HARISH V. PAREKH, MUMBAI V. ITO 13(2)(4), MUMBAI

ITA 6232/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1079 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 02-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Assessee Lawyers: R ASOKAN
• Keywords: Capital asset; Gift; Cost of acquisition; Fair market value; Capital Gains
• Section: 11A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI `H BENCH BEFORE SHRI R.V.EASWAR [PRESIDENT] & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.6232/MUM/2009 - A.Y 2006-07 SHRI HARISH V. PAREKH, 406, ARIHANT CHAMBERS, AHMEDABAD STREET, CARNAC BUNDER, MUMBAI 400 009 PAN NO.AABPP 3551 A THE INCOME TAX OFFICER 13(2)(4), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. ASOKAN. RESPONDENT BY : SHRI C.P.PATHAK. ADDL. CIT. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME TAX APPEALS-24, HEREINAF TER REFERRED TO AS THE LD. CIT[A] HAS ERRED IN LAW IN U PHOLDING THE CALCULATION MADE BY THE ASSESSING OFFICER FOR THE PURPOSE OF THE CALCULATION OF CAPITAL GAIN ON SALE OF RESIDENT IAL FLAT. THE SAID CALCULATION OF THE APPELLANT MAY BE ACCEPTED A ND THE COST INFLATION INDEX OF A.Y 1981-1982 MAY PLEASE BE ACCE PTED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE DI SALLOWANCE OF THE CLAIM OF RS.5600/- ON ACCOUNT OF ADVERTISEME NT EXPENSES. THE SAID CLAIM MAY PLEASE BE ALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.20000/- ON ACCOUNT OF CLEARING AND FORWARDING EXPENSES. THE SAID DISALLOWANCE MAY PLEA SE BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.69481/- ON ACCOUNT OF TELEPHONE EXPENSES. THE SAID DISALLOWANCE MAY PLEASE BE DELET ED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.75,702 /- ON ACCOUNT OF MOTOR C AR EXPENSES. THE SAID DISALLOWANCE MAY PLEASE BE DELET ED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE AD HOC 2 DISALLOWANCE OF RS.63305/- ON ACCOUNT OF SALES PRO MOTION EXPENSES. THE SAID DISALLOWANCE MAY PLEASE BE DELET ED. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT[A] HAS ERRED IN LAW IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.8096/- ON ACCOUNT OF CONVEYANCE , GENERAL EXPENSES AND STAFF WELFARE. THE SAID DISALL OWANCE MAY PLEASE BE DELETED. 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURI NG THE YEAR THE ASSESSEE HAS SOLD A PROPERTY SITUATED AT 11A AKASH GANGA, NEPEAN SEA ROAD, MUMBAI, FOR A SUM OF RS.2,5 0,70,000/-. THIS PROPERTY WAS PURCHASED BY THE ASSESSEES FATHER IN 1966. ON 6-12- 1979 ASSESSEES FATHER EXPIRED AND THE PREMISE WAS TRANSFERRED TO HIS MOTHER. ON 9-5-1994 ASSESSEES MOTHER EXPIRED AND A S PER THE WILL THE SAID PROPERTY WAS INHERITED BY THE ASSESSEE ON 16-2-1994. ASSESSEE GOT THE FAIR MARKET VALUE DONE FROM THE VA LUER AND APPLIED INDEXATION W.E.F. F.Y 1981-82. HOWEVER, AO WAS OF T HE VIEW THAT BENEFIT OF INDEXATION COULD BE GIVEN ONLY W.E.F. F. Y 1994-95 WHEN ASSESSEE BECAME OWNER OF THE PROPERTY. 3. ON APPEAL, LD. CIT[A] CONFIRMED ACTION OF THE AO ON THE BASIS OF THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS . KISHORE KANUNGO 102 ITD 437. 4. BEFORE US LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT DECISION OF DCIT VS. KISHORE KANUNGO [SUPRA] HAS ALREADY BEEN O VER RULED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF DCIT VS. MANJULA J. SHAH 126 TTJ [MUM] [S.B] 145. HE POINTED OUT THAT IN THIS DECISION IT WAS SPECIFICALLY HELD THAT BENEFIT OF I NDEXATION WOULD BE 3 AVAILABLE FROM THE YEAR IN WHICH THE PREVIOUS OWNER FIRST OWNED THE PROPERTY. 5. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDER O F THE CIT[A]. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y, WE FIND THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF DCIT VS. MANJULA J. SHAH [SUPRA] HAS HELD AS UNDER: CAPITAL GAINS-COST OF ACQUISITION-INDEXED COST OF PROPERTY RECEIVED THROUGH GIFT-FOR THE PURPOSE OF COMPUTING LONG-TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET WHICH HAD BECOME PROPERTY OF THE ASSESSEE UNDER GIFT, THE FIRST YEAR IN WHICH THE CAPITAL ASSET WAS HELD BY THE ASSESSEE HAS TO BE DETERMINED TO WORK O UT THE INDEXED COST OF ACQUISITION AS ENVISAGED IN EXPLN. (III) TO S.48 AFTER TAKING INTO ACCOUNT THE PERIOD FOR WHICH THE SAID CAPITAL ASSET WAS HELD BY THE PREVIOUS OWNER-IN THAT VIEW OF THE MATTER, THE INDE XED COST OF ACQUISITION OF SUCH CAPITAL ASSET HAS TO BE COMPUTE D WITH REFERENCE TO THE YEAR IN WHICH THE PREVIOUS OWNER FIRST HELD THE ASSET-LEGISLATIVE INTENTION BEHIND ENACTING THE PROVISIONS IS VERY CL EAR TO TREAT THE DATE AND COST OF ACQUISITION OF THE ASSESSEE FOR THE PUR POSE OF COMPUTING CAPITAL GAIN IN TERMS OF S.48-IF EXPLN. (III) TO S. 48 IS INTERPRETED IN THE WAY SOUGHT BY THE DEPARTMENTAL REPRESENTATIVE BY TA KING THE DATE ON WHICH THE CAPITAL ASSET RECEIVED BY THE ASSESSEE UN DER A GIFT BECOMING HIS PROPERTY FOR THE PURPOSE OF WORKING OU T THE INDEXED COST OF ACQUISITION, IT WILL CERTAINLY NOT BE ON CONSONA NCE WITH THE SCHEME OF THE ACT AND WILL ALSO DEFEAT THE VERY PURPOSE OF INTRODUCING THE CONCEPT OF INDEXED COST OF ACQUISITION. FROM THE ABOVE, IT IS CLEAR THAT AS PER THE DECISIO N OF THE SPECIAL BENCH OF THE TRIBUNAL THE BENEFIT OF INDEXATION IS AVAILA BLE FROM THE DATE WHEN THE ASSET WAS FIRST HELD BY THE PREVIOUS OWNER . IN THE CASE BEFORE US, ADMITTEDLY, THE SAID FLAT WAS PURCHASED IN THE YEAR 1966 AND, THEREFORE, BENEFIT OF INDEXATION IS CLEARLY AV AILABLE FROM F.Y 1981- 82. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DEC ISION, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 7. GROUND NO.2 : DURING ASSESSMENT PROCEEDINGS, AO NOTICED THAT OUT OF TOTAL CLAIM OF ADVERTISEMENT EXPENDITURE AMO UNTING TO 4 RS.6,600/-, RS.5,000/- ON ACCOUNT OF DONATION TO VI SHWA JAGRUTI MISSION AND RS.600/- PAID TO SHREE UPNAGAR MODH VAN IK SAMASJ FOR WHICH EVEN RECEIPT WAS NOT THERE. THEREFORE, IT WAS CONCLUDED THAT THESE EXPENSES HAVE NOT BEEN INCURRED FOR ADVERTISE MENTS AND THAT IS FOR BUSINESS PURPOSES. 8. ON APPEAL, ADDITION HAS BEEN CONFIRMED BY THE CI T[A]. 9. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND THE SA ME CANNOT BE SUSTAINED. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ADDITION HAS BEEN MADE BY SPECIFICALLY POINTING OUT THAT A SUM O F RS.5,000/- WAS DONATED TO VISHWA JAGRUTI MISSION AND RS.600/- TO S HREE UPNAGAR MODH VANIK SAMASJ. IN THE ABSENCE OF ANY FURTHER DE TAILS, IT IS DIFFICULT TO UNDERSTAND HOW THESE EXPENSES HAVE BEEN INCURRED FOR BUSINESS PURPOSES AND, THEREFORE, WE ARE CONSTRAINED TO CONF IRM THE ADDITION. 11. GROUND NO.3 : DURING ASSESSMENT PROCEEDINGS, AO NOTICED THAT A SUM OF RS.1,98,835/-HAS BEEN CLAIMED UNDER THE HEAD CLEARING & FORWARDING EXPENSES. ON VERIFICATION IT WAS NOTICED THAT NO BILLS AND SUPPORTING VOUCHERS WERE AVAILABLE AND ACCORDINGLY RS.20,000/- WERE DISALLOWED OUT OF THE SAME. 12. ON APPEAL, THE LD. CIT[A] OBSERVED THAT THOUGH ADDITION HAS BEEN MADE ON AN ADHOC BASIS, STILL NO BILLS AND VOU CHERS WERE PRODUCED FOR VERIFICATION. HOWEVER, HE RESTRICTED T HE ADDITION TO RS.10,000/-. 5 13. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND, THEREFORE, SAME SH OULD BE DELETED. 14. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THOUGH ADDITION HAS BEEN MADE ON AN ADHOC BASIS, BUT THE F ACT REMAINS THAT SUPPORTING VOUCHERS AND BILLS WERE NOT PRODUCED. IN ANY CASE, THE LD. CIT[A] HAS RESTRICTED THE ADDITION TO A REASONABLE SUM OF RS.10,000/- AND, THEREFORE, WE DECLINE TO INTERFERE IN HIS ORDE R. 16. GROUND NO.4 : THE ASSESSEE HAD CLAIMED TELEPHONE EXPENSES AMOUNTING TO 2,08,660/-. IT WAS FOUND BY THE AO THA T BILLS TO THE EXTENT OF RS.1,54,731/- WERE IN THE NAME OF HARISH PARIKH, S. HARISH & CO. FURTHER BILLS AMOUNTING TO RS.45,359/- WERE IN THE NAMES OF ARUNA PAREKH, HIMANSHU PAREKH AND RACHNA PAREKH. ACCORDIN G TO HIM, THESE RELATIVES BILLS CANNOT BE RELATED TO BUSINESS PURP OSES AND, THEREFORE, SAME WERE DISALLOWED. FURTHER, 20% OF THE BILLS IN THE NAME OF HARISH PARIKH WERE ALSO DISALLOWED FOR THE PERSONAL USAGE. 17. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND, THERE FORE, SAME SHOULD BE DELETED. 18. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT BILLS AMOUNTING TO RS.45,359/- CANNOT BE SAID TO BE RELAT ED TO BUSINESS 6 PURPOSES. AS FAR AS DISALLOWANCE OF PERSONAL USE I S CONCERN, THE SAME HAS NOT BEEN DENIED BEFORE US. HOWEVER, THE SAME SE EMS TO BE ON A HIGHER SIDE AND, THEREFORE, WE RESTRICT THE DISALLO WANCE TO 10% OF SUCH EXPENSES. THEREFORE, WE CONFIRM THE TOTAL ADDI TION OF RS.60,832/- [RS.45359 + RS.15473]. 19. GROUND NO.5 : THE ASSESSEE HAD MADE CLAIM FOR MOTOR CAR EXPENSES AMOUNTING TO RS.2,39,418/-, PLUS DEPRECIAT ION AND CAR INSURANCE AT RS.1,19,141/- AND RS.19,953/- RESPECTI VELY. SINCE ASSESSEE COULD NOT PRODUCE LOG BOOK ETC., THEREFORE , 20% OF THE SAME WAS DISALLOWED FOR THE PERSONAL USAGE. 20. ON APPEAL, THE LD. CIT[A] RESTRICTED THE DISALL OWANCE TO 10%. 21. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND, THERE FORE, SAME SHOULD BE DELETED. 22. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 23. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT ELEMENT OF PERSONAL USAGE HAS NOT BEEN DENIED BEFORE US AND TH E LD. CIT[A] HAS ALREADY RESTRICTED THE ADDITION TO A REASONABLE LEV EL OF 10% OF THE EXPENDITURE. WE, THEREFORE, DECLINE TO INTERFERE WI TH HIS ORDER. 24. GROUND NO.6 : THE ASSESSEE HAD CLAIMED RS.1,10,923/- AS SALES PROMOTION EXPENSES. HOWEVER, ASSESSEE COULD FURNISH DETAILS OF RS.47,618/- ONLY. UPON ENQUIRY FOR THE DIFFERENCE, IT WAS SUBMITTED THAT THE BALANCE OF RS.63,305/- WAS ON ACCOUNT OF A IR TICKETS OF SHRI 7 H.V.PAREKH WHICH WERE PURCHASED THROUGH HIS CREDIT CAR. AO DISALLOWED THE SAME AS BEING NOT INCURRED FOR THE P URPOSE OF BUSINESS. 25. ON APPEAL, THE ADDITION HAS BEEN CONFIRMED BY T HE LD. CIT[A]. 26. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND, THEREFORE, SAME SH OULD BE DELETED. 27. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 28. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY, WE FIND THAT NOTHING HAS BEEN PRODUCED BEFORE US TO SHOW THAT EX PENDITURE ON AIR TICKETS WAS FOR THE PURPOSE OF BUSINESS AND, THEREF ORE, WE ARE CONSTRAINED TO CONFIRM THE ADDITION. 29. GROUND NO.7 : THE ASSESSEE HAD INCURRED A SUM OF RS.27,410/- UNDER THE HEAD CONVEYANCE, RS.26,670/- UNDER THE HE AD GENERAL EXPENSES AND RS.26,880/- UNDER THE HEAD STAFF WELFA RE EXPENSES. AS ONLY SELF MADE VOUCHERS WERE PRODUCED, THEREFORE, A O DISALLOWED 10% OF THESE EXPENSES. 30. ON APPEAL, THE ADDITION HAS BEEN CONFIRMED BY T HE LD. CIT[A]. 31. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION HAS BEEN MADE ON AN ADHOC BASIS AND, THEREFORE, SAME SH OULD BE DELETED. 32. ON THE OTHER HAND, LD. DR, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 33. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT MANY A TIMES, IT IS NOT POSSIBLE TO HAVE SUPPORTING VOUCHE RS FOR CONVEYANCE 8 AND SMALL EXPENSES IN THE NATURE OF TEA FOR STAFF E TC. THEREFORE, WE RESTRICT THIS ADDITION TO RS.5,000/-. 35. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JULY, 2010. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) PRESIDENT ACCOUNTANT MEMBER MUMBAI: 16 TH JULY, 2010. P/-*