P Sriram Reddy (HUF), Hyderabad V. ACIT, Hyderabad

ITA 1202/HYD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6228 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 22-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Set aside; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1202/H/2009 ASSESSMENT YEAR 2006-07 SHRI P. SRIRAM REDDY (HUF), HYDERABAD (PAN AAIHP 7851 A) VS THE ACIT, CIRCLE 8(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI K.V.N. CHARYA, DR O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-III, HYDERABAD DATED 21.10.200 9 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSES SEE IN ITS APPEAL IS THAT THE ASSESSING OFFICER OUGHT TO HAVE ACCEPTE D THE CONTENTION OF THE ASSESSEE REGARDING THE EXPENDITURE INCURRED BY HIM TOWARDS DEVELOPMENT AND LEGAL EXPENSES SPREAD OVER FOUR DECADES, BASED ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. AT THE TIME OF HEARING ON 8.11.2010, NONE APPE ARED ON BEHALF OF THE ASSESSEES. HOWEVER, A LETTER WAS FILED BY O NE MR. B.R. MAHESH, CHARTERED ACCOUNTANT ON BEHALF OF THE ASSESSEE STAT ING THAT THIS ISSUE IS COVERED BY THE ORDER OF THIS TRIBUNAL DATED 4.12.20 09 IN THE CASE OF SHRI P. SRIKANTH REDDY (HUF) & OTHERS IN ITA NOS.404 & 405/ HYD/2009 WHEREIN THE TRIBUNAL HELD IN PARAS 6 & 7 AS FOLLOWS: ITA NO.1202/H/2009 SHRI P. SRIRAM REDDY, HUF, HYDERABAD 2 2 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIALS AVAILABLE ON RECORD. AS REGARDS THE ASSE SSEES CLAIM FOR LEGAL EXPENSES, AS NOTED ABOVE, THE CLAIM OF THE LE ARNED DEPARTMENTAL REPRESENTATIVE IS THAT THE LITIGATION CARRIED ON BY THE ASSESSEE IS IN RESPECT OF DIFFERENT LANDS, AND HENCE, IT HAS NOTHI NG TO DO WITH THE LAND, THE SALE OF WHICH HAS YIELDED THE CAPITAL GA INS IN QUESTION DURING THE YEAR UNDER CONSIDERATION. THIS CONTENTI ON OF THE LEARNED DEPARTMENTAL REPRESENTATIVE GOES TO THE ROOT OF THE MATTER AND HAS A BEARING ON THE DETERMINATION OF THE ISSUE AS TO THE ALLOWABILITY OF DEDUCTION IN RESPECT OF SUCH LEGAL EXPENSES IN THE COMPUTATION FROM THE CAPITAL GAINS. WE, THEREFORE, ARE OF THE VIEW THAT THIS ASPECT OF THE MATTER NEEDS VERIFICATION BY THE ASSESSING OFFI CER. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RES TORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH A DIRECTION TO VERIFY WHETHER THE LEGAL EXPENSES CLAIMED BY THE ASSESSEE ARE IN RELAT ION TO THE LAND IN QUESTION WHICH YIELDED THE CAPITAL GAINS DURING THE YEAR UNDER CONSIDERATION, AND THEREUPON ALLOW THE SAME AT 50% OF EXPENSES SO CLAIMED TO MEET THE ENDS OF JUSTICE, ONLY IF SUCH E XPENSES ARE FOUND TO BE IN RELATION TO THE LAND IN QUESTION. TO THIS EXTENT, ASSESSEES GROUND OF APPEAL IS ALLOWED. 7. AS FOR THE OTHER EXPENSES INCURRED BY THE ASSES SEE FOR SAFE GUARDING THE PROPERTY AND CLAIMED AS DEVELOPMENTAL EXPENSES, WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES WERE JUSTIFI ED IN NOT TAKING INTO ACCOUNT THE SAID EXPENSES IN THE COMPUTATION OF CAP ITAL GAINS CHARGEABLE TO TAX, SINCE IT IS ONLY COST OF IMPROVE MENT THAT HAS TO BE TAKEN INTO CONSIDERATION AND EXPENSES INCURRED FOR SAFE GUARDING THE PROPERTY CANNOT BE EQUATED AND TREATED AS COST OF I MPROVEMENT OF THE PROPERTY. CONSEUENTLY, ASSESSEES GROUNDS WITH REG ARD TO DEVELOPMENT EXPENSES ARE REJECTED. 3. WE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE. AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE, W E ARE OF THE OPINION THAT THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THIS TRIBUNAL CITED (SUPRA) AND ON THE SAME LINE THE ISSUE IS DISPOSED OF FINALLY. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 8.11.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 8 TH NOVEMBER, 2010 ITA NO.1202/H/2009 SHRI P. SRIRAM REDDY, HUF, HYDERABAD 3 3 COPY FORWARDED TO: 1. SHRI P. SRIRAM REDDY, HUF, HYDERABAD C/O SHRI M/S MAHESH, VIRENDER & SRIRAM, CA, 6-3-788 /36 & 37, AMEERPET, HYDERABAD 2. THE ACIT, CIRCLE 8(1), HYDERABAD 3. CIT(A)-III HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP