ITO 13(3)(1), MUMBAI V. SHAH DAMJI CHAMPSI & CO, MUMBAI

ITA 1189/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75804 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 20-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: DHIRENDRA M SHAH
• Keywords: Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, M UMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND B.R.BHASKARAN (AM ) . . , . . , ./I.T.A. NO.1189/MUM/2011 ( / ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER, 13(3)(1), ROOM NO.428, 4 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 / VS. M/S SHAH DAMJI CHAMPSI AND CO., 227,NARSHI NATHA STREET, MUMBAI-400009. ( % / APPELLANT) .. ( &% / RESPONDENT) ./ ./PAN/GIR NO. : AACFS9222Q % / APPELLANT BY : SHRI PITAMBAR DAS &% * /RESPONDENT BY : SHRI DHIRENDRA M SHAH * - / DATE OF HEARING : 20.2.2014 * - /DATE OF PRONOUNCEMENT : 26.2.2014 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL AGAINST THE ORDER OF LD. CIT(A) DATED 24.11.2010 FOR ASSESSMENT YEAR 2007-08 ON THE FOLLO WING GROUNDS: 1. I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED C.I.T.(A) HAS ERRED IN HOLDING THAT THE AO HAS NOT CARRIED OUT THE DIRECTIONS AS CONTAINED IN THE APPELLATE ORDER DATED 16.7.2009 IN APPEAL NO.CIT(A)- XIII/13(3)(1)/122/2008-09, II) WHILE DOING SO, THE LD CIT(A) HAS FAILED TO APPRECIATE THAT IN THE SAID APPELLATE ORDER. THE LD. CIT(A) HAS DIRECTED THE AO TO ADOPT 1986 AS BASE YEAR AND TREAT THE SUBSEQUENT PAYMENTS/EXPENSE AS COST OF IMPROVEMENT OF THE ASSET AND WORK OUT THE INDEXED COST OF ACQUISITION AND ACCORDINGLY CALCULATED THE CAPITAL GAINS. THE AO HAS CALCULATED THE CAPITA L GAINS IN THE ORDER U/S 250 DATED 10.9.2009 AS PER THE DIRECTIONS CONTAINED IN THE ORDER DATED 16.7.2009 AS UNDER : WORKING OF LONG TERM CAPITAL GAINS: SALE CONSIDERATION RS.40,25,000/- LESS : BROKERAGE RS.1,60,000/- A RS.38,65,000 I.T.A. NO.1189/MUM/2011 2 WORKING OF INDEXED COST OF ACQUISITION : PAYMENT MADE DURING FY 1986-87 = RS.20,000 X 497 = RS.71,000 172 PAYMENT MADE DURING FY 1989-90 = RS.1,80,000 X 4 97 = RS.5,20,116 172 PAYMENT MADE DURING FY 1991-92 = RS.53,332 X 497 = RS.1,33,196 199 PAYMENT MADE DURING FY 1998-99 = RS.6,786 X 497 = RS.9,609 351 PAYMENT MADE DURING FY 2001-02 = RS.30,000 X 497 = RS.35,000 426 PAYMENT MADE DURING FY 2004-05 = RS.4,28,304 X 49 7 = RS.4,43,473 480 -------------- TOTAL INDEXED COST (B) = RS.1 2,12,394 LONG TERM CAPITAL GAIN (A-B) RS.26 ,52,606 III) THE LD. CIT(A) HAS ERRED IN DIRECTING THE A O TO INCLUDE PAYMENTS MADE AFTER 1986 TO BE INCLUDED IN THE COST OF BASE YEA R 1986. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAS SHO WN LONG TERM CAPITAL GAINS (LTCG) OF RS.13,14,602/- ON SALE OF BANGALOW PLOT. THE AO WHILE VERIFYING THE DETAILS OF WORKING OF CAPITAL GAINS OBSERVED THAT THE ASSES SEE CLAIMED BROKERAGE OF RS.1,60,000/- AND NO TDS WAS DEDUCTED. THEREFORE, HE DISALLOWED THE SAID CLAIM U/S 40(A)(IA) OF THE ACT. IT WAS FURTHER OBSERVED BY T HE AO THAT THE ASSESSEE HAS TAKEN PURCHASE VALUE OF THE PLOT AT RS.7,18,422/- IN THE FINANCIAL YEAR 1986-87 AND CLAIMED INDEXED COST ACCORDINGLY. AO STATED THAT CIDCO LETTER DATED 5.3.1991 HAS SHOWN THAT THE PURCHASE COST IS RS.2,46,832/- OF THE A GREEMENT SO EXECUTED IN THE FINANCIAL YEAR 1991-92. THE ASSESSEE STATED THAT THE SAID COST OF RS.7,18,422/- ALSO INCLUDES MAINTENANCE CHARGES AND ACCORDINGLY CALCULATED LTC G BY CONSIDERING THE BASE FINANCE YEAR 1991-92 AND WORKED OUT THE CAPITAL GAIN AT RS .34,08,540/-. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE A UTHORITY. 4. THE LD. CIT(A) BY HIS ORDER DATED 16.7.2009 AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DIRECTED THE AO TO ADOPT BASE YEAR IN RESPECT OF THE SAID PLOT AS 1986 TO WORK OUT THE CAPITAL GAINS. ACCORDINGLY, AO PASSE D THE ORDER GIVING EFFECT TO THE ORDER I.T.A. NO.1189/MUM/2011 3 OF LD. CIT(A) TO CONSIDER THE RESPECTIVE YEARS OF PAYMENT MADE BY ASSESSEE FOR WORKING OUT THE INDEXED COST OF PURCHASE VALUE. IT IS REL EVANT TO STATE THAT THE ASSESSEE PAID TO CIDCO FOR PURCHASE OF PLOT AS UNDER : DATE OF PAYMENT AMOUNT IN RS. DESCRIPTION 12.8.1986 20,000 REGISTRATION CHARGES FOR LEASE OF BUNGALOW 2 8 .4.1989 1,00,000 D EPOSIT BUYERS CONTRIBUTION 17.11.1989 80,000 DEPOSIT BUYERS CONTRIBUTION 4.4.1991 46,832 DEPOSIT BUYERS CONTRIBUTION 26.2.1992 6,500 DEPOSIT BUYERS CONTRIBUTION 16.5.1998 6,500 DEPOSIT BUYERS CONTRIBUTION 16.5.1998 286 OTHERS 7.3.2002 30,000 - 19.3 .2005 45,434 - 31.3.2005 3,82,870 PAID TO SHIVAM ENTERPRISE FOR FENCING WORK, CLEANING AND LEVELING OF LAND 7,18,422 HOWEVER, THE ASSESSEE FILED APPEAL BEFORE THE LD.C IT(A) AND THE LD. CIT(A) BY AN IMPUGNED ORDER DATED 24.11.2010 DIRECTED THE AO TO TAKE BASE YEAR 1986 FOR THE ENTIRE AMOUNT. HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. AR COULD NOT DISPUT E THE VALIDITY OF THE CALCULATION MADE BY AO TO COMPUTE CAPITAL GAIN, THE DETAILS OF WHICH ARE MENTIONED BY DEPARTMENT IN THE GROUNDS OF APPEAL ITSELF (SUPRA). THEREFORE , HE CONCEDED THAT THE ORDER OF AO DOES NOT CONTAIN ANY INFIRMITY AND THE SAME SHOULD BE CONFIRMED. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF LD. CIT(A) AND CONFIRM THE ACT ION OF AO TO WORK OUT LTCG BY ALLOWING THE GROUND OF APPEAL TAKEN BY DEPARTMENT. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS A LLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26TH FEBRUARY, 2014 . 1 2 26TH FEBRUARY, 2014 * SD SD ( . . , / B.R. BASKARAN ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: ON THIS 26TH DAY OF FEBRARY,2014 I.T.A. NO.1189/MUM/2011 4 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. &% / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 &9 , - 9 , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - 9 , /ITAT, MUMBAI