* 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:
ITA No. 655/2014 Page 1 of 11
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
ITA No. 655/2014 Page 2 of 11
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
ITA No. 655/2014 Page 3 of 11
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
ITA No. 655/2014 Page 4 of 11
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".
ITA No. 655/2014 Page 5 of 11
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
ITA No. 655/2014 Page 6 of 11
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
ITA No. 655/2014 Page 7 of 11
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;
ITA No. 655/2014 Page 8 of 11
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
ITA No. 655/2014 Page 9 of 11
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
ITA No. 655/2014 Page 10 of 11
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
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