ORDER
M. V. R. Prasad, AM
This appeal is directed against the order of the Commissioner (Appeals) dated 22-12-1997 for the assessment year 1993-94. Various objections are taken, but the gist of the main objection is that the CIT(Appeals) erred in taking the sale proceeds of a property sold by the appellant for the purpose of working out the capital gains thereof at Rs. 1,13,25,000 instead of Rs. 71,79,720.
2. The appellant, which is a co-operative society filed a return declaring an income of Rs. 59,77,670 which comprised capital gains on sale of a plot No. 1087 (CST No. 1051, Mulund) of Rs. 57,14,286. The assessee worked out the capital gains as follows :-
“Sale of Development of Plot No. 1087 CST No. 1051 Mulund (W) Bombay to Marathon Combine price
Rs. 71,79,720
Less :
Cost of plot purchased as per valuation report of
Mr. Namavati Roshan attached
11,83,159
Legal Fees Payable
M/s. Soloman & Co.
1,00,000
H. P. Ranina
6,750
Mr. Namavati
1,500
D. M. Harish
4,000
M. R. Deshpande
10,000
M. K. S. Chave
500
Other legal provisions
35,000
1,57,750
Paid to Compound Wall
16,750
Demolition of office Shater & Temporary office construction (As per statement)
47,775
Security Salary & Other expenses (As per statement)
60,000
14,65,434
Long Term Capital Gain
57,14,286″
3. The assessee entered into an agreement dated 26-6-1992 to sell all the development rights in respect of the above-mentioned plot to one M/s. Marathon Combines and to appreciate the issues raised in this appeal it is necessary to look into some of the terms of this agreement. In the agreement, the appellant is described as the owner and M/s. Marathon Combines as the developer. It is mentioned in the agreement that the owner has agreed to grant to the developer and the developer agreed to acquire from the owner development rights of the above-mentioned plot i.e., Plot No. 1087. The rest of the relevant clauses are reproduced below:-
“1. The owner to thereby agree to grant to the Developers and the Developers do the hereby agree to acquire from the owner all the development rights of all that piece or parcel of land bearing Plot No. 1087 City Survey No. 1051 admeasuring about 1,672 square metres (One Thousand Six Hundred Seventy Two square metres only) situated at Devidayal Road, Mulund (West), Bombay 400 080 particularly described in the schedule hereunder written (hereinafter referred to as ‘the said Property’) free from all encumbrances at or for the consideration of Rs. 1,13,25,000 (Rupees One Crore Thirteen Lac Twenty Five Thousand only) and on the terms and conditions recorded herein.
2. On the execution of this Agreement the Developers have paid to the owner Rs. 11,32,500 (Rupees Eleven Lacs Thirty Two Thousand Five Hundred only) as and by way of earnest money and in part payment of the consideration (the payment and receipt whereof the owner to the hereby admit and acknowledge).
3. The Agreement is subject to the permission of the Appropriate Authority under Chapter XX-C of the Income Tax Act, 196 1.
4. The parties hereto shall within ten days from the date of execution of this Agreement jointly submit to the Appropriate Authority a Statement in Form No. 37-1 under section 269AB of the Income Tax Act, 1961 duly signed by the parties hereto.
5. In the event of the Appropriate Authority under the Income Tax Act, 1961 exercising its right to purchase and/or acquire the said property this Agreement shall stand automatically terminated and cancelled and the owner shall within thirty days of receipt of the intimation of the order of the Appropriate Authority for acquisition of the said property refund to the Developers the earnest money without interest against the other.
6. The Developers shall pay the balance of consideration of Rs. 1,01,92,500 as follows:-
Rs. 33,97,500 (Rupees Thirty Three lacs ninety seven thousand five hundred only) within 6 months from the date of execution of this Agreement. The Owners shall be entitled to make time as the essence in this respect by giving 15 days’ notice in writing to the Developers on expiry of such 6 months.
Rs. 56,62,500 (Rupees Fifty Six lacs sixty two thousand five hundred only) within 9 months from the date of execution of this Agreement. The Owners shall be entitled to make time as the essence in this respect by giving 15 days’ notice in writing to the Developers on expiry of such 9 months and the balance of;
Rs. 11,32,500 (Rupees Eleven lacs thirty two thousand five hundred only) before delivery, of charge of the said Property to the Developers or on or before 31st March, 1993 whichever is earlier-. The owners shall be entitled to make time as the essence in this respect by giving 15 days’ notice in writing to the Developers on expiry of such period.
7. Upon payment of the full consideration by the Developers to the powers as provided in this Agreement the owners shall grant a licence to the Developers to enter upon the said Property with rights :
To put up and/or erect sign boards upon the said property as also issue advertisements including the advertisements in newspapers as may be deemed fit by the Developers in respect of the said property and the sale by the Developers of the premises thereon on ownership basis;
To carry out and complete in the name and account of the Developers construction of building on the said property by themselves or through any building contractors, sub-contractors or agents;
To dispose of in the name and on account of the Developers on Ownership basis the premises to be constructed on the said Property and other rights like advertisement rights and parking spaces to the persons of their choice and at the price as they may deem fit and proper for that purpose;
To enter into their own name and on their account agreement for sale of the premises on the said property;
To apply for and obtain in the name of the owners building completion certificate;
8. ** ** ** 9. ** ** **
10.The consideration of Rs. 1,13,25,000 (One crore thirteen lacs twenty five thousand only) fixed as above is on the best that the estimated FSI available for construction of premises on the said property shall be 1,672 square metres. If the FSI available on sanction of the building plans in respect of the said Property is less than 1,672 square metres notwithstanding what is elsewhere provided herein the consideration fixed as above shall proportionately reduce and the decrease in consideration fixed as above shall be reduced from the instalment fixed as under clause 6(1) above provided that if the FSI available oil sanction of the building plant in respect of the said property is less than 836 square metres either of the parties hereto shall be entitled to terminate this Agreement by giving to the other notice in writing of their intention to do so and in case of such termination the owner shall forthwith return to the Developers all amounts paid by the Developers to the owner in pursuance of the Agreement with interest earned by the owner thereon the thereupon neither party shall have any other claim against the other.
** ** **
15. On the Developers paying to the owner the consideration in full as provided herein the owner shall deliver to the Developers charge of the said property. Until payment by the Developers to the owner of the consideration in full the Developers shall have no right title permission or authority to enter upon the said Property for any purpose whatsoever.
16. The owners shall at the option of the Developers handover possession of the said property to the Developers at any time before execution of the conveyance after full payment of the consideration and against execution of the supplementary agreement providing for possession on which the appropriate stamp duty payable in that case shall be paid by the Developers.
17. ** ** ** 18. ** ** ** 19. ** ** **
20. Within 12 months of the completion of construction of new budding on the said property as provided herein the developers shall form a Co-operative Housing Society of holding of premises therein and on completion of registration of such Co-operative Housing Society the owner shall executate a conveyance on the said property alongwith buildings thereon in favour of such Co-operative Housing Society and the developers shall join in the execution of the conveyance as confirming party thereto. All the costs charges and expenses of the formation and registration of such Co-operative Housing Society shall be borne and paid by the developers only and the, owner shall not in any way be responsible or liable for the same.”
4.Thearcaof the plot i.e.,plotNo. 1087is 1,672 sq. mtrs. The consideration of Rs. 1, 13,25,000 was fixed on the basis that the estimated FSI available for construction of the premises on the said plot would be 1,672 sq. mtrs and the clause at 10 extracted hereinabove provided for reduction of the consideration in case the FSI available should be less than 1,672 sq. mtrs. Further, the agreement also provided that if the FSI should be less than 836 sq. mtrs (half of 1,672 sq. mtrs.) either of the parties had the option of terminating the agreement. In effect, the Society agreed to dispose of the development rights of plot No. 1087 for a consideration which works out to Rs. 6,773.72 per sq. mtrs. of FSI. On the execution of the agreement M/s. Marathon Combines paid to the Society Rs. 11,32,500 by way of’ earnest money as stipulated in the agreement. M/s. Marathon Combines pursued the matter with the Bombay Municipal Corporation, and initially could obtain FSI of only 1,060 sq. mtrs. In the subsequent year, i.e., in the year of account relevant for the assessment year 1994-95, it obtained further FSI of 89 sq. mtrs. After further pursuing the matter with the Corporation, the developer could obtain a further FSI of 104 sq. mtrs. in the year of account relevant for the assessment year 1995-96. Thus, in all, it obtained FSI of 1,253 sq. mtrs. The balance FSI of 419 sq. mtrs (1,672-1,253) was not obtained till date. The assessee received the consideration from the developer on the basis of the FSI obtained in each year. Accordingly, it worked out the capital gains on the basis of consideration relatable to 1,259 sq. mtrs. of FSI and offered it in the respective years concerned. In other words, it offered the capital gains on proportionate basis in three years, i.e., assessment years 1993-94, 1994-95 and 1995-96. Thus, it offered capital gains of Rs. 57,14,286 for the assessment year 199394, Rs. 5,60,341 for the assessment year 1994-95 & Rs. 5,72,923 for the assessment year 1995-96. The sale consideration taken into account for working out the capital gains is Rs. 71,79,720 in the assessment year 199394, Rs. 6,69,037 in the assessment year 1994-95 and Rs. 7,07,695 in the assessment year 1995-96. As the plot was acquired in 1968, the appellant opted for the substitution of its value as on 1-4-1981 as permitted under the Act and for this purpose, it got the plot valued by an approved valuer and the approved valuer, Dr. Roshan H. Namavate, determined the value of the plot as on 1-4-1981 at Rs. 11.83 lakhs after taking into account the cost inflation index multiplier of 2.23. As the capital gains were returned in three different assessment years, the cost of the plot for the purpose of working out the capital gains was also taken proportionately in the respective years.
The assessing officer held that the sale consideration should be taken at the figure of Rs. 1,13,25,000 stipulated in clause (1) of the agreement. He was of the view that there cannot be a transfer in stages or in different years and as per the above agreement, the entire plot No. 1087 of 1,672 sq. mtrs. had been transferred. He also mentioned that the assessee obtained the necessary ‘No Objection Certificate’ under section 269UL(3) of the Income Tax Act from the Appropriate Authority and such a certificate is issued on the basis of the representation made before the Authority by the appellant that the entire plot was sought to be transferred. He was of the view that, if the assessee sought to transfer the plot in different stages, it was incumbent upon it to approach the Appropriate Authority repeatedly, i.e., at the time of each transfer. He was also of the view that the Bombay Municipal Corporation granted the FSI in stages and, therefore, there seemed to be no end to such gradualism. He also observed that the purchaser was given possession of the whole plot of land and the appellant had no authority to reduce the consideration on its own. He accordingly worked out the capital gain at Rs. 1,01,37,341 as per the following computation :-
“Capital Gain
Sale proceeds as per NOC of Appropriate Authority
Less :
(1)
Indexed cost of the plot as per valuation report
11,83,159
(2)
Demolition of old structure expenses
4,500
Rs. 11,87,659
Long Term Capital Gain
..
Rs. 1,01,37,341″
The Commissioner (Appeals) upheld the finding of the assessing officer that capital gains cannot be charged in bits and pieces. He did not dispute the appellant’s claim that the entire consideration of Rs. 1, 13,25,000 was not received by it, but however, he upheld the order of the assessing officer on the ground that capital gains cannot be charged in different years. He, however, gave a direction that the cost of 1,672 sq. mtrs. should be substituted for the cost of 1,060 sq. mtrs. allowed by the assessing officer for computing the capital gains.
5. Before us, the learned counsel for the assessee pleaded that the revenue authorities were totally unjustified in levying capital gains tax on the basis of hypothetical sale consideration mentioned in the agreement of Rs. 1, 13,25,000. This amount was never received and it was stipulated only on the basis of an optimistic estimate that the F81 that would be available was of the order of 1,672 sq. mtrs. The FSI of 1,672 sq. mtrs. was not allowed and so there was no question of receiving consideration of Rs. 1, 13,25,000. The learned counsel for the assessee invited our attention to clause 10 of the agreement which we have extracted hereinbefore and pleaded that in terms of this clause, the consideration had to be scaled down on the basis of FSI that became actually available. lt is pleaded that the assessee cannot be subjected to taxation in respect of an income that was never received.
6. The learned counsel has invited our attention to appellant’s letter dated 5-10-1995 addressed to the assessing officer which may be seen at pages 87 to 89 in which it was submitted as follows—
“Society entered into Agreement for Development dated 26-6-1992 for FSI to be consumed by Developer, M/s. Marathon Combines for Plot area of 1,672 sq. mtrs. The said Plot No. 1087 is an amalgamated plot with Plot No. 1088, and thus total plot area of both the plots in BMC records is 3,154.60 sq. mtrs., out of which internal road (access) area is 75 sq. mtrs. and Recreation Garden area is 473.19 sq. mtrs. (for both these items FSI is riot permitted to be consumed as per BMC rules) and hence net area for consumption available remains 2,606.14 sq.i-ntrs. and out of which on plot No. 1088, the consumed FSI (for Anuparna & Anurag, existing buildings built in 1974) is 1,342.25 sq.mtrs., and hence net available FSI permitted by, BMC to develop on plot No. 1087 remains only 1,253 sq.mtrs., for which developer has paid to Society on different dates as follows :-
1.
Rs.
11,32,500
dated 30-6-1992
For FSI of 1,060 sq. mtrs.
Rs.
60,47,220
dated 13-11-1992
2.
Rs.
6,02,825
dated 24-9-1993
For FSI of 89 sq. mtrs.
Rs.
45,212
.
Interest @ 15% per annum
3.
Rs
7,07,695
dated 20-9-1994
For FSI of 104 sq. mtrs.
Rs.
85,35,452
Total FSI 104 of 1253 sq. mtrs.
It has been provided under clause No.10 of the agreement dated 26-6-1992, that 11 the FSI available on sanction of the building Plan in respect of the property is less than 1,672 sq. mtrs., the consideration fixed as above shall proportionately reduce.”
Accordingly as per amended agreement by letter exchanged between Solicitors of Society, and Developer i.e., dated 21-10-1992 and 29-10-1992, the consideration was reduced and only for 1,060 sq. mtrs. first payment was made. Subsequently Developer made efforts to get more FSI, Le., for 89 sq mtrs, from MAC, on getting it they paid to Society the agreed further consideration as per agreement dated 26-6-1992. Thereafter again Developer made attempts to get more FSI for 104 sq. mtrs. and when Plans were sanctioned, they paid agreed consideration to Society, as mentioned hereinabove. Hence Society has received full consideration for FSI sanctioned by BMC, and only equivalent plot area of 1,253 sq. mtrs. will be conveyed to Developer, out of 1,672 sq. mtrs. Rest of area of 419 sq. mtrs. shall remain vested with Society as its Plot.”
7. In the light of the above clarification, it is also pleaded that the method adopted by the assessee for offering the capital gains in respect of the transfers involved under the agreement is quite correct and required no disturbance. In other words, the plea taken is that there was not a single transfer under the agreement but there were transfers of development rights in stages as per the FM that become available in different years. It is stressed that the possession of entire plot was not granted and possession of only 1,253 sq. mtrs. was granted in different years, and possession of the balance of 419 sq. mtrs. was never granted. It is also pleaded that it was not incumbent upon the appellant to go to the Appi7opriate Authority for obtaining a ‘No Objection Certificate’ at each time of the transfer because the Appropriate Authority had already granted its approval and the authority was quite aware of the terms of the agreement as per which the consideration of Rs. 1,13,25,000 was only an assumed figure and clause 10 of the agreement made it clear that the assessee would be entitled only for a reduced consideration in case the FS1 was less than 1,672 sq. mtrs.
8. The learned departmental representative on the other hand supported the stand of the assessing officer and pleaded that the approval of the Appropriate Authority was obtained on the representation that the consideration was Rs. 1,13,25,000 and so there was no justification at all for not working out the capital gains on the basis of this consideration. It is also pleaded that there is only one agreement in respect of the transfer of the development rights and there cannot be repeated transfers of the same development rights. As the capital gains have to be levied in the year of the transfer, it is pleaded that the action of the assessing officer in bringing the entire amount to tax in one year is valid in law.
9. We are of the view that the assessee deserves to succeed. Firstly, the sale consideration cannot be taken at Rs. 1, 13,25,000 for the simple reason that this amount was never received. The terms of the agreement make it very clear that this amount was only a hypothetical figure and as per clause 10 of the agreement it is evident that the assessee would be entitled only for a reduced consideration if the FSI obtained is less than 1,672 sq. mtrs. So clearly, the assessee cannot be taxed on an amount that was not received.
10. The next question is whether the entire capital gain has to be worked out in one year or it can be spread over to three years as returned by the appellant. As perclause20of the deed which we have extracted hereinabove, the appellant has to execute the conveyance in favour of another cooperative society after the completion of the construction and the Developers formed that society with the buyers of the flats being made members. So a view can be taken that till the conveyance is executed in favour of the proposed co-operative society to be formed by the Developer, there is no transfer of any rights in the plot in question. However, that issue is not before us as the appellant had itself offered the capital gains in the three years in question. Another point also may be made, that is, even though, the preamble of the deed describes that only development rights are transferred, what remains after their transfer is only a shell and the appellant is not entitled for any consideration at the time of the execution of the proposed conveyance to the co-operative society. However, the question is whether the transfer of the development rights has taken place in one year as per the agreement or whether there are transfers in stages and the claim of the appellant that there are transfers of the development rights in stages is correct. The learned counsel for the assessee invited our attention to the correspondence between the appellant and M/s. Marathon Combines and from this correspondence which is in the appellant’s paper book, it appears to us that the possession of entire 1,672 sq. mtrs. was never given to the developers and what was given was given only in stages. In a letter dated 21-10-1992 addressed by M /s. Solomon & Co., Advocates of the appellant, the former categorically mentioned that his clients, i.e., Marathon Combines would be entitled for only to possession of conveyance of 1,060 sq. mars. of land which has been arrived at after excluding the area covered for recreation ground and other deductions. This letter may be seen at pages 45 to 49 of the appellant’s paper book. In other words, the possession is claimed by M/s. Marathon Combines only to 1,060 sq. mtrs. which is proportionate to the FSI obtained in the first stage. In the subsequent letter dated 29- 101992 M/s. LD. Shah & Co. mentions as follows:-
“3. It may be made clear that after payment of Rs. 71,79,720 being the full consideration, our clients will be entitled to all the rights of an absolute owner to the portion admeasuring 1,060 sq. mtrs. of the above plot including right available on account of relaxation of building regulations or otherwise.”
This letter may be seen at pages 52 and 53 of the appellant’s paper book. in the letter dated 13-11-1992 addressed by the appellant to M/s. Marathon Combines and which may be seen at page 54 of the applicant’s paper book, it is made clear that the former have granted a licence to enter upon and charge of a portion admeasuring 1,060 sq. mtrs. The relevant portion of the letter dated 16-12-1993 addressed by the appellant to M /s. Marathon Combines which may be seen at pages 59 to 62 of the appellant’s paper book reads as under:-
“Your two letters, both dated 24~h September, 1993 as also your letter dated 2nd December, 1993 were considered at the Special General Body Meeting of our members held on 5th December, 1993, when your Shri Ramnikbhai Z. Shah was also present. At our aforesaid Special General Body Meeting, your offer for payment of Rs. 6,48,037 for utilisation of additional 89 square metres of FSI was accepted, and the Managing Committee has been authorised to finalise the terms in connection therewith. Accordingly after discussions in our Managing Committee, we confirm that we are prepared to grant you the right to utilise 89 square metres of additional FSI in carrying out construction on our plot admeasuring 1,060 square metres granted to your under the above agreement on the following terms and conditions :-
You shall immediately pay to us consideration for right to utilise additional FSI of 89 square metres calculated at the rate of Rs. 6,773.32 per square metre as agreed under the aforesaid Agreement dated 26-6-1992 amounting to Rs, 6,02,825 alongwith interest thereon at the rate of 15% per annum from 1-4-1993 till 30-9- totalling to Rs, 6,48,087.
You shall at your own cost obtain necessary Municipal sanction for the amended plan of the scheme for amalgamation of our plot Nos. 1087 and 1088 by shifting the location of the internal road from the site shown red on the sketch hereto annexed to the site shown yellow on the sketch hereto annexed. The area of plot on which your building is under construction is enhanced from 1,060 square metres to 1,149 square metres and you are permitted to carry out construction of a building with FSI of 1,149 square metres on the aforesaid plot denoted with letter B’on the sketch hereto annex.” [Emphasis supplied]
In the subsequent letter dated 24-12-1993 which may be seen at pages 64 to 65, the assessee has made it clear that it had granted licence to the latter to enter upon and charge an additional portion admeasuring 89 square metres of the plot in question making a total area of 1, 149 sq. mtrs. Letter dated 29-9-1994 addressed by Marathon Combines reads as follows (which may be seen at page 75 of the appellant’s paper book):-
“As per the earlier correspondence and agreement we wish to inform you that M.C.G.B. has approved the plans for additional F.S.I. to the extent of 104 sq. mtrs.
The payment for this area works out as follows :
104 sq. mtrs. X 8,611/20 sq. mtrs.
Rs.
8,95,565
Less : expenses
Rs.
1,87,870
Payable
Rs.
7,07,695
Cheque for the above amount is enclosed herewith. (enclosed is one set of approved plans duly approved by the architects)
Marathon Combines
Sd/-”
11. The above correspondence corroborates the clarification of the assessece contained in its letter dated 5-10-1995 addressed to the assessing officer which we have extracted hereinbefore. In other words, there is no dispute that the FSI of 1,253 sq. mtrs. was obtained in stages and that possession of 1,253 sq. mtrs. was given in stages and that possession of 419 sq. mtrs. was not handed over to the developer and that the consideration was also received on different dates falling in different accounting years.
12. Actually, the assessee had all along claimed that only a licence to enter and carry on construction was granted to the developer and the possession of the plot was not allowed. However, the question whether such granting of licence amounts to granting possession or even if it does not amount to granting possession, whether it, under specified circumstances, amounts to transfer in terms of section 2(47)(v) of the LT. Act need not detain us here as the assessee himself had offered capital gains on the basis of the area in respect of which the developer was allowed the licence to enter and carry on construction and it appears to us that such an offer could have been made only on the implicit assumption that such licence was tantamount to granting of possession and that such licence coupled with he receipt of consideration was tantamount to a transfer interest is of section 2(47)(v) of the Income Tax Act. The revenue is entitled to accept the position conceded or stated implicitly or explicitly by an assessee. It cannot, however, go further than the conceded position and levy tax on the basis of a position that is not only not conceded but specifically denied by an assessee. In the present case, the assessee has denied that the possession of 1,672 sq. mtrs. was granted in the year of account relevant for the assessment year 1993-94 and there is no evidence with the revenue that such possession of 1,672 sq. mtrs. was allowed. It is also an undisputed fact that the total consideration of Rs. 1,13,25,000 was not received by the appellant either in the assessment year 1993-94 or even in the subsequent years. It is also not disputed that the conveyance of the land in question in favour of the proposed co-operative society to be formed by the developer subsequent to the construction as mentioned hereinbefore, was not even executed in the year of account relevant for the assessment year 1993-94. In these circumstances, we have to hold that there was no transfer of 1,672 sq. mtrs. and so the revenue was not justified in working out the capital gains on the basis of the said consideration of Rs. 1, 13,25,000. A licence to enter upon the land or possession of the land was given only in stages and as some consideration has also been received in pursuance of the agreement dated 26-6-1992, we have to hold that the transfer has taken place in stages in terms of section 2(47)(v) and accordingly, the capital gains has to be levied in the relevant years as returned by the appellant. In the circumstances, we have to set aside the orders of the revenue authorities on this issue. The capital gains for the assessment year 1993-94 may be worked out on the basis of the sale consideration actually received in respect of FS1 of 1,060 sq. mtrs. which is Rs. 71,79,720. Subject to this remark, the main ground is allowed.
13. There are other grounds taken and in these grounds it is claimed that the C1T(Appeals) has not dealt with the claim of the assessee for the deduction for the following expenses
(1)
Legal fees payable
Rs.
1,57,750
(2)
Expenditure on construction of compound wall
Rs.
16,750
(3)
Expenditure on demolition of office structure and construction office
Rs.
47,775
(4)
Expenditure on security, salaries and other expenses
Rs.
60,000
It is stated that the assessing officer disallowed the above expenditure except for Rs. 4,500 paid for demolition of old structure. It is also claimed that the Commissioner (Appeals) has not dealt with the relevant grounds raised before him in respect of the above expenditures. Commissioner (Appeals) disposed of the above grounds stating that they were not pressed. It is mentioned before us that the assessee only wanted the above grounds to be disposed of’ on the basis of written submissions and the Commissioner (Appeals) was not correct in remark in that they were not pressed. In the circumstances, so far as the claim of the assessee for these expenditures is concerned, remit the matter to the file of the Commissioner (Appeals) for considering the grounds raised before him.
14. Subject to the above, the appeal is partly allowed