NEELAM SUNIL SOORMA, MUMBAI V. ASST CIT CEN CIR 15 & 16, MUMBAI

ITA 4954/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88634 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Cost of acquisition
• Section: 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI . , ! ' ' ' ' #$ %&'( , #) *+ # ! BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 4954/MUM/2012 ( , , , , / ASSESSMENT YEAR : 2010-11 SMT. NEELAM SUNIL SOORMA, 11, SHIV SHAKTI, PLOT NO.30, N.S. ROAD NO. 10, JUHU SCHEME, JUHU, MUMBAI-400 049 THE ACIT, CENTRAL CIRCLE-15 & 16, AAYAKAR BHAVAN, MUMBAI-400 020 +- #) ./ ./ ./ PAN/GIR NO. : AEXPS 4136C ( -0 / APPELLANT ) .. ( 12-0 / RESPONDENT ) -0 3 # / APPELLANT BY: SHRI NISHIT GANDHI 12-0 4 3 # / RESPONDENT BY: SHRI S.J. SINGH 4 5) / DATE OF HEARING :12.03.2015 6, 4 5) / DATE OF PRONOUNCEMENT :18.03.2015 *#7 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-39, MUMBAI DT. 01.06.2012 PERTAINING TO ASSE SSMENT YEAR 2010- 11. ITA NO. 4954/M/2012 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN NOT ALLOWING INTEREST PAID FOR ACQUISITION OF FLAT OF RS. 18,20,679/- AS PART OF THE COST OF FLAT SOLD. 3. IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSI NG OFFICER SHOULD BE DIRECTED TO ALLOW INTEREST PAID FOR ACQUISITION OF FLAT AS PART OF THE COST OF FLAT SOLD. 4. THE ASSESSEE IS IN THE BUSINESS OF FILM PRODUCTI ON, MANAGEMENT OF THE ENTERTAINMENT/EVENT SHOWS AND DISPLAY OF FIREWO RKS. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS SELECTED FOR SCRUT INY ASSESSMENT. 5,. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, INTER ALIA, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN S HORT TERM CAPITAL LOSS OF RS. 16,81,989/-. THE ASSESSEE WAS ASKED TO EXPL AIN THE SAME. THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAS SOLD A PRO PERTY FOR RS. 1,31,00,000/- FOR WHICH THE COST OF ACQUISITION IS SHOWN AT RS. 1,47,81,989/-. THE COST OF ACQUISITION WAS FURTHE R EXPLAINED TO BE THE PURCHASE COST OF THE FLAT AT RS. 1,21,60,000/- + ST AMP DUTY OF RS. 7,70,610/- + REGISTRATION CHARGES RS. 30,700/- TOTA LING TO RS. 1,29,61,310/-. 5.1. THE AO FURTHER OBSERVED THAT THE STAMP DUTY VA LUE OF THE SAID PROPERTY WAS AT RS. 1,83,36,990/-. ACCORDING TO TH E AO, THE ASSESSEE HAS NOT ONLY SHOWN HIGHER COST OF ACQUISITION BUT HAS ALSO UNDER VALUED THE SALE PRICE. THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROVISIONS OF SEC. 50C OF THE ACT SHOULD NOT BE APPLIED. IN HER REPLY, TH E ASSESSEE STATED THAT THE COST OF ACQUISITION INCLUDES INTEREST ON HOUSING LO AN WHICH IS CAPITALIZED ITA NO. 4954/M/2012 3 BY THE ASSESSEE AND THE STAMP DUTY VALUE TAKEN BY T HE VALUATION AUTHORITY IS ON THE HIGHER SIDE. 6. THE SUBMISSIONS MADE BY THE ASSESSEE DID NOT FIN D CONVINCING. THE AO WAS OF THE FIRM BELIEF THAT THE INTEREST CAP ITALIZED BY THE ASSESSEE DOES NOT FORM THE COMPONENT OF PURCHASE PRICE. MOR EOVER, THE ASSESSEE HAS TAKEN BENEFIT OF INTEREST PAID ON HOUSING LOAN FROM THE INCOME FROM HOUSE PROPERTY SEPARATELY. IN SO FAR AS THE STAMP DUTY VALUE IS CONCERNED, THE AO HELD THAT IT HAS TO BE TAKEN AS P ER THE PROVISIONS OF SEC. 50C OF THE ACT. THE AO RECOMPUTED THE CAPITA L GAINS AS FOLLOWS: SALE PRICE AS PER THE STAMP VALUATION AUTHORITY (AS PER AGREEMENT FOR SALE DT. 26.6.2009) RS. 1,83,36,919/- LESS: COST OF ACQUISITION (AS PER AGREEMENT FOR PURCHASE DT. 29.9.2006) STAMP DUTY & REGISTRATION CHARGES 1,21,60,000/- 8,01,310/- 1,29,61,310/- SHORT TERM CAPITAL GAIN 53,75,609/- 7. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IN SO FAR AS THE STAMP DUTY VALUE OF PROPE RTY IS CONCERNED, THE ASSESSEE SUCCESSFULLY CONVINCED THE LD. CIT(A) TO D IRECT THE AO TO REFER THE MATTER TO THE DVO. THIS IS NOT THE ISSUE BEFOR E US. 7.1. IN SO FAR AS THE CLAIM OF INTEREST ON HOUSING LOAN IS CONCERNED, THE LD. CIT(A) OBSERVED THAT THE HOUSE PROPERTY WAS PUR CHASED IN THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2008-0 9 AND THE ASSESSEE HAS BEEN CLAIMING INTEREST ON HOUSING LOAN AS A DED UCTION UNDER THE HEAD ITA NO. 4954/M/2012 4 INCOME FROM HOUSE PROPERTY. THE LD. CIT(A) WAS OF THE OPINION THAT THE INTEREST EXPENDITURE CANNOT BE CONSIDERED AS CO ST OF IMPROVEMENT AND CONFIRMED THE FINDINGS OF THE AO. 8. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IN SUPPORT OF THE CL AIM, THE LD. COUNSEL RELIED UPON THE DECISION OF THE TRIBUNAL, CHENNAI B ENCH IN THE CASE OF ACIT VS C. RAMABRAHMAM 57 SOT 130 AND STRONGLY CONT ENDED THAT THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL CHENNAI BENCH. 10. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTED THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLA TE AUTHORITY. 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW. IN THE LIGHT OF THE DECISION OF THE TRIBUNAL, CHENNAI BENCH (SUPRA), THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER THE INTEREST ON HOUSING LOAN BE PART OF COST OF ACQUISITION OF FIXED ASSET. COST O F ACQUISITION HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. TO UNDERSTAND THE C OMPONENTS OF THE COST WE ARE TAKING SHELTER BEHIND ACCOUNTING STANDA RD-10 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA, THE HIG HEST ACCOUNTING BODY OF INDIA CREATED BY AN ACT OF PARLIAMENT. COMPONENTS OF COST GROSS BOOK VALUE OF A FIXED ASSET IS ITS HISTORICA L COST OR OTHER AMOUNT SUBSTITUTED FOR HISTORICAL COST IN THE BOOKS OF ITA NO. 4954/M/2012 5 ACCOUNT OR FINANCIAL STATEMENTS. WHEN THIS AMOUNT IS SHOWN NET OF ACCUMULATED DEPRECIATION, IT IS TERMED AS NE T BOOK VALUE. THE COST OF AN ITEM OF FIXED ASSET COMPRISES ITS PU RCHASE PRICE, INCLUDING IMPORT DUTIES AND OTHER NON-REFUND ABLE TAXES OR LEVIES AND ANY DIRECTLY ATTRIBUTABLE COST OF BRINGING THE ASSET TO ITS WORKING CONDITION FOR ITS INTENDED USE, ANY TRADE DISCOUNTS AND REBATES ARE DEDUCTED IN ARRIVIN G AT THE PURCHASE PRICE. THE COST OF A FIXED ASSET MAY UNDERGO CHANGES SUBSE QUENT TO ITS ACQUISITION OR CONSTRUCTION ON ACCOUNT OF EXCHA NGE FLUCTUATIONS, PRICE ADJUSTMENTS, CHANGES IN DUTIES OR SIMILAR FACTORS. THE EXPENDITURE INCURRED ON START-UP AND COMMISSION ING OF THE PROJECT, INCLUDING THE EXPENDITURE INCURRED ON TEST RUNS AND EXPERIMENTAL PRODUCTION, IS USUALLY CAPITALIZED AS AN INDIRECT ELEMENT OF THE CONSTRUCTION COST. IF THE INTERVAL BETWEEN THE DATE A PROJECT IS READY TO COMMENCE COM MERCIAL PRODUCTION AND THE DATE AT WHICH COMMERCIAL PRODUCT ION ACTUALLY BEGINS IS PROLONGED, ALL EXPENSES INCURRED DURING THIS PERIOD ARE CHARGED TO THE PROFIT AND LOSS STA TEMENT. 11.1. A PERUSAL OF THE ABOVE CLEARLY SHOWS THAT ANY DIRECTLY ATTRIBUTABLE COST OF BRINGING THE ASSET TO ITS WORKING CONDITION FOR ITS INTENDED USE ARE ADDED TO THE PURCHASE PRICE FOR DETERMINING THE COS T OF ASSET. IN THE PRESENT CASE, AS PER THE CATEGORICAL FINDING OF THE LD. CIT(A), THE HOUSE PROPERTY WAS PURCHASED IN THE FINANCIAL YEAR 2007-0 8. WE HAD SPECIFICALLY ASKED THE LD. COUNSEL TO PROVIDE US TH E DATE OF PURCHASE, WHICH HE FAILED. GOING BY THE FINDING OF THE LD. C IT(A), IF THE HOUSE PROPERTY WAS PURCHASED IN THE FINANCIAL YEAR 2007-0 8, ANY PAYMENT OF INTEREST ON HOUSING LOAN PRIOR TO THE PURCHASE OF T HE HOUSE PROPERTY WOULD DEFINITELY GO TOWARDS THE COST OF ACQUISITION AS PE R THE AS-10 (SUPRA). ANY PAYMENT OF INTEREST SUBSEQUENT TO THE SAID DATE , BY ANY STRETCH OF IMAGINATION, CANNOT FORM THE PART OF THE COST OF AC QUISITION. ITA NO. 4954/M/2012 6 11.2. A SIMPLE READING OF THE DECISION OF THE TRIBU NAL CHENNAI BENCH WOULD ALSO SUGGEST THAT THE TRIBUNAL HAS CONSIDERED THE PAYMENT OF INTEREST AS PART OF THE COST OF ACQUISITION. IT IS NOT CLEAR WHETHER THE INTEREST UPTO THE DATE OF ACQUISITION OF THE ASSET HAS TO BE CONSIDERED OR EVEN SUBSEQUENT PAYMENT OF INTEREST WOULD ALSO GO T OWARDS THE COST OF ACQUISITION. THEREFORE, PRINCIPALLY WE MAY AGREE W ITH THE FINDINGS OF THE TRIBUNAL, CHENNAI BENCH BUT SINCE FACTS ARE NOT CLE AR, WE DO NOT FIND IT APPROPRIATE TO MAKE ANY OBSERVATIONS ON THE SAID DE CISION OF THE TRIBUNAL. MOREOVER, THE TRIBUNAL CHENNAI BENCH HAS NOT CONSID ERED AS-10 WHILE DECIDING THE ISSUE BEFORE IT. 11.3. EVEN THE FACTS OF THE CASE IN OUR HAND ARE AL SO NOT COMPLETE AS THE EXACT DATE OF ACQUISITION IS NOT KNOWN, WE ARE THER EFORE LEFT WITH NO CHOICE BUT TO RESTORE THE MATTER TO THE FILES OF TH E AO. THE ASSESSEE IS DIRECTED TO FURNISH THE EXACT DATE OF PURCHASE OF H OUSE PROPERTY. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE DETAILS OF PAYMENT OF INTEREST UPTO THE DATE OF THE PURCHASE OF HOUSE PROPERTY. THE AO IS DIRECTED TO CONSIDER THE INTEREST ONLY UPTO THE DATE OF PURCHAS E OF PROPERTY AS PART OF THE COST OF ACQUISITION. 12. WITH THESE DIRECTIONS, WE DISPOSE OF THE APPEAL WHICH IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2015 SD/- SD/- (D.MANMOHAN ) (N.K. BILLAIYA) ! / VICE PRESIDENT #) *+ / ACCOUNTANT MEMBER MUMBAI; 8* DATED : 18 TH MARCH, 2015 . . ./ RJ , SR. PS . . ./ RJ , SR. PS ITA NO. 4954/M/2012 7 *#7 *#7 *#7 *#7 4 44 4 15% 15% 15% 15% 9#%,5 9#%,5 9#%,5 9#%,5 / COPY OF THE ORDER FORWARDED TO : 1. -0 / THE APPELLANT 2. 12-0 / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. %;< 15 , , / DR, ITAT, MUMBAI 6. < = / GUARD FILE. *#7 *#7 *#7 *#7 / BY ORDER, 2%5 15 //TRUE COPY// / . . . . (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI