S.Ramamirtham, CHENNAI V. DCIT, CHENNAI

ITA 1382/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7794 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 02-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Cost of acquisition
• Section: 143(3); 142(1); 12; 2; 11

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1382 /MDS/201 6 / ASSESSMENT YEAR :20 11 - 1 2 SHRI S. RAMAMIRTHAM, C/O M/S. RAMESH & RAMACHANDRAN CHARTERED ACCOUNTANTS, NEW NO. 39, OLD NO. 29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI 6 00024. [PAN: A A DPR0369J ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE V, CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI Y . SRIDHAR , ADVOCATE , C.A. / RESPON DENT BY : SHRI SUPRIYO PAL , J CIT / DATE OF HEARING : 02 . 11 .201 6 / DATE OF P RONOUNCEMENT : 23 . 1 2 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) 3 , C HENNAI , DATED 2 6 . 0 2 .20 1 6 RELE VANT TO THE ASSESSMENT YEAR 20 11 - 1 2 . THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF .4,50,00 0/ - FROM THE COST OF ACQUISITION. I.T.A. NO . 1382 /M/ 16 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRECTOR OF M/S. RAMAMIRTHAM INVESTMENTS PRIVATE LIMITED AND FILED HIS RETURN OF INCOME ON 16.09.2011 DECLARING NIL INCOME. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE AND UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS ISSUED. NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED TO THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE FURNISHED ALL DETAILS CALLED FOR. A FTER EXAMINING THE DETAILS FILED BY THE ASSESSEE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME OF ASSESSEE AT ( - ) .1,03,45,961/ - . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COST OF ACQUISITION OF AN ASSET INCLUDES ALL INCIDENTAL COSTS ACCRUED AT THE TIME OF ACQUISITION AS THE SAME WAS INCURRED AT THE TIME OF TRANSFER. IN THIS CASE, THE RENTAL ADVANCE RECEIVED BY THE PREVIOUS OWNER IS A LIABILITY TO THE VENDOR ON THE DATE OF REGISTRATION OF THE PROP ERTY. THEREFORE, THE RENTAL ADVANCE AMOUNTING TO .4,50,000/ - MADE BY THE ASSESSEE WAS A LIABILITY TO THE OWNER ON THE DAY WHEN THE PROPERTY HAD BEEN REGISTERED IN ASSESSEE S NAME, WHICH WAS RIGHTLY TAKEN AS COST OF ACQUISITION FOR THE PURPOSE OF INDEXATIO N AND I.T.A. NO . 1382 /M/ 16 3 THEREFORE, HE PLEADED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAS RETURNED LONG TERM CAPITAL GAIN WITH RESPECT TO SALE OF PROPERTY AT ADYAR, CHENNAI AND FURNISHED THE WORKING AS UNDER: SALE CONSIDERATION . 2,52,00,000/ - INDEXED COST OF ACQUISITION . 89,50,088/ - LONG TERM CAPITAL GAIN (RETURNED) . 16,24,99,912/ - ACCORDINGLY, THE ASSESSEE WAS ASKED FURNISH THE DETAILS OF THE COST OF ACQUISITION AND THE ASSESSEE HAS FURNISHED THE SAME AS UNDER: PARTICU LARS AMOUNT PROPERTY COST . 37,50,000/ - STAMP DUTY . 5,25,050/ - DEPOSIT (DOCUMENT ENCLOSED) . 4,50,000/ - OTHER MOVABLE PROPERTY [INTERIOR WORK DONE BY THE SELLER] . 6,37,450/ - TOTAL COST OF THE PROPERTY . 53,62,500/ - FROM THE DEED AS PROOF OF PURCHASE OF PROPERTY, THE ASSESSING OFFICER HAS NOTICED THAT THE DEPOSIT OF .4,50,000/ - WAS CLAIMED AS COST OF ACQUISITION AND THEREFORE, HE ASKED THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE HAS SUBMITTED THAT THE RENTAL ADVANCE AMOUNT MADE BY THE ASSE SSEE WAS A LIABILITY TO THE OWNER ON THE DAY WHEN THE PROPERTY HAS BEEN REGISTERED IN THE I.T.A. NO . 1382 /M/ 16 4 ASSESSEE S NAME. AS FAR AS THE COST OF ACQUISITION OF AN ASSET CLEARLY INCLUDES ALL INCIDENTAL COST ACCRUED TO THE ASSET AT THE TIME OF ACQUISITION, IT IS CORRECT IN ADDING THE LIABILITY ON RENTAL DEPOSIT ACCEPTED BY THE ASSESSEE AS A COST TO THE ASSET UPON ACQUISITION OF THE SAME . THE ASSESSEE HAS PROVIDED THE PROOF OF THE TENANT HAVING PAID THE AMOUNT TO ERSTWHILE OWNER. THE REFUNDABLE DEPOSIT WAS PAID TO THE TEN ANT ON VACATING THE PREMISES. HOWEVER, A GAINST THE ABOVE SUBMISSIONS OF THE ASSESSEE , THE ASSESSING OFFICER HAS OBSERVED THAT THE ABOVE DEPOSIT OF .4,50,000/ - IS A MERE LEASE/RENTAL DEPOSIT REFUNDABLE ON TERMINATION OF THE LEASE OR VACATION OF THE PREMISE S BY THE TENANT AS SUCH. IN VIEW OF THE PROVISIONS OF SECTION 48 OF THE ACT, ONLY THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND COST OF ACQUISITION OF ASSET AND COST OF IMPROVEMENT ARE ALLOWED AS DEDUCTION FROM THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF THE PROPERTY , THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF DEPOSIT OF .4,50,000/ - AS IT DOES NOT QUALIFY TO BE A PART OF ACQUISITION SO AS TO CLAIM THE BENEFIT OF INDEXATION. 6. IT IS NO T UNDER DISPUTE THAT THE EXPENSES ACCRUING AS A RESULT OF TRANSFER OF THE PROPERTY SHALL BE ALLOWED AS DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 48 OF THE ACT. HOWEVER, N O MATERIAL WITH REGARD TO SALE/PURCHASE OF THE PROPERTY OR PROOF OF PAYMENT OF DE POSIT OF .4,50,000/ - I.T.A. NO . 1382 /M/ 16 5 HAS BEEN FILED BEFORE THE TRIBUNAL FOR VERIFICATION. IT IS A FACT THAT ANY DEPOSIT TOWARDS LEASE/RENTAL DEPOSIT IS REFUNDABLE ON TERMINATION OF THE LEASE OR VACATION OF THE PREMISES BY THE TENANT AS SUCH. HERE, THE TERMINATION OF THE LEASE THEREBY PAYMENT OF RENTAL DEPOSIT IS NOT A POINT AT ISSUE. AFTER CAREFULLY GOING THROUGH THE ASSESSMENT ORDER, IT IS NOT CLEAR AS TO WHAT WAS AGREED UPON TOWARDS PAYMENT OF THE RENTAL DEPOSIT OR WHETHER THE ASSESSEE HAS PAID THE AMOUNT TO THE ERSTWHI LE OWNER AS PART OF THE AGREEMENT TOWARDS PAYMENT TO THE TENANT ON VACATION OF THE PREMISES. THUS, THE ASSESSING OFFICER IS DIRECTED TO EXAMINE AND DECIDE THE ISSUE AFRESH AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THE GROUND RAISE D BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 23 RD DECEMBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( D UVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 23 . 1 2 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.