RAJANI BHATIA, Jaipur V. ITO, Jaipur

ITA 516/JPR/2014

• Counselvise Citation: 51623114 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 17-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Keywords: Capital asset; Cost of acquisition

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 516/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SMT. RAJANI BHATIA 4-THA-24, JAWAHAR NAGAR, JAIPUR CUKE VS. THE ITO WARD- 6(1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAPPB 4247 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL - CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT-.. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /11/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-II, JAIPUR DATED 08-05-2014 FOR THE ASSES SMENT YEAR 2009-10 RAISING SOLITARY GROUND AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ACTIO N OF THE AO IN NOT TREATING THE INTEREST OF RS. 1,85,553/- P AID ON ITA NO. 516//JP/2014 SMT. RAJANI BHATIA VS. ITO, WARD- 6 (1), JAIPUR . 2 CAPITAL BORROWED FOR PURCHASE OF THE CAPITAL ASSET AS COST OF ACQUISITION AND THUS ARBITRARILY DISALLOWING THE S AME AS DEDUCTION FROM THE SALE PROCEEDS OF THE CAPITAL ASS ET. 2.1 BRIEFLY STATED THE FACTS ARE THAT DURING THE YE AR UNDER CONSIDERATION ASSESSEE HAS DECLARED INCOME FROM SHORT TERM CAPITA L GAINS OF RS.33,447/- FROM SALE OF UNIT CONSTRUCTED AT 9 JMC COLONY, MALV IYA NAGAR, JAIPUR. THE ASSESSEE HAD PURCHASED THE SAID PLOT ON 25-09-2 006 FOR RS.21,00,000/- AND FOR PURCHASE OF PLOT LOAN OF RS. 16,75,000 WAS TAKEN BY ASSESSEE FROM ICICI BANK LTD. LATER ON 19-03-20 07, ASSESSEE ENTERED INTO AN AGREEMENT WITH DEVELOPERS TO DEVELOP FLATS ON SAID PLOT ALONG WITH PLOT NO.10, JMC COLONY AND SHARE OF THE ASSESSEE I N CONSTRUCTED BUILDING ON BOTH PLOTS WAS DECIDED AT 25%. DURING THE YEAR U NDER CONSIDERATION THREE FLATS CONSTRUCTED ON PLOT 9, JMC COLONY WAS S OLD FOR RS 8,75,000/- (25% SHARE OF APPELLANT) AND AGAINST THE SALE PROC EEDS THE ASSESSEE HAS CLAIMED EXPENSES OF RS.1,85,553/- AS A PART OF COST OF ACQUISITION PAID ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS FOR PURC HASE OF PLOT. THE AO DISALLOWED THE CLAIM OF INTEREST OF THE ASSESSEE W HILE COMPUTING THE CAPITAL GAIN U/S 48 BY OBSERVING THAT WHILE COMPUTI NG CAPITAL GAINS ONLY EXPENSES INCURRED ON FURTHER CONSTRUCTION I.E. COS T OF IMPROVEMENT IS ITA NO. 516//JP/2014 SMT. RAJANI BHATIA VS. ITO, WARD- 6 (1), JAIPUR . 3 ALLOWABLE AND CAPITALIZATION OF INTEREST OR INTERES T PAID ON BORROWED FUND IS NOT ALLOWABLE. FURTHER LD. CIT(A) HAS ALSO SUSTA INED THE ADDITION ON THE GROUND THAT INTEREST PAID SUBSEQUENT TO PURCHAS E IS NOT PART OF COST OF ACQUISITION OF THE PROPERTY AND PAYMENT OF INTEREST IS A SUBSEQUENT ACT AFTER ACQUISITION OF PROPERTY, IT CANNOT FORM PART OF COST OF ACQUISITION. 2.2 THE LD. AR SUBMITTED THAT THE LD. CIT(A) AS WEL L AS AO HAS FAILED TO APPRECIATE THE FACT THAT INTEREST WAS PAID ON T HE FUNDS BORROWED FOR THE PURCHASES OF CAPITAL ASSET AND HAS DIRECT NEXUS WIT H COST OF ACQUISITION OF THE SAID PLOT AS WITHOUT THE PAYMENT OF INTEREST AS SESSEE WAS NOT ABLE TO ENJOY THE TITLE OF SAID PLOT AS OUT OF TOTAL COST OF RS. 21 LACS AN AMOUNT OF RS. 16.75 LACS WAS FINANCED BY BANK AND INTEREST WA S PAID ON SUCH LOAN THEREFORE IT BECOME PART OF THE COST OF ACQUISITION OF THE CAPITAL ASSET AND DESERVES TO BE ALLOWED AS DEDUCTION U/S 48(II) OF T HE INCOME TAX ACT, 1961. WITHOUT PAYMENT OF THE LOAN TAKEN FROM THE BA NK WITH INTEREST THEREON TRANSFER / SALE OF SUBJECT ASSETS WAS NOT P OSSIBLE AND THE SAME BEING INCURRED WHOLLY AND EXCLUSIVELY IN RELATION T O GET THE ABSOLUTE TITLE ON SAID PLOT OF LAND THUS THE SAME HAS BEEN CLAIMED AS EXPENDITURE U/S 48(II) BEING INCIDENTAL AND UNAVOIDABLE EXPENSES. A S INTEREST ON BORROWED FUND FOR PURCHASE OF CAPITAL ASSETS HAS DI RECT NEXUS WITH THE ITA NO. 516//JP/2014 SMT. RAJANI BHATIA VS. ITO, WARD- 6 (1), JAIPUR . 4 COST OF THE CAPITAL ASSET AND PART OF ACTUAL COST T HEREFORE INTEREST PAID BY THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 48(II) WHILE COMPUTING THE INCOME FROM CAPITAL GAIN. IN THIS REGARD, THE ASSES SEE RELIED ON FOLLOWING CASE LAWS (1) CIT VS. SRI HARIRAM HOTELS P. LTD. REPORTED IN 325 ITR 136(2010) (KARNATAKA) (2) CIT VS. TRISHUL INVESTMENTS LTD. (2008),305 ITR 434 (MAD.) (3) CIT VS. MITHLESH KUMAR 92 ITR 0009 (1973) (DE L.) (4) CIT VS. K RAJA GOPALA RAO, 252 ITR 459 (MAD.) (5) GOPEE NATH PAUL &SONS S DCIT , 147 TAXMAN 629 (CALCUTTA) THE LD. AR FURTHER CONTENDED THAT THE DISALLOWANCE OF RS. 1,85,553/- SUSTAINED BY THE LD. CIT(A) DESERVES TO BE DELETED. 2.3 THE LD. DR ON THE OTHER HANDS CONTEND THAT THE ASSESSEE HAS NOT SPELT OUT THE FACTS AS TO WHETHER THE INTEREST IN Q UESTION WAS OUTSTANDING OR PAID SO AS TO ASCERTAIN WHETHER IT AMOUNTED TO A N ENCUMBRANCE ON THE IMPUGNED PROPERTIES OR NOT. THERE IS NO WHISPER ABO UT THESE CRUCIAL FACTS; CONSEQUENTLY BOTH THE AUTHORITIES REJECTED THE CLAI M. THE ASSESSEE MAY BE ASKED TO CLARIFY THESE FACTS BESIDES DEMONSTRATING WHETHER THE AMOUNTS IN QUESTION WERE BORROWED FROM ANY FINANCIAL INSTITUTI ON FOR ITA NO. 516//JP/2014 SMT. RAJANI BHATIA VS. ITO, WARD- 6 (1), JAIPUR . 5 PURCHASE/CONSTRUCTION OF PROPERTIES; WHETHER THERE WAS ANY TYPE OF MORTGAGE AND IF ANY THAN WHO REDEEMED THE SAME. SIN CE THE ASSESSEE HAS NOT COME UP WITH PROPER FACTS WHICH WERE CLEAR IN A BOVE CITED JUDGMENTS ASSESSEES CLAIM HAS BEEN RIGHTLY REJECTED BY AUTHO RITIES BELOW. 2.4 LD. COUNSEL IN REPLY FAIRLY CONTENDED THAT HE I S NOT BRIEFED ON THESE ASPECTS BESIDES THESE FACTS ARE NOT READILY AVAILAB LE ON HIS RECORD. 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN MY CONSIDERED VIEW, THE ISS UED AS RAISED BY LD. DR ARE VERY PERTINENT AND CRUCIAL TO DECIDE THE MERITS OF THE CLAIM AND APPLICABILITY OF ABOVE CITED JUDICIAL PRECEDENTS. I N THESE FACTS AND CIRCUMSTANCES, THE ISSUE RAISED IS THE GROUNDS OF A PPEAL IS SET ASIDE AND RESTORED BACK TO THE FILE OF AO. THE ASSESSEE WILL EXPLAIN ALL THESE AND OTHER RELEVANT FACTS WHICH LD. AO FEEL NECESSARY FO R PROPER ADJUDICATION OF THE ISSUE INCLUDING ANY OTHER CASE LAWS WHICH MA Y BE AVAILABLE BY NOW. THE ASSESSEE MAY BE PROVIDED WITH ADEQUATE OPP ORTUNITY OF BEING HEARD. ITA NO. 516//JP/2014 SMT. RAJANI BHATIA VS. ITO, WARD- 6 (1), JAIPUR . 6 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /11/ 2015 SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /11/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SMT. RAJANI BHATIA JAIPUR , 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6 (1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 516/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR