Dy. Commissioner of Income Tax, Lucknow V. M/s. Mansarovar Urban Coop.Bank Limited, Lucknow

ITA 169/LKW/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8177 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI S VERMA
• Assessee Lawyers: B P YADAV
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI MEHAR SI NGH , ACCOUNTANT MEMBER ITA NO. 169/LKW/2012 ASSESSMENT YEAR: 2007 - 08 DCIT RANGE I, LUCKNOW V. M/S MANSAROVAR URBAN COOP. BANK LIMITED A - 969, INDIRA NAGAR, LUCKNOW PAN: AAAAM2181P (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. NIDHI S. VERMA, D.R. RESPONDENT BY: SHRI. B. P. YADAV, C.A. DATE OF HEARING: 04.07.2012 DATE OF PRONOUNCEMENT: 22.08.2012 O R D E R PER S UNIL KUMAR Y ADAV : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) MAINLY RAISING TWO GROUNDS, WHICH ARE AS UNDER: - 1 . THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF RS, 11,100 / - BEING PAYMENT FOR CONVERSION OF T ITLE TO FREE HOLD FROM COST OF ACQUISITION/IMPROVEMENT WITHOUT APPRECIATING THAT THE PROPERTY COULD NOT BE CONVERTED I N TO FREE HOLD AND SO THERE WAS NO IMPROVEMENT IN TITLE OR VALUE. 2 . THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW IN DELETING THE DISA LLOW ANCE OF LEVY CHARGES OF RS.40, 90 , 216/ - PAID TO AWAS VIKAS FOR RENEWAL OF LEASE (RS. 3,02,979/ - ) AND NON - CONSTRUCTION FEES (RS. 37,87,237 / - ) FROM COST OF ACQUISITION/IMPROVEMENT U/S 48 WITHOUT APPRECIATING THAT THESE CHARGES DID NOT QUALIFY AS COST OF ACQUISI TION : - 2 - : OR IMPROVEMENT AS DEFINED IN SECTION 55. 2 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND DOCUMENTS PLACED ON RECORD. 3 . WITH REGARD TO GROUND NO.1, IT IS NOTICED FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN AMOUNTING TO ` 8,25,59,854. WHILE COMPUTING THE LONG TERM CAPITAL GAIN THE ASSESSEE HAS TAKEN INTO CONSIDERATION VARIOUS AMOUN T S AS COST OF ACQUISITION AND IMPROVEMENT FOR INDEXATION AND VARIOUS EXPENS ES ON ACCOUNT OF TRANSFER OF ASSETS. OUT OF THE AMOUNTS CLAIMED TOWARDS THE COST OF ACQUISITION AND IMPROVEMENT, THE FOLLOWING AMOUNTS WERE DISALLOWED AND EXCLUDED BY THE ASSESSING OFFICER: - (I) CHARGES FOR LEASE HOLD TO FREE HOLD RS. 11,100/ - INDEXED COST RS. 20,501/ - (II) ARCHITECT'S FEE FOR MAP RS. 2,00,150/ - INDEXED COST RS. 3,40,583/ - (III) ARCHITECT'S FEE FOR MAP RS. 2,45,240/ - INDEXED COST RS. 4,17,310/ - (IV) ARCHITECT'S FEE FOR MAP RS.23,460/ - INDEXED COST RS. 37,785/ - (V) LEV Y CHARGES PAID TO AVAS VIKAS FOR RENEWAL AND NON CONSTRUCTION FEES RS. 40,90,216/ - INDEXED COST RS. 40,90,216/ - 4 . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSIONS THAT THE ABOVE COSTS HAVE BEEN INCURRED TOWARDS COST OF IMPRO VEMENT. WITH REGARD TO THE AMOUNTS OF ` 2,00,150; ` 2,45,240 AND ` 23,460, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THESE WERE CLAIMED AS ARCHITECTS FEE FOR MAP SO IT MAY NOT BE CONSIDERED TOWARDS COST OF IMPROVEMENT. SO FAR AS THE PAYMENT OF ` 4 0,90,216 IS CONCERNED, IT WAS PAID TO AVAS VIKAS FOR RENEWAL AND NON - CONSTRUCTION FEE. THE RENEWAL AND NON - CONSTRUCTION FEE NOT ONLY RESTORED THE LEGAL RIGHT OF THE ASSESSEE TO POSSESS THE ASSET BUT ALSO CONFERRED ON IT RIGHT TO S ALE . THEREFORE, THE RENE WAL AND NON - CONSTRUCTION FEE ARE PART OF COST OF IMPROVEMENT. WITH REGARD TO THE PAYMENT OF ` 11,100, IT WAS CONTENDED THAT THIS WAS INCURRED : - 3 - : FOR CONVERSION OF LAND FROM LEASE HOLD TO FREE HOLD. THEREFORE, IT IS ALSO PART OF COST OF IMPROVEMENT. 5 . THE LD. C IT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF ASSESSEES CONTENTION AND TREATED THE PAYMENT MADE TO AVAS VIKAS FOR RENEWAL AND NON - CONSTRUCTION FEE OF ` 40,90,216 AS PART OF COST OF ACQUISITION AND IMPROVEMENT IN COMPUTATION OF CAPITAL GAIN. THE RELEVANT OBS ERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER: - 3. THE APPELLANT CONTENDED THAT ALL THE ABOVE COSTS HAD BEEN INCURRED TOWARDS COST OF IMPROVEMENT. HOWEVER, AS REGARDS THE AMOUNTS OF RS.2,00,150 / - ; RS. 2,45,240 / - AND RS.23 , 460 / - CLAIMED AS AR CHITECT'S FEE FOR MAP CAN NOT BE SAID TO HAVE BEEN INCURRED TOWARDS ANY IMPROVEMENT SINCE THE EX PENSES INCURRED DID NOT BRING ANY QUALITATIVE CHANGE IN THE ASSETS SOLD OR TO ANY VALUE ADDITION TO THE ASSET. THESE COSTS MIGHT HAVE BEEN INCURRED BY THE APPEL LANT FOR ITS OWN PURPOSES WHEN THE CONSTRUCTION WAS UNDER CONSIDERATION. AS THE CONSTRUCTION NEVER TOOK PLACE, THE ARCHITECT'S FEES FOR MAP B ECAME INCONSEQUENTIAL AND SUCH FEES CANNOT BE TAKEN INTO CONSIDERATION TOWARDS COST OF ACQUISITION OR IMPROVEMENT . AS REGARDS THE CHARGES PAID TO AVAS VIKAS FOR RENEWAL AND NON CONSTRUCTION FEES AMOUNTING TO RS.40,90,216 / - THE AMOUNT PAID WAS LINKED TO THE ASSET SOLD. THE RENEWAL AND NON CONSTRUCTION FEE NOT ONLY RESTORED THE LEGAL RIGHT OF THE APPELLANT TO POSSES S THE ASSETS BUT ALSO CONFERRED ON IT THE RIGHT TO SALE . THIS RESTORATION OF OWNERSHIP AND RIGHT TO SALE DEFINITELY QUALIFIED AS COST OF IMPROVEMENT BECAUSE WITHOUT THE INCURRENCE OF THESE COSTS THE ASSET SUFFERED FROM AN INHERENT DEFICIENCY AND THE APPE LLANT COULD NOT HAVE LEGALLY SOLD THE PLOT. THE OWNERSHI P OF THE PLOT HAD BECOME DEFICIENT DUE TO LAPSE OF LEASE AND IT HAD TO BE RENEWE D WHEREAS THE RENEWAL WAS NOT POSSIBLE : - 4 - : UNLESS THE APPELLANT HAD PAID NON CONSTRUCTION FEE . I N MY CONSIDERED OPINION TH E SUM OF RS. 40,90,216 / - BY THE APPELLANT HAS TO BE CONSIDERED AS COST OF ACQUISITION/IMPROVEMENT IN COMPUTATION OF CAPITAL GAINS. SIMILARLY THE CHARGES FOR LEASE HOLD TO FREE HOLD ALSO NEED TO BE ALLOWED IN COMPUTATION. 6 . AGGRIEVED, THE REVENUE HAS PREFE RRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED HEAVY RELIANCE UPON THE ASSESSMENT ORDER. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A). 7 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIO NS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE PAYMENT MADE TO AVAS VIKAS FOR RENEWAL AND NON - CONSTRUCTION FEE IS CERTAINLY PART OF IMPROVEMENT , AS BY MAKING PAYMENT OF SUCH FEE THE LEGAL RIGHT IN THE PROPERTY IS RESTORED AND THE ASSESSEE WOULD BE ABLE TO TRANSFER THIS PROPERTY TO SOMEONE ELSE . THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN TREATING THE AFORESAID AMOUNT AS PART OF COST OF ACQUISITION OR IMPROVEMENT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. 8 . SO FAR AS THE PAYMENT FOR CONVERSION OF LEASE HOLD TO FREE HOLD OF ` 11,100 IS CONCERNED, IT IS ALSO A PART OF IMPROVEMENT. THEREFORE, IT WAS RIGHTLY ALLOWED BY THE LD. CIT(A). WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE C ONFIRM THE SAME. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.8.2012. S D/ - S D/ - [ MEHAR SINGH ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22.8.2012 JJ: 2407 : - 5 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR