Malba charges was rejected as cost of investment for claiming deduction u/s 54F as there was no occasion for purchasing malba – ITAT
ABCAUS Case Law Citation:
ABCAUS 2728 (2019) (01) ITAT
The Assessee had challenged the order passed by the CIT(A) in confirming in confirming the action of Assessing Officer (AO) in disallowing deduction claimed u/s 54F of the Income Tax Act, 1961 (the Act) on Long term Capital Gain to the extent of amount paid for malba charges.
During the course of the assessment proceedings it was observed by the AO that the assessee had claimed deduction under Section 54F which comprised of “cost of malba rights on the property”.
The AO did not finding favour with the claim of the assessee in respect of deduction u/s 54F, to the extent the same was relatable to the malba charges claimed to have been made by him towards ‘Malba rights’.
The AO declined to allow the same and resultantly restricted the entitlement of the assessee towards claim of deduction under Section 54F excluding the malba charges.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) rejected the same and upheld the order passed by the AO.
Before the Tribunal, the assessee submitted that the payment was made by the assessee towards ‘Malba charges’ formed part and parcel of the purchase consideration of the portion of the new residential property.
The assessee relied upon an agreement executed between the assessee and the seller for purchase of malba. Apart therefrom, the assessee submitted that the aforesaid seller had duly included the sale consideration of malba while computing his capital gains tax liability for the year under consideration.
The Tribunal observed that the part of the house on question was sold by the seller to the assessee and the remaining part was sold to a third party.
The Tribunal opined that when the entire residential house had been purchased by the assessee and the third party thus there could be no occasion for the assessee to have purchased any malba from the seller, at least in context of the property under consideration.
The Tribunal opined that the payment made by the assessee towards the malba charges could in no way be related to the purchase of the house in question.
Apart therefrom, the Tribunal stated that the fact that the impugned agreement in context of the purchase of malba was an unregistered agreement, thus the same was not reliable as regards the genuineness of the veracity of the transaction under consideration.
Accordingly, the Tribunal opined that the payment made by the assessee to could in no way be construed as part and parcel of the purchase consideration in context of the residential property part of which was purchased by him.
The Tribunal upheld the CIT(A) order.