INCOME TAX ACT, 1961

Section 45 Section 48 Section 55

Capital gains - Computation - Cost of acquisition, whether includes payment of commission to agent -

Assessee purchased about 36 Acres of land (measuring 15,59,123 sq.ft.) in the financial year 2003-04 for a consideration of Rs. 14,19,99,602. During the financial year 2005-06, he transferred 3,26,635.3 sq.ft. to Bangalore Development Authority and retained 1232771 sq.ft of land. The assessee entered into a JDA with M/s. Brigade Enterprises Private Limited on 8-1-2004 and retained land measuring 12,32,771 sq.ft. which was put to development as per the covenants of JDA. The cost of acquisition includes a sum of Rs. 1 crore paid to M/s. Bentely Investment as commission. The commission paid was with respect to the purchase of aforesaid land. The assessee though had an obligation to pay the commission amount immediately after the purchase of land, had to defer the payment due to negotiation differences. The assessee had paid the commission amount of Rs. 1 crore in the financial year 2007-08. CIT(A) did not adjudicate the issue even when there was a specific ground (Ground No. 4). The assessee had filed a confirmation letter from M/s. Bentley Investment for having acknowledged the commission amount. However, the CIT(A) rejected the contentions of assessee. Held: The reasons given by AO for not considering the payment of commission as cost of acquisition was not justified. The party who has received the commission payment confirmed that they have received the commission and payment has been made by cheque. The AO cannot doubt the genuineness of these payments. These payments were inextricably linked to the acquisition of the impugned property and it should be considered as cost of acquisition while determining the capital gain on entering into JDA. Accordingly, the AO was directed to consider the payment of Rs. 1 crore as part of cost of acquisition and thereafter compute the capital gain.

Relied:Pradeep Kar, Bangalore v. Asstt. CIT ITA No. 596/Bang/2014, dated 11-5-2016 : 2016 TaxPub(DT) 2454 (Bang-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 45 2(47)

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