Smt. Shanno Devi Bhatia, New Delhi V. ITO, New Delhi

ITA 1199/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61707 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 1199/DEL/11 A.Y. 2007-08 SMT. SHANNO DEVI BHATIA, VS. INCOME-TAX OFFICER, 93, GOLF LINKS, NEW DELHI. WARD 31(1), NEW DELHI . PAN/ GIR NO.AAGPB1975P ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI D.P. SACHDEVA CA & MS. MONIKA AGARWAL CA RESPONDENT : SHRI S.K. UPADHYAYA SR. DR O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DA TED 16-12-2010 RELATING TO A.Y. 2007-08. SOLE GROUND RAISED IS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE PETITIONERS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) IS WRONG IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER FOR DISALLOWANCE OF RS. 6,28,559/- REPRESENTING INDEXED COST OF RS. 6,00,000/- PAID TO DDA AS COMPOSITION FEE FOR EXTEN SION OF CONSTRUCTION IN COMPUTING THE LONG-TERM CAPITAL GAI N ON SALE OF PLOT NO. A-16, GEETANJALI ENCLAVE, NEW DELHI. EVEN THE QUANTUM OF DISALLOWANCE HAS BEEN WRONGLY MADE AT R S. 6,28,559/- AGAINST RS. 6,26,559/-. 2. BRIEF FACTS ARE: THE ASSESSEE SOLD PROPERTY A-1 6, GEETANJALI ENCLAVE, NEW DELHI. WHILE WORKING OUT THE COST OF ACQUISITIO N AND IMPROVEMENT THEREON, ASSESSEE INCLUDED AN AMOUNT OF RS. 6 LACS PAID TO DDA AS EXTENSION CHARGES FOR FAILING TO CONSTRUCT THE HOUSE WITHIN THE STIPULATED TIME AS PER THE DDA RULES. THE AMOUNT WAS TERMED AS COMPOSITION FEE FOR DELAY IN CONSTRUCTION FOR THE PERIOD 1-10-1971 TO 31-10-1983 , EXCLUDING THE PERIOD ITA NO. 1199/DEL/11 SMT. SHANNO DEVI BHATIA 2 UPTO 31-12-1975 (BEING AMNESTY PERIOD) AND FURTHER EXTENSION UPTO 31-7- 2007. THE FACTUM OF PAYMENT IS NOT DISPUTED. THE AS SESSEE CLAIMED IT TO BE CAPITAL EXPENDITURE INCURRED IN CONNECTION WITH TH E REMOVAL OF ENCUMBRANCE FOR THE CONSTRUCTION OF THE HOUSE. AO, HOWEVER, TRE ATED THE SAME AS PAYMENT OF PENALTY AND EXCLUDED THE ABOVE AMOUNT FROM INDEX ED COST OF ACQUISITION. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, BE FORE CIT(APPEALS) IT WAS PLEADED THAT THERE WERE CERTAIN DISPUTES BETWEEN TH E ASSESSEE AND DDA, CONSEQUENTLY IT INITIATED PROCEEDINGS TO TAKE OVER POSSESSION OF THE PLOT. ASSESSEE IN ORDER TO DEFEND HER TITLE, APPROACHED T HE HONBLE DELHI HIGH COURT AND AS PER THEIR DIRECTIONS THIS AMOUNT WAS P AID. THE AMOUNT BEING TOWARDS DEFENDING THE TITLE FOR THE CONSTRUCTION OF HOUSE, WAS ALLOWABLE TOWARDS COST OF ACQUISITION/ IMPROVEMENT ON THE TIT LE OF THE PROPERTY. RELIANCE WAS PLACED ON HONBLE BOMBAY HIGH COURT JU DGMENT IN THE CASE OF CIT VS. ABRAR ALVI 247 ITR 312. LD. CIT(APPEALS) , HOWEVER, CONFIRMED THE ORDER OF AO. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AND CONTENDS THAT THE SOLE BASIS FOR DENYING THE INCLUSION OF AMOUNT TOWARDS COST OF ACQUISITION OF PLOT VESTS IN AOS FINDING TO THE E FFECT THAT THE AMOUNT REPRESENTED A PENALTY. IT IS PLEADED THAT THE SAME IN FACT IS CATEGORIZED BY DDA AS COMPOSITION FEE AND IS PAID AS PER THE DIREC TION OF HONBLE DELHI HIGH COURT. WITHOUT THIS PAYMENT, THE ASSESSEE WOU LD HAVE BEEN DEPRIVED FROM THE CONSTRUCTION AND HER TITLE OVER THE PROPER TY WOULD HAVE BEEN JEOPARDIZED. THEREFORE, THE FINDING OF THIS AMOUNT BEING PENALTY IS ERRONEOUS AND CONTRARY TO THE MATERIAL AVAILABLE ON RECORD. T HE AMOUNT BEING SPECIFICALLY SPENT THROUGH JUDICIAL REMEDY FOR DEFE NDING THE TITLE I.E. CONSTRUCTION OF HOUSE, IS INCLUDIBLE IN THE COST OF ACQUISITION WHILE WORKING OUT THE CAPITAL GAINS PAYABLE BY THE ASSESSEE. FURT HER RELIANCE IS PLACED ON ITA NO. 1199/DEL/11 SMT. SHANNO DEVI BHATIA 3 CIT VS. SHAKUNTALA KANTILAL (1991) 190 ITR 56 (BOM. );MISS DHUV DADABHOY KAPADIA VS. CIT (1967) 63 ITR 651 (SC); AN D THAT OF HONBLE DELHI HIGH COURT IN THE CASE OF S.M. WAHI VS. DIREC TOR OF INCOME-TAX & ANOTHER (2011) 220 TAXATION 209 (DEL) OBSERVING AS UNDER: AS PER THIS SECTION COST OF ACQUISITION OF ASSET A ND COST OF ANY IMPROVEMENT IS TO BE DEDUCTED FROM THE CONSIDERATIO N RECEIVED AS A RESULT OF TRANSFER OF THE CAPITAL ASSET, IT IS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME-TAX VS. SHAKUNTAL KANTILAL (1991) 190 IUTR 56 THAT THE EXPRESSION USED IN SECTION 48 OF THE ACT, VIZ. EXPENDITURE IN CURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER H AS WIDER CONNOTATION THAN THE EXPRESSION, FOR THE TRANSFER , THIS VIEW HAS BEEN ACCEPTED BY THE MADRAS HIGH COURT IN THE C ASE OF COMMISSIONER OF INCOME-TAX VS. BRADFORD TRADING CO. P. LTD. 261 ITR 222. WE ARE IN AGREEMENT WITH THE AFORESAID INTERPRETATION GIVEN TO SECTION 48 OF THE ACT. 3.1. LD. COUNSEL PLEADED THAT IN VIEW OF THESE FACT S, CIRCUMSTANCES AND CASE LAWS, THE ASSESSEES CLAIM MAY BE ALLOWED. 4. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF LOWER AUTHORITIES AND PLEADS THAT THE AMOUNT IN QUESTION IN EFFECT ME ANS PAYMENT OF PENALTY WHICH CAN NOT BE INCLUDED IN THE COST OF ACQUISITI ON. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE SOLE QUESTION FOR OUR CONSIDERATION IS, WHETHER THE AMOUNT IN QUESTION IS BY WAY OF PENALTY OR COMPOSITION AND WHETHER IT CAN BE ATTRIBUTED TO THE COST OF ACQUISI TION COST OR IMPROVEMENT OF THE ASSESSEES TITLE. IN THE FACTS AND CIRCUMSTANCE S OF THE CASE WE HAVE NO HESITATION TO HOLD THAT ASSESSEE WOULD HAVE LOST HE R TITLE OVER THE CONSTRUCTION OF HOUSE IF THE ISSUE WAS NOT AGITATED BEFORE THE HONBLE HIGH COURT AND THE AMOUNT WAS NOT PAID FOR ANY CRIMINAL ACTIVITY ON THE PART OF ASSESSEE BUT FOR NOT CONSTRUCTING THE HOUSE PROPERT Y ON THE VACANT DDA PLOT ITA NO. 1199/DEL/11 SMT. SHANNO DEVI BHATIA 4 WITHIN STIPULATED TIME. DELAY IN CONSTRUCTION MAY D EPEND ON SO MANY FACTORS INCLUDING FINANCIAL DIFFICULTIES AND OTHER EXIGENCI ES. THE COMPENSATION PAID IN ACCORDANCE WITH RULES AND AS PER DIRECTION OF HO NBLE HIGH COURT, CANNOT BE CONSTRUED AS PENALTY. THE AMOUNT CLEARLY REPRESE NT THE CHARACTER OF COMPOSITION FEE AND AMOUNT SPENT ON IMPROVEMENT/ DE FENDING OF HER TITLE ON CONSTRUCTION OF HOUSE PROPERTY. IN OUR CONSIDERE D VIEW, THE SAME IS TO BE INCLUDED IN THE COST OF ACQUISITION, WHICH IS ALLOW ABLE AS PER THE SCHEME OF COMPUTATION OF CAPITAL GAINS IN INCOME TAX LAW. THU S, WE ALLOW THE GROUND TAKEN BY THE ASSESSEE. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11-6-2012. SD/- SD/- ( SHAMIM YAHYA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11-6-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR