Himanshu Goyal, CA for the Assessee. Runi Pal, DCIT for the Revenue.

This appeal by the assessee is directed against the order dated 19.11.2018 of LD. CIT (A)-2, Jaipur for the assessment year 2012-13. The assessee has raised the following grounds :-

“ 1. The appellant had acquired the property from her Grandmother on 11th August 2008 through a registered gift deed. The learned Commissioner (Appeals) in their Appellate Order disallowed the Registered value of gift deed and considered cost of acquisition of the property as per Section 49(1) of Income Tax Act, 1961, but they failed to allow indexation cost as per section 49(1) of Income Tax Act, 1961. Further, here, it is necessary to mention that the benefit of indexation will be allowed in the year in which the property was first acquired by her grandmother. However, the learned Commissioner (Appeals) allowed the indexation from the year when the appellant became owner of the property i.e. 2008- 09 which is completely against the law. Due to that reason, index cost of the property was reduced and tax incidence had increased.

2. The learned Commissioner (Appeals) failed to consider that the transfer expenses of Rs. 5,00,000/- were paid by the appellant to the persons who helped in sale of the property and did all formalities of sale proceedings.

3. Tax and interest levied by the learned Commissioner (Appeals) is unjustified and incorrect. Hence the Appellate order passed by the learned Commissioner (Appeals) is bad in the eye of law and deserve to be set aside.”

Ground No. 1 is regarding incorrect computation of the indexation cost of acquisition of the property in question acquired by the assessee under a Gift from Grandmother.

2. The assessee is an Individual and filed her return of income on 31st March, 2014 declaring total income of Rs. 4,63,020/-. During the year under consideration the assessee has sold a residential house bearing no. A-13, New Pinkcity Gruh Nirman Sahakari Samiti, Mahaveer Nagar-1, Tonk Road, Jaipur for a total consideration of Rs. 1,98,00,000/-. The assessee has computed the Long Term Capital Gain of Rs.63,17,562/- after claiming cost of indexation. The assessee has also claimed deduction under section 54 on account of purchase of a house property for a consideration of Rs.90,06,910/-. Accordingly the assessee has declared Nil taxable income from Long Term Capital Gain. During the assessment proceedings, the AO noted that the assessee has calculated indexed cost of the property in question by applying the DLC rate as on the date of Gift by which the assessee received the property on 11.08.2008 as against the actual cost of acquisition of fair market value as on 17.09.1988 when the Donor has acquired the property. The AO accordingly re-calculated the indexed cost by considering the actual cost of acquisition and stamp duty paid by the Grandmother of the assessee at the time of acquisition on 16.09.1988. The AO has also considered the JDA development expenses incurred by the Grandmother as well as the construction cost of the property. However, the AO has taken the indexation only from the date of gift till the sale of the property as against from the date of acquisition of the property by the Grandmother of the assessee. The assessee challenged the action of the AO before the LD. CIT (A) but could not succeed.

3. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. There is no dispute that the AO has applied provisions of section 49(1) which is applicable in this case as the mode of acquisition by the assessee is Gift and, therefore, the cost of acquisition of the property has to be considered as in the hands of previous owner. To that extent the AO was right in considering the actual cost of acquisition in the hands of the previous owner, however, while calculating the indexed cost, the AO has applied the indexed cost from 2008-09 instead of 1988 when the property was acquired by the previous owner. The LD. CIT (A) while rejecting the ground of the assessee has simply stated that the AO has invoked provisions of section 49(1) and took the cost of acquisition in the hands of the Donee which would be deemed as the cost of acquisition in the hands of the assessee for the purpose of computing the Long Term Capital Gain. However, the LD. CIT (A) has not looked into the issue that the indexation cost computed by the AO is not taken from the year of acquisition of the property by the previous owner but was taken from the year when the property was gifted by the Grandmother to the assessee. Accordingly, we find that the orders of the AO as well as LD. CIT (A) are suffering from gross error to the extent of calculating indexed cost of acquisition. Hence, we direct the AO to compute cost of acquisition by taking the year of acquisition as 1988 when the property was acquired by the previous owner and not the year of Gift. Accordingly, ground no. 1 of the assessee’s appeal is allowed.

Ground No. 2 is regarding disallowance of expenditure of Rs. 5,00,000/- claimed by the assessee as Commission paid to the Agent at the time of transfer of the property and, therefore, the assessee claimed that the same is an allowable deduction under section 48 of the IT Act being the expenditure incurred in connection with transfer of the property.

4. The ld. A/R of the assessee has submitted that the assessee has paid Rs. 5,00,000/- as a Commission to the Agent in respect of transfer of the property in question, however, the AO has disallowed the claim for want of documentary evidence.

He has referred to an Affidavit/Undertaking of one Imran Khan wherein he has acknowledged the receipt of Rs. 5,00,000/- from assessee. Except the said Affidavit/Undertaking, the assessee is not having any other documentary evidence. The ld. A/R has further submitted that even otherwise it is a prevailing practice and assessee being a lady, could not have sold the property without help of the property agent and, therefore, the claim of the assessee is reasonable and incurred in connection with the transfer of the property is allowable under section 48 of the IT Act. Thus the ld. A/R has pleaded that when the claim of the assessee is a reasonable claim and assessee being a lady could not have found the buyer, the service of the real estate agent was inevitable.

5. On the other hand, the ld. D/R has submitted that though the assessee has claimed the deduction of Rs. 5,00,000/- towards Commissioner paid, however, the assessee has not filed any supporting evidence to show that the amount was actually paid. The Affidavit filed by the assessee cannot be accepted when the amount is claimed to have been paid in cash and without any Receipt. She has relied upon the orders of the authorities below.

6. We have considered the rival submissions as well as the relevant material on record. In the transaction of sale of property of such a high value of about Rs. 2,00,00,000/-, service of real estate agent is bound to be availed by the assessee who is a lady. Further, the preparation of the documents being Sale Deed, purchase of stamp duty and other documents and formalities require the assistance and help of a person who is well versed and having the experience of such work. Therefore, there is a prevailing practice of charging 2% of the sale consideration by the real estate Agents for providing the service of documentation, scrutiny of the documents and assisting the party in registration of the document. They are also performing the functions as they inter-face between the seller and buyer and ensures fair play between the parties regarding the sale consideration of the property transferred from one party to another as well as the proper title of the seller over the property. Therefore, the property agent is not merely helping in registration of the property but he is also instrumental in finding out the buyer and seller as well as ensuring the clear title as well as the payment of the consideration. Therefore, once the transfer of the immovable property requires documentation, scrutiny of the documents and title, then the expenditure is bound to be incurred in respect of such work performed by the real estate Agents. Hence in the facts and circumstances of the case, we allow the expenditure @ 2% of the sale consideration which is a prevailing rate for such type of transactions while computing the Long Term Capital Gain. The AO is directed to allow 2% of the sale consideration as the expenditure on account of Commission paid to the real estate Agent. Ground no. 2 is partly allowed.

7. The ld. A/R has also raised a point regarding allowing the deduction under section 54 in respect of the payment made by the assessee towards furniture and fixtures purchased by the assessee along with new house property. He has pointed out that in the purchase document the consideration is shown towards purchase of the residential house but vide a separate agreement dated 20th July, 2012 the assessee has also paid Rs. 14,00,000/- towards furniture and fixtures. The assessee has filed an application for admission of additional evidence in support of this plea of allowing deduction under section 54 towards the payment made by the assessee of Rs. 14,00,000/-.

8. The ld. D/R has objected to the plea raised by the assessee and submitted that the assessee has not raised this issue before the authorities below and it is the first time the assessee is bringing some new facts of payment made by the assessee for purchase of furniture and fixtures.

9. We have considered the rival submissions and perused the orders of the AO as well as the LD. CIT (A). The assessee has not claimed such a payment as part of the investment made in the new residential house for the purpose of deduction under section 54 of the IT Act. Even before the LD. CIT (A), the assessee has not raised such a ground and only two grounds which are raised before the Tribunal were raised before the LD. CIT (A). Therefore, such a plea which is completely new and requires investigation of new facts not brought before the AO or LD. CIT (A) cannot be accepted at this stage. The assessee has even not raised any additional ground before us.

Therefore, in these facts and circumstances, the assessee cannot be permitted to set up a new case based on entirely new facts which were not brought before the authorities below. Hence, we do not accept this new plea raised by the assessee at this stage. The same is rejected.

10. In the result, appeal of the assessee is partly allowed.

Order is pronounced in the open court on 07/08/2020.

Sd/- Sd/-

(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)

Accountant Member Judicial Member

Jaipur

Dated:- 07/08/2020.