The Dy. CIT- Circle-I(1), Baroda V. M/s. Balajikrupa Estates Pvt. Ltd., Baroda

ITA 1071/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9327 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Valuation report
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 969 & 1071/AHD/2014 (ASSESSMENT YEAR: 2010-11) BALAJIKRUPA ESTATES PVT. LTD. 8, SATYAM APARTMENTS, 13, SAMPATRAO COLONY, ALKAPURI, GARODA-390007 DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BARODA. V/S V/S DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), BARODA. BALAJIKRUPA ESTATES PVT. LTD. 8, SATYAM APARTMENTS, 13, SAMPATRAO COLONY, ALKAPURI, GARODA-390007 (APPELLANT) (RESPONDENT) PAN: AAPPT0319Q APPELLANT BY : SHRI TUSHAR P. HEMANI, AR RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 31 -01-201 7 DATE OF PRONOUNCEMENT : 07-02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 2 1. ITA NOS. 969 & 1071/AHD/2014 ARE CROSS APPEALS OF T HE ASSESSEE AND THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A )-I, BARODA DATED 03.01.2014 PERTAINING TO A.Y. 2010-11. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEIN G DISPOSED OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 969/AHD/2014 ASSESSEES APPEAL FOR A.Y. 201 0-11 3. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1.45 CRORE IN RESPECT OF COST OF IMPROVEMENT WHILE ARRIVING AT LONG TERM CAP ITAL GAIN. 4. THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICA LLY ON 08.10.2010 DECLARING TOTAL INCOME AT RS. 49,60,542/-. THE RETU RN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTIC ES WERE ISSUED AND SERVED UPON THE ASSESSEE. 5. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SOLD A PROPERTY FOR A TOTAL C ONSIDERATION OF RS. 4.11 CRORES. ON PERUSING THE COMPUTATION OF CAPITAL GAIN S, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN COST OF IMPROVEMENT AT RS. 1 .95 CRORES IN THE FINANCIAL YEAR 2009-10. THE ASSESSEE WAS ASKED TO SUBMIT DETAILS OF IMPROVEMENT DONE IN F.Y. 2009-10. IN RESPONSE THE A SSESSEE SUBMITTED THE ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 3 LEDGER ACCOUNT OF RAMA REALTY TO WHOM CONTRACT FOR IMPROVEMENT OF ASSET WAS GIVEN. ON PERUSAL OF THE COPY OF THE LEDGER ACC OUNT, THE A.O. FOUND THAT THE ASSESSEE HAS CREDITED AMOUNT OF RS. 1.45 C RORES WITH THE NARRATION BEING THE AMOUNT PAID TO PARTY UP TO 31.03.2010. THE A.O. NOTICED THAT THE PAYMENTS AMOUNTING TO RS. 50 LACS WERE MADE IN TOTAL TO RAMA REALTY AND THE CLOSING BALANCE WAS SHOWN AT RS. 1.45 CRORE S. 6. THE A.O. WAS OF THE OPINION THAT THE AMOUNT OF RS. 1.45 CRORES WAS NOT PAID DURING THE YEAR UNDER CONSIDERATION AND ONLY 50 LAC S WAS PAID TOWARDS THE COST OF IMPROVEMENT. THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY COST OF IMPROVEMENT AMOUNTING TO RS. 1.45 CRORES WHICH HAS NOT BEEN ACTUALLY INCURRED DURING THE YEAR SHOULD NOT BE DISALLOWED. 7. THE ASSESSEE FILED A DETAILED REPLY EXPLAINING THE VARIOUS CONDITIONS OF THE SALE AGREEMENT AND STATED THAT THE ASSESSEE HAD TO DO SOME WORK TOWARDS THE IMPROVEMENT OF THE IMPUGNED LAND SOLD TO RAYCHE M RPG LTD. AND FOR COMPLETING THOSE WORK, THE ASSESSEE HAD TO INCUR EX PENDITURE TOWARDS THE SAID PROPERTY. THE ASSESSEE STRONGLY CONTENDED THAT IF THE EXPENDITURE WAS NOT INCURRED, IT WOULD NOT HAVE BEEN POSSIBLE TO SE LL THE PORTION OF THE ESTATE. 8. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE A.O. WAS OF THE FIRM BELIEF THAT THE ONLY EXPENSES WHICH ARE DEDUCTIBLE FOR COMPUTING CAPITAL GAINS CHARGEABLE TO TAX ARE:- ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 4 (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF IMPROVEMENT THEM. 9. SINCE THE ASSESSEE HAS NOT INCURRED FULL EXPENDITUR E FOR THE IMPROVEMENT OF THE PROPERTY NOR ANY DETAILS HAVE BEEN FURNISHED IN CONNECTION WITH OF DEVELOPMENT OF ASSET NOR ANY EVIDENCE HAS BEEN BROU GHT ON RECORD THAT THE REMAINING EXPENSES FROM IMPROVEMENT OF ASSET HA S BEEN MADE, THE NATURE OF WORK DONE, THE A.O. DENIED THE EXPENDITUR E INCURRED TOWARDS THE COST OF IMPROVEMENT AMOUNTING TO RS. 1.45 CRORES. 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM BUT WITHOUT ANY SUCCESS. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT BOTH THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN NOT APPRECI ATING THE FACTS IN TRUE PERSPECTIVE. THE LD. COUNSEL BROUGHT TO OUR NOTICE THAT OUT OF THE BALANCE OF RS. 1.45 CRORES, THE ASSESSEE HAS PAID RS. 45.90 LA CS TO RAMA REALTY AS ON 31.03.2012. THE LD. COUNSEL FURTHER STATED THAT THE AMOUNT OF RS. 99.10 LACS HAS BEEN TREATED AS INCOME FOR A.Y. 2013-14 ON WHIC H TAXES HAVE BEEN PAID, AS RS. 99.10 LACS WAS NEVER PAID TO RAMA REAL TY AND, THEREFORE, THE SAME HAS BEEN OFFERED BY THE ASSESSEE ITSELF AS INC OME FROM SUBSEQUENT ASSESSMENT YEAR. ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 5 12. IT IS THE SAY OF THE LD. COUNSEL U/S. 48(I) IT IS P ROVIDED THAT EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER HAS TO B E CONSIDERED AND CLAUSE (II) OF SECTION 48 PROVIDES FOR DEDUCTION COST OF A NY IMPROVEMENT WHICH MEANS THAT DEDUCTION IN RESPECT OF COST OF IMPROVEM ENT IS AVAILABLE EVEN IF SUCH COST IS SHOWN AS PAYABLE. THE LD. COUNSEL FURT HER STATED THAT SINCE OUT OF OUTSTANDING 1.45 CRORES, RS. 99.10 LACS HAS BEEN OFFERED AS INCOME IN SUBSEQUENT ASSESSMENT YEAR, ADDITION OF THE SAME WO ULD AMOUNT TO DOUBLE TAXATION. 13. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE LD. CIT(A). 14. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELO W. THE UNDISPUTED FACT IS THAT THE TOTAL SALE CONSIDERATION WAS AT RS. 4.11 C RORES. IT IS ALSO A FACT THAT WHILE COMPUTING THE CAPITAL GAINS TAX LIABILITY, TH E ASSESSEE DEDUCTED COST OF IMPROVEMENT OF RS. 1.95 CRORES. IT IS NOT IN DIS PUTE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID ONLY RS. 50 LACS TO RAMA REALTY. ADMITTEDLY, THE BALANCE OF RS. 1.45 CRORES WAS SHOW N AS OUTSTANDING AS ON 31.03.2010. 15. THE LOWER AUTHORITIES ARE OF THE FIRM VIEW THAT SIN CE THIS AMOUNT WAS NEVER PAID DURING THE YEAR UNDER CONSIDERATION, THE SAME CANNOT BE ALLOWED AS COST OF IMPROVEMENT. ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 6 16. IT IS TRUE THAT U/S. 48 CLAUSE (I) WHAT HAS MENTION ED IS EXPENDITURE INCURRED AND INCURRED MEANS PAID OR PAYABLE BUT THERE IS NO SUCH REFERENCE SO FAR AS COST OF IMPROVEMENT IS CONCERNED. BE THAT AS IT MA Y, IT IS EQUALLY TRUE THAT THE ONUS IS UPON THE ASSESSEE TO DEMONSTRATE THAT H E HAS ACTUALLY INCURRED SOME EXPENDITURE, WHETHER PAID OR PAYABLE, BY BRING ING COGENT MATERIAL EVIDENCE ON RECORD. EXCEPT FOR THE COPY OF THE LEDG ER ACCOUNT OF RAMA REALTY, THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE T O DEMONSTRATE THAT SOME IMPROVEMENT WORK HAS BEEN DONE ON THE IMPUGNED PROPERTY. THE ASSESSEE HAS SIMPLY REFERRED TO THE VARIOUS CLAUSES OF THE SALE DEED TO SHOW THAT THE ASSESSEE HAD TO DEVELOP THE PROPERTY AS PE R THE CONTRACTUAL OBLIGATION MADE WITH THE BUYER RAYCHEM RPC LTD. BU T, WE FIND THAT THE SALE DEED WAS EXECUTED ON 28.01.2010. THEREFORE, IT CANNOT BE SAID THAT THE VARIOUS CONDITIONS IN THE SALE DEED WERE CONDI TION PRECEDENT. ALTHOUGH, THE A.O. HAS ALLOWED RS. 50 LACS PAID DUR ING THE YEAR UNDER CONSIDERATION AS COST OF IMPROVEMENT BUT WE CANNOT COMMENT ON THAT BECAUSE THAT IS NOT AN ISSUE BEFORE US. ALL THAT WE HAVE TO SEE IS WHETHER THE CLAIM OF COST OF IMPROVEMENT IS SUPPORTED BY AN Y DOCUMENTARY EVIDENCES. NO VALUATION REPORT HAS BEEN FURNISHED N OR ANY CERTIFICATE FROM ANY ENGINEER/VALUER/CONTRACTOR HAS BEEN FURNISHED T O SHOW THAT THE COST WAS ACTUALLY INCURRED BY THE ASSESSEE. 17. THE ENTIRE CLAIM OF THE ASSESSEE IS BASED ON THE VA RIOUS CLAUSES IN THE SALE DEED AND THE COPY OF THE LEDGER ACCOUNT OF RAMA REA LTY. AS MENTIONED ELSEWHERE, THE SALE DEED WAS ALREADY EXECUTED WITHO UT THE ASSESSEE CARRYING OUT ANY WORK AS MENTIONED IN THE SALE DEED . THE ASSESSEE MAY ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 7 HAVE PAID RS. 45.90 LACS TO THE CONTRACTOR IN THE S UBSEQUENT YEAR BUT THEN THE PAYMENT IS NOT SUPPORTED BY ANY ACTUAL WORK DON E BY M/S. RAMA REALTY. TO THIS EXTENT, IN OUR CONSIDERED OPINION, THE SAME CANNOT BE CONSIDERED TOWARDS COST OF IMPROVEMENT. WE, ACCORDI NGLY, CONFIRM THE DISALLOWANCE TO THE EXTENT OF RS. 45.90 LACS. 18. SO FAR AS THE BALANCE OF RS. 99.10 LACS IS CONCERNE D, A PERUSAL OF THE PAPER BOOK SHOWS THAT THE ASSESSEE HAS OFFERED THE SAME A S REMISSION/CESSATION OF LIABILITY IN A.Y. 2013-14 AND HAS PAID THE TAXES ACCORDINGLY. SINCE, THE ASSESSEE HAS OFFERED THIS AMOUNT AS ITS INCOME IN S UBSEQUENT YEAR IF THE DISALLOWANCE IS SUSTAINED DURING THE YEAR UNDER CON SIDERATION, IT WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME AMOUNT. THERE FORE, IN OUR UNDERSTANDING OF THE FACT, THIS DISALLOWANCE CANNOT BE SUSTAINED. WE, ACCORDINGLY, MODIFY THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO CONFIRM THE ADDITION OF RS. 45.90 LACS AND DELETE T HE ADDITION OF RS. 99.10 LACS. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1071/AHD/2014 FOR A.Y. 2010-11 REVENUES APPEAL 20. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN ALLOWING THE EXEMPTION U/S. 54EC OF THE ACT. ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 8 21. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 54EC IN ITS RETURN OF IN COME FOR INVESTMENT IN INFRASTRUCTURE BONDS WORTH OF RS. 1 CRORE. COPIES O F BONDS CERTIFICATE ISSUED BY REC AND NHAI ALLOTTED ON 31.03.2010 WERE EXAMINE D. THE A.O. WAS OF THE OPINION THAT SINCE THE LONG TERM ASSET WAS TRAN SFERRED ON 28.01.2010, THE SIX MONTHS PERIOD EXPIRED ON 27.07.2010 AND THE ASSESSEE HAS CLAIMED 54EC EXEMPTION BY MAKING INVESTMENT OF RS. 50 LACS EACH IN TWO FINANCIAL YEARS. 22. THE A.O. WAS OF THE FIRM BELIEF THAT THERE IS A CA P IN THE PROVISION OF SECTION 54EC WHICH PROVIDES FOR THE MAXIMUM INVESTM ENT UP TO RS. 50 LACS. THE A.O. ACCORDINGLY DENIED THE CLAIM OF DEDUCTION U/S. 54EC AT RS. 50 LACS. 23. BEFORE THE LD. CIT(A), THE ASSESSEE STRONGLY CONTEN DED THAT THE MANDATORY REQUIREMENT FOR CLAIMING EXEMPTION U/S. 54EC, THE S AME SHOULD BE MADE WITHIN SIX MONTHS FROM THE DATE OF TRANSFER. THIS M ANDATORY CONDITION HAS BEEN FULFILLED BY THE ASSESSEE AND THE SAME HAS ALS O BEEN ACCEPTED BY THE A.O. 24. THE ASSESSEE FURTHER CONTENDED THAT THE INVESTMENTS IN EACH FINANCIAL YEAR DID NOT EXCEED THE UPPER LIMIT OF RS. 50 LACS, THER EFORE, THE A.O. ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION. 25. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED AS UNDER:- ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 9 7.2 THE ABOVE SUBMISSION OF THE APPELLANT WITH REGA RD TO DISALLOWANCE OF ITS CLAIM OF DEDUCTION U/S 54EC OF THE ACT IS FOUND TO BE TENABLE. IN MY OPINION IF THE ASSESSEE IS ABLE TO KEEP SIX MONTHS LIMIT FROM THE DATE OF TRANSFER OF CAPITAL ASSET, BUT STILL ABLE TO PLACE INVESTMENT OF RS. 50 ,00,000/- IS IN TWO DIFFERENT FINANCIAL YEARS, THEN IT CANNOT BE SAID THAT RESTRI CTIVE PROVISO WILL LIMIT THE CLAIM TO RS. 50,00,000/- ONLY. THE APPELLANT HAD INVESTED RS. 50,00,000/- EACH IN TWO DIFFERENT FINANCIAL YEARS, BUT WITHIN SIX MONTHS PE RIOD FROM THE DATE OF TRANSFER OF CAPITAL ASSETS AND THEREFORE IT IS ELIGIBLE TO CLAI M DEDUCTION U/S 54EC UP TO RS. 1 CRORE. THE AO HAS MENTIONED IN THE ASSESSMENT ORDER THAT THE APPELLANT HAD CLAIMED DEDUCTION U/ S 54 EC IN ITS RETURN OF INCOM E OF RS 1 CRORE FOR INVESTMENT IN INFRASTRUCTURE BONDS WORTH OF RS 1 CRORE. AS PER THE AO THE APPELLANT HAD SUBMITTED COPIES OF THE BOND CERTIFICATE ISSUED BY THE REC AND NHAI ALLOTTED ON 31/3/2010 AND 30/6/2010 RESPECTIVELY. AS PER THE AO THE APPELLANT HAD TRANSFERRED THE LONG TERM CAPITAL ASSETS ON 28TH JA NUARY 2010, HENCE THE SIX MONTHS PERIODS EXPIRES ON 27/07/2010. AS PER THE AO HOWEVER THE APPELLANT HAD MADE INVESTMENT IN NHAI BOND ON 30/6/2010 AND IT HA D CLAIMED 54EC EXEMPTION IN TWO FINANCIAL YEARS BEING 50 LACS IN EACH YEAR. THUS, THE UNDISPUTED FACT IS THAT THE APPELLANT HAD MADE INVESTMENT OF RS. 50,00,000/ - EACH IN FY 2009-10 AND IN FY 2010-11 IN REC AND NHAI BOND, BUT WITHIN SIX MON TH FROM THE DATE OF TRANSFER OF CAPITAL ASSET. THE APPELLANT HAD TRANSFERRED THE LONG TERM CAPITAL ASSET ON 28/01/2010 AND INVESTMENT OF RS 50,00,000/- EACH IN TWO FINANCIAL YEARS TOTAL OF WHICH COMES TO RS. 1 CRORE WHICH WAS MADE WITHIN SI X MONTH FROM SUCH DATE OF 28/01/2010. IN VIEW OF THIS, THE APPELLANT IS ELIGI BLE FOR CLAIM OF DEDUCTION U/S 54EC TO THE EXTENT OF RS. 1 CRORE. IN THIS REGARD T HE SUPPORT IS DRAWN FROM THE DECISIONS OF FOLLOWING HON'BLE COURTS: 1) DECISION OF HON'BLE ITAT AHEMEDABAD IN THE CASE OF SHRI VIVEK JAIRAZBHAY V/S DCIT ARISING OUT OF ITA NO. 236/BANG/2012. 2) DECISION OF HON'BLE ITAT CHENNAI IN CASE OF SMT SRIRAM INDUBAI V/S ITO, CHENNAI 32 TAXMANN.COM 118. 3) DECISION OF HON'BLE ITAT PANAJI BENCH IN CA SE OF ITO V/S MS. RANIA FALEIRO 32 TAXMANN.COM 611. 7.3 IN VIEW OF THE ABOVE DISCUSSIONS, THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION OF THE APPELLANT U/S 54EC UPTO RS. 1 CROR E INSTEAD OF RS. LACS ONLY. THUS, THE GROUNDS OF APPEAL NO. 1.01 AND 1.02 ARE A LLOWED ITA NOS. 969 & 1071/AHD/2014 . A.Y. 2010-1 1 10 26. BEFORE US, THE LD. D.R. COULD NOT BRING ANY DISTING UISHING DECISION IN FAVOUR OF THE REVENUE. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE VERY SAME DECISIONS RELIED BEFORE THE LD. CIT(A) AN D CONSIDERED BY THE LD. CIT(A) IN HIS APPELLATE ORDER. 27. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FIND INGS OF THE LD. CIT(A) (SUPRA) WHEREIN HE HAS RELIED UPON THE DECISION OF THE CO-ORDINATE BENCHES OF AHMEDABAD, CHENNAI AND PANAJI, WE DO NOT FIND AN Y ERROR OR INFIRMITY WHICH CALLS FOR ANY INTERFERENCE. WE, THEREFORE, DE CLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 28. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 07- 02- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 07 /02/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD