been acquired at the time of purchase. He would state that when the

appellant had sold the property, he is entitled to the deduction of the said

amount for the purpose of computing capital gain.

13. On the other hand, Ms.Suruchi Aggarwal, learned Sr.Standing

Counsel appearing for the revenue would support the conclusion of the

Authorities below, stating that, the same is a reasoned order, considering

all the aspects of the case and seek dismissal of the appeal.

14. Having heard the learned counsel for the parties, we note that the

issue which arises for our consideration is whether Rs. 12 lakhs paid by

the appellant assessee to the seller at the time of purchase of the property

in question must be construed as a cost of acquisition of the asset so as to

be deducted from the full value of consideration received by the

appellant assessee at the time when he had sold and transferred the

property in question. Section 48 of the Act stipulates the manner in

which the capital gain shall be calculated. We reproduce the said

Section as under:

"Section 48:

The income chargeable under the head capital gain shall be computed by deducting from the full value of consideration received or accruing as a result of transfer of 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."

15. From the perusal of the said Section, it is clear that; (1) asset sold

should be a capital asset; (2) from the sale consideration, only the cost of

acquisition of the asset, cost of improvement, if any, and expenses

incurred wholly and exclusively in connection with such transfers, are to

be reduced. The issue would be, whether the display windows, partition

of drawing room, wooden grills, wooden temples, wardrobes, cupboards,

crockery, windows, fans, geysers, light fittings, rugs, furniture, fixtures,

can be said to be capital asset, which were acquired by the assessee. It is

an admitted position as noted by the Authorities below that the assessee

had acquired the property by way of four sale deeds, each of Rs. 4.50

lakhs, the total of which, was Rs.18 lakhs. Another amount of Rs. 12

lakhs has been paid for acquisition of furniture and fixtures, which was

by way of a following bill:

"S.NO.             DESCRIPTION                       RATE        AMOUNT
                   ENTIRE REMOVABLE WOOD WORI (.....
                   THE FLAT I.E. ORNAMENTAL SHDW--
                   CASE ! DISPLAY WINDOWS. WKNH--
                   ~ENTAL PARTITION ON DRAWING
                   ROOM, WOODEN GRILLS. WOODEN
                   TEMPLE, WARDROBES, CUPBOARDS.
                   CROCKERY, WINDOWS, FANS, GEYSERS
                   ORNAMENTAL LIGHT FITTINGS,
                   RUGS ~FURNITURE ~IXTURE COMPLETE. L.S.     Rs.12,00,000/-
                                                              Rs.12,00,000/-
                   ~~. TWELVE LACS ONLY"

16. As noted by the Assessing Officer, there was no agreement, nor

any registered deed in that regard. The Assessing officer was right in

noting that there was no mention in the sale deeds of Rs. 18 lakhs about

purchase of the furniture and fixtures by way of a separate agreement for

Rs. 12 lakhs. The purported purchase was only effected by way of a bill.

Even the perusal of the bill would not reveal the details of show case,

windows, grills, wardrobes, crockery, fans, fittings, furniture etc. It is

also not known whether the seller of the property to the appellant

assessee had, in fact, sought the benefit of the capital gain. The

inventory has noted to mean "except two cotton rugs size 2‟ X 2‟ and

two Pooja stools" is vague. Similarly, the deed of 2008 also does not

give the inventory of the furniture and fixtures as sold in the year 2008,

which aspect has been conceded by the learned counsel for the appellant-

assessee at the time of the arguments. These findings are primarily

findings of fact.

17. Further, the issue can be looked from another perspective, which

is, most of the items which are said to have been acquired, are primarily

„personal effects‟ which are excluded from the definition of capital asset

under Section 2(14) of the Act if they are meant for personal use. It is

not the case of the appellant-assessee that the items like wooden temple,

crockery, fans, geysers, light fittings etc. were not for personal use, nor

such a case was put forth before the Authorities below. In fact, Rs. 12

lakhs was for all the fixtures and fittings including furniture. It is noted,

the break up of Rs. 12 lakhs was not given. In any case, as noticed above

it is a pure question of fact.

18. In view of the aforesaid position, we find that the Authorities

below were right in disallowing Rs. 12 lakhs for the purpose of

computation of the capital gain.

19. Keeping in view the above, no substantial question of law arises in

this appeal and we dismiss the same with no order as to costs.

(V.KAMESWAR RAO) JUDGE

(SANJIV KHANNA) JUDGE DECEMBER 03, 2014 akb