Justice Mohan Lal Varma (Retd.), New Delhi V. ACIT, Circle-63(1), New Delhi

ITA 1010/DEL/2019

AI Insights

The case involves Justice Mohan Lal Verma (Retd.), who appealed against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2013-14. The primary issues in the appeal were the addition of Rs. 93,736 to the returned income under Section 14A of the Income Tax Act and the disallowance of a Long Term Capital Loss of Rs. 18,68,720 claimed on a property at Crossing Republic, Ghaziabad. The Tribunal examined previous rulings and the specific circumstances of the case, including the treatment of administrative expenses related to exempt income and the correct date of property allotment for tax purposes.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121616 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 29-08-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 07-02-2019
• Other Referred Cases: Academy For Computer Training (Guj) Pvt. Ltd. vs. DCIT, ITO vs. Smt. Tripta Shahani
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 14A; 201; 64; 2(A); 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI ANUBHAV SHARMA, JUDICIAL MEMBER I.T.A. No.1010/DEL/2019 Assessment Year 2013-14 Justice Mohan Lal Verma (Retd.) A-124, Niti Bagh, New Delhi. Vs. ACIT, Circle-63(1), New Delhi. TAN/PAN: AACPV5024D (Appellant) (Respondent) Appellant by: Shri B.K. Anand, FCA Respondent by: Shri Subhra Jyoti Chakraborty, CIT-DR Date of hearing: 30 08 2023 Date of pronouncement: 20 09 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capt ione d a ppeal has bee n file d by t he assess ee a gainst the order of t he C ommiss ioner o f Income Ta x (A pp eals)-X X V II, N ew D elhi [ ‘C IT (A )’ i n s hor t] da te d 27. 11. 2018 a rising fr om the assess me nt orde r dat ed 19. 02. 20 16 pass ed by th e Assessing O fficer (A O) unde r Sect ion 143(3) of t he Inc ome T ax A ct, 19 61 (t he Act ) co ncerning AY 2013-1 4. 2. T he grou nds of appea l ra ised b y the assesse e read as unde r: “ 1 . Th at t h e ld . C I T (A ) e r r e d in c o nf i r m i n g th e a ddi t io n of R s . 9 3 , 7 3 6 / - t o th e r e t u r ne d i nc o m e u / s . 1 4A w i th c om p le t e d i s r e g a r d t o t he o r d e r of H o n ou r a bl e M e m b e r s I T A T B e n c h " A " , N e w D e lh i i n a s s e s s e e ' s ow n c a s e i n I T A N o . 8 64 / D e l/ 20 1 6 o n s a m e f a c t s a n d i s s u e . 2 (a ) T h at t he au t h or i t i e s b e l o w e r r e d i n d i s al l o w i ng t h e a s s e s s e e 's c la i m f o r Lo ng Te r m C a pi t a l L os s of R s . 1 8, 6 8 , 72 0 i n r e s p e c t o f t he I.T.A. No.1010/Del/2019 2 pr o p e r t y at C r o s s i n g R e p ub l i c , G h a z ia b a d . 2 (b ) T h at t he l e ar ne d C I T ( A ) f ur t he r e r r e d i n h ol d ing t h a t t h e c o s t of a c q u i s i t i on of t h e a s s e t h ad t o b e s pl i t ov e r t wo p e r i o d s a n d fu r t h e r e r r e d i n h o l d in g t h a t t h e ga i n w o ul d be as se s s a b l e a s " s h o r t t e r m c ap i t al g ai n " w i t h o ut a f f o r d i n g t h e as se s s e e a n op po r t u n i t y t o pr od uc e c l i nc h i ng do c u m e n t a r y e v i d e nc e t o r e b ut s uc h a c on c l us i o n o f th e C I T ( A ) w h o d i d n ot e v e n c on f r o n t t he as s e s s e e no r r a i s e d th i s i s s u e d ur i n g t h e A p pe l l a t e p r oc e e d i ng s an d m o r e pa r t i c ul a r l y s o w he n t h i s i s s u e w a s n o t e ve n r a i s e d by th e A O an d t he r e fo r e ba d i n l a w a nd in v io l a ti o n o f t h e p r i n c ip l e s of n a t u r a l j u s t i c e . ” 3. G ro und N o. 1 concerns a ddition of R s. 93,736/- on acc ount of ad mi ni strati ve expenses unde r Sect ion 14A of the A ct read w it h Rule 8D ( 2)(i ii ) of the IT R ules. The l d. cou nsel for the assessee at the outs et s ub mi ts tha t the iss ue is s quarel y c ove re d in favour of the as sessee in its ow n case con ce rni ng A ssess ment Ye ar 2 012-13 in ITA No.864/D el/ 2016 order date d 31. 01. 20 18. It was po inte d out t ha t o n a ba re pe rus al o f t he P &L account of the assessee, it can be noti ced t ha t no e xpe nses have bee n incurred whic h has an y re la tion to the cor respondi ng exe mp t inc ome b y wa y o f divi dend on mu tua l f unds a nd s hares a s noted in the ea rl ie r year by the C o- ord inate Bench on si mi la r fac ts. Th e ld. c ounsel further pointed out t hat maj ori t y of the divi de nd is att ributable to inves tmen t i n mut ual funds whic h are supe rvised by the expe rt s of the fi eld and ma na gement cha rges for s uc h s uper visi on ar e r ec ove re d fr om the inves tors and hence n o separat e expenses a re inc urred b y the inves tor -ass essee w hil e placing fu nds w ith the mutua l fu nds gi vi ng ri se to di vi dend inc ome. 4. We find t ha t t he is sue h as been e xa mine d b y the C o-o rdina te Bench i n favo ur of the A sses see. B e sid es, t he disa ll ow ance unde r Sect ion 14A w i th re ference t o investment i n mutual f unds has been a nsw ered i n favour of t he a ssessee i n t he case o f M /s. I.T.A. No.1010/Del/2019 3 Academ y For C om puter Tra ining (G uj ) Pv t. Ltd. vs. DCIT i n ITA No. 3065/A hd/2013 order dated 3 0. 11. 2016. The Co-o rdi na te Bench has a ddress ed the issue of dis all ow ance unde r Section 14A in relation to the mut ua l funds in fo ll ow ing ter ms ; “ 1 0 . W e h av e c a r e f u ll y c on s i d e r e d th e r i v a l s u b m i s si o ns , p e r us e d th e m a t e r i a l av a i la b l e on r e c o r d a n d g o n e t h r o u g h th e or de r s o f th e a ut h or i t ie s be l o w . T he s ol i t a r y i s s u e i n t h e p re s e n t ap p e a l i s di s a l l ow a nc e of c e r t ai n e x p e nd i t u r e b y r e s or t i n g t o s e c t i o n 1 4 A of th e A c t . W e f in d t h a t a v e r m e n t m ad e o n b e ha l f of t he a s s e s s e e t h at th e ow n c ap i t al t og e t he r w i t h r e s e r v e s h e l d b y t h e a s s e s s e e a r e i n e x c e s s of c or r e s p on d in g in v e s t m e n t i s s up p o r t e d by t h e b a l a n c e - s he e t f il e d b y t h e a s s e s s e e . Th e r e is n o r e b ut t a l fr o m t h e R e v e n ue in t h i s r e g a r d . I n v i e w of t h e l on g l i n e of j u di c i al pr e c e d e nt s o n t he is s u e , w e f i n d m e r i t i n t h e c on t e n ti o n of t h e as s e ss e e t h at pr o p or ti o na t e d i s a l l o w an c e o f e x p e nd i t u r e un d e r R u le 8 D (2 ) ( i i ) i s no t j us t i f i e d w h e r e t he i n t e r e s t -f r e e o w n c a pi t a l to g e th e r w i t h r e s e r v e s e x c e e d s t he c o r r e s po n di n g i n v e s t m e n t . Wi t h r e f e r e n c e t o th e d i s a l l ow an c e m a d e b y t he A O u n de r R ul e 8D 2 ( i ii ) a g i t a t e d by th e as s e s s e e , w e n o t ic e t h e a v e r m e n t s m a de o n b e ha lf o f t he as s e s s e e t ha t i n ta x - f r e e i n c o m e b y w ay o f d i v i de n d a r i s e s e nt i r e l y ou t o f m ut u a l f u n d s w h i c h ar e o ne t i m e s in g l e i n v e stm e nt s w i th o ut an y p r o a c t i v e i nv o l v e m e n t of th e m an a g e m e n t p e r s e . The s u r pl u s fu n d of t h e c o m p a n y h as be e n s i m pl y p a r k e d i n t h e mu t u a l f u nd s . We t ak e c og n iz a n c e o f th e ar g u m e nt o n be h a lf o f t h e a s s e s s e e t h at m u tu a l f u nd s i nv e s t m e nt b e a r s d i f f e r e nt t r a i t s a n d i s a d i f f e r e nt s pe c i e s of i n v e s t m e n t. T h e m u tu a l f un ds ar e s u pe r v is e d b y t he e x p e r t s i n t he f i e l d a nd m a n a g e m e n t c h a r g e s f o r s uch s up e r v i s i on is r e c ov e r e d f r o m t h e c l i e nt s . T h i s b e i n g s o , a n i nv e s t o r in t he m u tu a l f un d s e pa r a t e ly pa y s a d m i ni s t r at i v e a nd m a n ag e r i al e x p e n s e s un l i k e a c a s e w h e r e as s e s s e e c ho os e s t o m ak e i nv e s tm e nt in s h a r e s di r e c t l y . I n t h e c a s e o f a m u t ua l f u n ds , ad m i n i s t r at i v e an d m a n a g e r i a l e x p e n s e s ar e f ac t o r e d i n t he i nv e s t me n t s i ts e lf . I n s uc h a s c e n a r i o, t h e e x p l a na t i on o f f e r e d by th e a s se s s e e o f n o e x p e n di t u r e i nc u r r e d ap pe a r s t o be i n c on gr ui t y w ith t he m ar k e t pr a c t i c e . A c c o r di n g l y , w e d o n o t f i n d i t a f i t c a s e f or r e s o r t i n g t o do ub l e di s a l l ow an c e of t he s i m i l a r e x pe n di t u r e i n the ga r b o f R ul e 8D ( i i i ) o f t h e IT R u l e s . It w il l b e p e r t i ne n t t o not e t ha t a ba r e r e ad i n g of s e c t i o n 1 4A o f t he A c t s u g ge s t s t h at i ts a pp l i c a b i l i ty i s no t a u t o m a t i c . I t i s h e d g e d by c on d i t i o ns p r e s c r i b ed t h e r e in . Se c t i on 14 A i nh e r e s i n i t t he c on c e pt o f r e a s o n a b l ene s s . T he fo r m i da b l e a m o un t o f e x p e n di t u r e as c o m pu t e d b y t h e A O c an n ot be s a i d t o be a tt r ib u t ab l e t o t ax - f r e e i nc o m e by a pp l y i ng a s t r ai g h t ja c k e t f o r m u l a as p e r R u l e 8D (2 ) ( i i i ) of t h e I T R ule s i n t h e g i v e n fa c t s . Th u s , w e f i nd c o n s i de r a b l e m e r i t i n t h e pl e a o f th e as s e s s e e . H e nc e , w e ar e d i s p o s e d t o a dj u di c a t e t h e i s s u e i n fav o ur o f t he I.T.A. No.1010/Del/2019 4 as s e s s e e . Th us , o r d e r o f th e C I T ( A ) s u s t ai n i ng t he di s a l l o w a nc e s e c t io n 1 4 A d e s e r v e s t o be v a c at e d . ” 5. We thus fi nd me ri t in the pl ea of t he assesse e fo r revers al of dis al low ance unde r Section 14A in th e fac ts of th e case. 6. G ro und N o. 1 is ac co rdingl y a llow ed. 7. G ro unds N o. 2(a) and 2( b) conce rns disa ll ow ance of Long Terms Ca pita l Los s of 1 8, 68, 72 0/- clai me d in res pect o f prope rt y at C ross ing Republ ik Ghaz ia ba d. 8. Br ie f facts as poi nt ed out on beha l f of t he ass essee conce rn ing t he iss ue are that th e ass essee in t he year 2006 booke d a flat under cons truct ion w ith dev el ope r M/s. Cr ossing Inf ras truct ure P vt. Ltd. (C IPL ) on 24. 04. 201 6. The as sessee paid amount of Rs. 2, 56, 000/ - as an appl i cation mone y and the re afte r ma de f urt he r pa yme nts betw een 20 06 and 2010. T he purc hase consi derati on was det er mi ned @ 1 600 per sq. ft. on an area 17 25. The tota l purc ha se cost i ncludin g incidental cha rg es w ere dete rmined a t Rs. 31,2 6, 118/- by t he assessee. T he assessee i s cla imed to ha ve s urren de red i ts ri ght in t he flat on 12. 04. 201 2 i n fa vour of one M r. Raj nis h Man tri t hro ugh s urrender to the devel op er w ith a request to r e-al lo t the fla t t o Mr. Man tri. Th e tota l sa le c ons i dera tion w as dete rmi ne d b y t he a ssessee at Rs. 32, 96,173/- o ut of which Rs.28, 46, 46 0/ - w ere re ceived fro m the bu il de r on su rre nder a nd R s. 4, 49,713/ - w as r eceived directl y fro m the pro pos e d b uye r Mr. Raj nis h Man tr i. The assessee cla imed t he ga ins /l oss ar is ing from surrender of a ll ot me nt i n fa vour of thi rd p ar ty as Lo ng T erm Ca pi ta l G ai n/l oss a nd f or co mputati on of s uch gai ns, the asses see a ppli ed i ndexati on on the cos t of acqu is it io n by w a y of al lot ment in Ap ri l, 2006 a s pe r I.T.A. No.1010/Del/2019 5 pro viso t o Se ct ion 4 8 of the A ct. O n inde xa tion of cost of acquis i tion, t he as sessee determin ed capit al loss at Rs. 18, 68,720/- w hich w as clai me d to be car ri ed forw ard. T he A ssessi ng O ffice r at the t i me of sc ruti ny asses s ment did not comp ute a ny l oss but ins tea d disal low ed the be nefit of loss clai med ho ldi ng tha t there w as no amount w hich coul d be asse s sed t o tax as capit al g ai n i n the absence of any al lot me nt le tte r produc ed e tc. The Assessing O fficer further a dded Rs. 4, 49, 71 3/ - being the a mount receive d fro m t hi rd pa rt y t o the ret urned i ncome. 9. In t he fi rst a ppe a l, t he CIT (A ) vali dat ed t he sta nd of the assessee that s uch trans ac tions o f surre nd er of allot ment in fa vour of the t hird pa rt y resulte d in cap ital gains t o t he assess ee and als o obs erve d tha t Rs. 4, 49,713/ - receive d f rom thi rd part y w as als o t o be ta ken as par t of sale considera t io n and cann ot be asses sed separatel y as wr ongl y done b y the A ssessi ng O fficer. The C IT (A ) how e ver o bser ved the cl ai m of the as sessee that the al lot ment w as carr ie d out on 24. 04.2006 w as i nc orrect. The C IT (A ) t hus rejec te d the clai m of the as sessee towa rds dat e of a ll ot me nt of 28. 04.2 006. The assess ee point ed ou t be for e t he CIT (A ) t ha t the a llot ment w as ori gi na ll y made for fl at no. 904 6 w hic h w as change d to flat no. 9064 on 29. 03. 2008 w i t h sa me area, costs and terms a nd conditions and ot he r speci fica ti ons. Howeve r si nce the o riginal doc uments f or fl at no. 9046 (a llotm ent le tte r, NO C lette r of th e buil der for mo rtgage and payme nt r ecei pts ) w ere l ying wit h the bank as coll at er al for ra is ing the loan qu a flat no. 9046, the excha nge could have bee n done on ly w he n t he documents w ere re tu rned b y the ba nk on clos ure of bank l oa n o n 01.0 2. 2010. T he CIT (A ) how eve r held t hat a mende d right in f la t no. 9064 came int o existe nce on 01. 02. 2010 onl y and not be fore. T he C IT (A ) also I.T.A. No.1010/Del/2019 6 obs erve d t hat the total p ayment ma de upto 01. 02. 2010 w as Rs. 27, 72,000/- only and t his amount shou ld be trea te d as c ost of acquis i tion. T he C IT (A) t hus i n es senc e t re ate d the trans fe r of all ot ment to thir d part y as Shor t T er m Ca pi tal A sset and g ai n ar isi ng therefrom was di recte d to be taxed as Short T er m C api tal G ain b y the A sses sing O ffic er on t he basis of modi fie d c os t of acquis i tion. T he i nde xa tion b en efi t was th us denied as t he as set held b y w ay o f all ot me nt ri ght wa s t reated to b e S hor t T er m Capit al A sset. 10. In r eb ut ta l of t he aforesa id f indings of the C IT (A ), the assessee before us submi tte d th at the assessee ha d ob ta ined a let ter fr om buil de r date d 29 t h March, 200 8 in acknow le dge me nt o f the fact t hat flat no. 9046 s tood c hanged to 9 064. Th e assess ee contend s that it w as onl y on acc ount of the d ocu ment s in the poss ess io n of the bank, a f ormal a ll ot me nt l et ter co ul d not be issu ed as the assessee w as prevente d fro m surrendering the ori gi na l a ll ot me nt le tte r. H ow ever, the develope r ha d conf ir med the fact um o f cha nge in flat numb er in Ma rc h, 20 08 on the sa me terms a nd c ondi tions as ori gi na l a ll ot me nt. T hus, the da te of all ot ment sh ould be recko ned w. e. f. 29. 03.2 008 and not late r. 11. We fi nd that the Co-ordi na te B ench in the case o f ITO vs. Sm t. Tripta Shahani i n ITA N o. 459/L K W/2009, or de r da te d 05. 09.2014, has hel d t hat t he all otment o f new flat w as in cont inuati on of the ol d fl at an d t he date of ac quisit ion of fla t sol d thus s hould be c onsi de re d before the date on w hic h orig inal fl at w as al lotted. We thus see that the ac ti on of t he assessee is suppo rted b y th e d ecis ion of t he Co-ordina te B enc h. B e t hat as it ma y, in the ins tant case, the buil de r / de ve lo per had c onfir me d the I.T.A. No.1010/Del/2019 7 chang e in th e flat number wa y ba ck on 2 9. 03. 2008 and if t ha t da te is taken int o accou nt as the da te of ac quis it ion, the capit al gains /l osse s w ould be brack et ed as Lo ng T er m Capital G ains /Losses as per the pr ovis io ns of the A ct. We th us see mer it in t he plea o f the assessee for reve rsa l of the ac tion of the C IT (A ) and A ssess ing O ff ice r. H ence, the p ositi on taken b y t he assesse e is res t ored a nd t he action o f the Reve nue A uth ori t y is set asi de. 12. In the res ul t, the appeal of t he asses see is allow e d. Order pronounced in the open Court on 20/09/2023 Sd/- Sd/- [ANUBHAV SHARMA] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /09/2023 Prabhat