ACIT, New Delhi V. Sh. Amit Sharma, New Delhi

ITA 1348/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0696 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK SENIOR
• Keywords: Cost of acquisition; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.1348/DEL./2010 (ASSESSMENT YEAR : 2006-07) ACIT, CIRCLE 47 (1), VS. SHRI AMIT SHARMA, NEW DELHI. E 84, PACHIMI MARG, VASANT VIHAR, NEW DELHI. (PAN :AAQPS8121A) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SMT. PRATIMA KAUSHIK, SENIOR DR O R D E R PER I.P. BANSAL, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRE CTED AGAINST THE ORDER OF THE CIT (APPEALS) DATED 4.1.2010 FOR ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL READ AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN THE LAW, THE LD. CIT (A) HAS ERRED IN : 1. DELETING THE ADDITION ON ACCOUNT OF HYPO TAX, SA ID TO BE DEDUCTED BY THE EMPLOYER OF ASSESSEE IN USA AND HOLDING THAT THE METHOD OF COMPUTATION ADOPTED BY T HE ASSESSEE IS CORRECT, IGNORING THE REASONS FOR THE S AID ADDITION MENTIONED SPECIFICALLY BE BY THE A.O. IN T HE ASSESSMENT ORDER. 2. DELETING THE ADDITION ON ACCOUNT OF HYPO HOUSING ALLOWANCE IGNORING THE FACT THAT AS PER RULE 3 OF T HE I.T. ITA NO.1348/DEL./2010 2 RULES 1962 AND THE FACTS OF THE CASE, THE ASSESSEE DOES NOT QUALIFY FOR THE DEDUCTION UNDER DISPUTE; 3. ALLOWING THE ASSESSEE TO AVAIL THE DEDUCTION IN RESPECT OF BROUGHT FORWARD LOSSES FROM THE SALE OF HOUSE PROPE RTY, WHEN THE SALE DEED OF THE PROPERTY UNDER REFERENCE, THE AUTHORIZED DOCUMENT FOR ANY COMPUTATION OF CAPITAL GAIN/LOSS, VEHEMENTLY DENIES THE ASSESSEES CLAIM. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND, ADD OR SUBSTITUTE THE GROUND OF APPEAL. 2. NOTICE OF HEARING WAS SENT TO THE ASSESSEE. HOWE VER, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE ON THE FIXED DATE OF HEARING, I.E. 22.12.2010. HOWEVER, IT WAS FOUND FROM THE ORDER O F CIT (A) THAT THE ISSUES RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF TRIBUNAL. LEARNED DR ASKED FOR TIME T O GO THROUGH THE ORDER OF CIT (A) AND ACCORDINGLY, THE APPEAL WAS ADJOURNED F ROM 22.12.2010 TO 23.12.2010. 3. ON 23.12.2010, LEARNED DR RELIED UPON THE ORDER OF ASSESSING OFFICER. 4. FIRST ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS REGARDING HYPOTHETICAL TAX LIABILITY. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.55,00,011/- AS HYPOTHETICAL TAX BORNE BY THE EMPLOYER AND SUBSEQUENTLY, AN AMOUNT OF RS.39,48,69 5/- WAS ADDED BACK BY WAY OF TAX EQUALIZATION (RECOVERY/PAYMENT). THE DI FFERENCE AMOUNT OF RS.15,51,316/-, ACCORDING TO ASSESSING OFFICER, WAS CLAIMED AS DEDUCTION ITA NO.1348/DEL./2010 3 WHILE COMPUTING PERQUISITES, WHICH WAS ADDED BY THE ASSESSING OFFICER AS AN INCOME OF THE ASSESSEE. THE ASSESSEE OBJECTED TO SUCH ADDITION AND IT WAS SUBMITTED THAT THE ENTIRE DEDUCTION OF HYPOTHET ICAL TAX WAS SHOWN BY THE ASSESSEE AS THE TOTAL LIABILITY FOR THAT YEAR WAS $ 1,25,437 WHICH WAS EQUIVALENT TO INR 55,00,011/- AND THE SAID LIABILIT Y WAS DULY TALLIED WITH THE AMOUNT CONSIDERED FOR COMPUTING THE TAX PERQUISITES UNDER THE HEAD TAX BORNE BY EMPLOYEE. THE OTHER AMOUNT OF RS.26,56,08 7/- REPRESENTING HYPOTHETICAL TAX IN THE MONTH OF APRIL, 2005 IS REP RESENTING ANNUAL BONUS. REFERENCE WAS MADE TO THE PAY SLIP FOR THE MONTH OF APRIL 2005 AND OTHER NECESSARY DETAILS FOR COMPUTING SUCH LIABILITY. LE ARNED CIT (A), AFTER CONSIDERING THESE SUBMISSIONS, HAS RETURNED A FINDI NG THAT THE ASSESSEES COMPUTATION OF HYPOTHETICAL TAX IS IN ACCORDANCE WI TH THE DECISION OF ITAT IN THE CASE OF ITO VS. LUKAS FOLE C/O SKODE AUTO IN DIA (P) LTD., 124 TTJ 965 AND OTHER DECISIONS OF THE TRIBUNAL. HE ALSO H ELD THAT THE ALLEGATION OF ASSESSING OFFICER THAT THE DETAILS OF THE CLAIM IN RESPECT OF HYPOTHETICAL TAX WERE NOT FILED IS INCORRECT BECAUSE IN THE SUBMISSI ONS FILED BEFORE THE ASSESSING OFFICER ON 7.11.2008, THE COMPLETE DETAIL S OF HYPOTHETICAL TAX RECOVERY WERE SUBMITTED AND SIMILARLY DETAILS WERE FURNISHED IN RESPECT OF HYPOTHETICAL TAX IN THE MONTH OF APRIL 2005, WHICH IS AN AMOUNT EQUIVALENT TO ANNUAL BONUS. HE, THEREFORE, DELETED THE IMPUGN ED ADDITION OF RS.15,51,316/- AGAINST WHICH THE DEPARTMENT IS AGGR IEVED. ITA NO.1348/DEL./2010 4 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AS SESSING OFFICER AND CIT (A) AND ALSO CONSIDERED THE SUBMISSIONS OF THE LEARNED DR. IN THE DECISION OF TRIBUNAL IN THE CASE OF LUKAS FOLE (SUP RA), IT HAS BEEN HELD THAT THE DEDUCTION MADE FROM THE SALARY FROM A FOREIGN N ATIONAL ON ACCOUNT OF HYPOTHETICAL TAX IS DEDUCTIBLE; DEDUCTION IS HOWEVE R TO BE MADE AT THE STAGE OF COMPUTING THE TAXABLE PERQUISITE AND NOT THE BAS IC SALARY. NOTHING HAS BEEN SHOWN BY THE DEPARTMENT THAT THE FINDINGS RETU RNED BY THE LEARNED CIT (A) IN THIS REGARD ARE INCORRECT. THEREFORE, WE FI ND NO FORCE IN GROUND NO.1 RAISED BY THE REVENUE AND THE SAME IS DISMISSED. 6. APROPOS GROUND NO.2, AN ADDITION OF RS.6,11,288/ - WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CLAIM OF DEDUCTION OF HYPOTHETICAL HOUSING ALLOWANCE PAID BY THE EMPLOYER IN THE USA. THE SAI D ADDITION WAS FOUND TO BE AGAINST THE DECISION OF ITAT IN THE CASE OF GARR ICK DSILVA VS. JCIT, 5 SOT 132 (TM). BEFORE THE CIT (A), IT WAS SUBMITTED THAT THE CALCULATION OF RENT FREE ACCOMMODATION IN THE CASE OF HYPOTHETICAL HOUSING RECOVERY IS IDENTICAL TO THE HYPOTHETICAL TAX, I.E. FIRST THE H YPOTHETICAL HOUSING SHOULD BE ADDED TO THE BASE SALARY OF THE EMPLOYEE AND THEN I T HAS TO BE REDUCED WHILE COMPUTING THE VALUATION OF RENT FREE ACCOMMODATION OR ALTERNATIVELY IT CAN BE REDUCED FROM BASE SALARY AS NOTHING HAS BEEN REC EIVED BY THE EMPLOYEE FROM ITS EMPLOYER ONCE HE MOVED FOR THE FOREIGN ASS IGNMENT FROM HIS HOME COUNTRY. IT WAS SUBMITTED THAT THE ASSESSEE HAD AD OPTED FIRST METHOD WHICH ITA NO.1348/DEL./2010 5 HAS BEEN ACCEPTED BY THE REVENUE IN NUMBER OF CASES AS QUOTED IN THE AFORE- MENTIONED CASE OF GARRICK DSILVA. LEARNED CIT (A) , AFTER CONSIDERING ALL THESE ARGUMENTS AND AFTER GOING THROUGH THE COMPUTA TION OF INCOME OF THE ASSESSMENT YEAR UNDER APPEAL AS WELL AS ASSESSMENT YEAR 2005-06, HAS DELETED THE ADDITION. REVENUE IS AGGRIEVED, HENCE IN APPEAL. 7. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF ASS ESSING OFFICER AND CIT (A) AND THE SUBMISSIONS MADE BY THE LEARNED DR. IN THE CASE OF GARRICK DSILVA (SUPRA), REFERRING TO RULE 3B, IT W AS OBSERVED THAT PERQUISITES COULD BE VALUED AS PER RULE 3B ONLY IN A CASE WHERE RESIDENTIAL ACCOMMODATION IS PROVIDED AT A CONCESSIONAL RATE. IT HAS NOT BEEN SHOWN THAT THE FINDINGS RECORDED BY THE LEARNED CIT (A) ARE CONTRARY TO THE AFORESAID DECISION OF GARRICK DSILVA. THEREFORE, WE DECLINE TO INTERFERE WITH THE RELIEF GRANTED BY THE LEARNED CIT (A). WE DISMISS GROUND NO.2 OF REVENUES APPEAL. 8. APROPOS GROUND NO.3, THE ASSESSEE HAS SOLD TWO A PARTMENTS MEASURING 2622 SQ.FT. EACH LOCATED AT S-23A AND S-23B, WINDSO R COURT, DLF CITY-IV, GURGAON. IN THE RETURN FILED FOR ASSESSMENT YEAR 2 005-06, THE ASSESSEE HAD CLAIMED THAT THOSE PROPERTIES WERE SOLD AT A CONSID ERATION OF RS.82,36,233/- AND RS.81,78,591/- RESPECTIVELY ON 14.8.2001. IN T HE ORIGINAL RETURN FILED ON 1.8.2005 FOR ASSESSMENT YEAR 2005-06, FOLLOWING TWO LONG TERM AND SHORT TERM CAPITAL LOSSES WERE COMPUTED AND CLAIMED FOR T RANSACTIONS :- ITA NO.1348/DEL./2010 6 PROPERTY COST OF PURCHASE COST OF IMPROVEMENT DATE OF SALE NET SALE CONSIDERATION CAPITAL LOSS LTC G/S TCG S 23A 82,36,233 1,64,250 18.4.2004 53,68,225 30,32, 258 STC G S 23B 81,78,591 3,77,500 7.1.2005 68 LACS 64,48,725 LTC G THE AFORE-MENTIONED RETURN WAS REVISED ON 5.4.2006. IN THE REVISED RETURN, THE ASSESSEE HAD CLAIMED 50% OF THE ABOVE LOSSES AN D 50% OF THE LOSSES WERE CARRIED FORWARD TO THE NEXT ASSESSMENT YEAR, I .E. 2006-07 AND REMAINING 50% LOSSES WERE SHOWN IN THE RETURN OF WIFE OF THE ASSESSEE. THE DISPUTE IS WITH REGARD TO PROPERTY NO.S-23A. THE AGREEMENT FI LED WITH THE ASSESSING OFFICER DID NOT CONTAIN THE SIGNATURE OF THE PURCHA SER, THEREFORE, ASSESSING OFFICER INSTEAD OF TAKING THE SALE CONSIDERATION OF RS.53,68,225/- TOOK THE SALE CONSIDERATION AT RS.60 LACS AND AFTER ADDING T HE COST OF IMPROVEMENT AT RS.1,64,250/-, THE TOTAL COST WAS COMPUTED AT RS.84 ,00,483/- FROM WHERE THE SALE CONSIDERATION OF RS.60 LACS WAS REDUCED COMPUT ING THE TOTAL SHORT TERM LOSS AT RS.24,00,483/-, 50% OF WHICH PERTAINED TO A SSESSEE WAS ARRIVED AT RS.12,00,242/- WHICH WAS REDUCED FROM SHORT TERM CA PITAL GAIN SHOWN AT RS.21,91,299/-. 9. BEFORE THE CIT (A), IT WAS SUBMITTED THAT THE AS SESSING OFFICER HAS ERRED IN REDUCING THE SHORT TERM CAPITAL LOSS PERTA INING TO ASSESSMENT YEAR 2005-06 TO THE EXTENT OF RS.3,15,887/- WHILE COMPUT ING THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION WHICH, ACCORDING TO AR GUMENTS SUBMITTED, WAS ITA NO.1348/DEL./2010 7 IMPERMISSIBLE AS IT WILL TANTAMOUNT TO FRAMING THE ASSESSMENT OF ASSESSMENT YEAR 2005-06. ON THESE SUBMISSIONS, THE LEARNED CI T (A) HAS RETURNED THE FOLLOWING FINDINGS :- 8.1 I HAVE CONSIDERED THE SUBMISSIONS FILED BY THE APPELLANT AND CAREFULLY CONSIDERED THE FACTS STATED BY THE A. O. IN THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COM PUTATION OF INCOME OF THE YEAR UNDER APPEAL AND A.Y. 2005-06. I FIND THE OBJECTION RAISED BY THE APPELLANT ARE CORRECT THAT THE ONLY RECOURSE AVAILABLE TO A.O.L IS TO FIRST DETERMINE T HE LOSSES TO BE CARRIED FORWARD FROM THE ASSESSMENT YEAR 2005-06. IN VIEW OF THE ABOVE, THE ABOVE GROUND OF APPEAL IS ALLOWED FO R STATISTICAL PURPOSE WITH THE DIRECTION THAT THE ADDITION FOR TH E YEAR UNDER APPEAL BE DELETED IF THE RETURNED INCOME OF THE ASS ESSMENT YEAR 2005-06 HAS BEEN ACCEPTED BY THE A.O. OTHERWISE APP ROPRIATE ADJUSTMENT OF SET OF LOSSES WOULD BE MADE IN THE YE AR UNDER APPEAL ONLY AFTER DETERMINING THE LOSSES OF A.Y. 20 05-06. 10. WE HAVE HEARD THE LEARNED DR AND CAREFULLY GONE THROUGH THE ORDER OF ASSESSING OFFICER AND ORDER PASSED BY LEARNED CIT ( A). WE FIND NO INFIRMITY IN THE FINDINGS RECORDED BY THE LEARNED C IT (A) WHERE IT HAS BEEN HELD THAT FIRST STEP IS TO DETERMINE THE LOSSES TO BE CARRIED FORWARD OF SHORT TERM CAPITAL LOSS FOR ASSESSMENT YEAR 2005-06. TH EREFORE, HE HAS ALLOWED THE GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSES AND DIRECTION HAS BEEN GIVEN BY HIM. THE ADDITION OF THE YEAR UNDER APPEA L BE DELETED IF THE RETURNED INCOME OF THE ASSESSMENT YEAR 2005-06 IS A CCEPTED, OTHERWISE APPROPRIATE ADJUSTMENT OF SET OFF OF LOSSES WOULD B E MADE IN THE YEAR UNDER APPEAL ONLY AFTER DETERMINING THE LOSSES IN ASSESSM ENT YEAR 2005-06. WE FIND NO INFIRMITY IN THE FINDING OF THE CIT (A) THA T IF THE LOSSES ARE ITA NO.1348/DEL./2010 8 DETERMINED IN THE ASSESSMENT YEAR 2005-06 THEN THE EFFECT OF THE SAME SHOULD BE GIVEN IN THE YEAR UNDER CONSIDERATION. W E, THEREFORE, DECLINE TO INTERFERE WITH THE FINDINGS OF THE CIT (A). THIS G ROUND OF APPEAL OF REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 7 TH DAY OF JANUARY, 2011. SD/- SD/- (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 7 TH DAY OF JANUARY, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.