TOSHVIN ANALYTICAL PVT LTD., MUMBAI V. DY CIT CIRCLE-1 (3)(2), MUMBAI

ITA 7111/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7767 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 19-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Assessee Lawyers: RUTURAJ GURJAR
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital Gains
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , E BENCH MUMBAI BEFORE : SHRI M.BALAGANESH, A CCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 7111/ MUM/ 20 19 ( ASSESSMENT YEAR : 2013 - 14 ) M/S. TOSHVIN ANALYTICAL PVT. LTD., 103, S.J. HOUSE SITARAM MILL COMPOUND, N.M. JOSHI MARG LOWER PAREL MUMBAI 400 011 VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(3)(2) ROOM NO.540, AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI 400 020 PAN/GIR NO. AABCT4482D (APPELLANT ) .. (RESPONDENT ) ASSE SSEE BY SHRI RUTURAJ GURJAR REVENUE BY SHRI VIJAY KUMAR MENON DATE OF HEARING 16 /0 8 /2021 DATE OF PRONOUNCEMENT 30 / 08 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 7111/MUM/2019 FOR A.Y. 2013 - 14 ARISES OU T OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 3, MUMBAI IN APPEAL NO. CIT(A) - 3/IT - 10174 /2016 - 17 DATED 19/09/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 29/03/2016 BY THE LD. DY. COMMISSIONER OF INCOME TAX - 1(3)(2), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 2 2. THE GROUND NO. I AND II RAISED BY THE ASSESSEE IS WITH REGARD TO COMPUTATION OF CAPITAL GAINS ON SALE OF PROPERTY. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MARKETING, INSTALLATION AND SERVICING OF HIGH TECHNOLOGY, ANALYTICAL AND LABORATORY INSTRUMENTS, THE RETURNED INC OME FOR THE A.Y.2013 - 14 WAS ELECTRONICALLY FILED ON 30/09/2013 DECLARING TOTAL INCOME OF RS.6,93,07,420/ - . DURING THE YEAR, THE ASSESSEE SOLD A RESIDENTIAL FLAT BEARING NO.1401, 14 TH FLOOR, B - WING, TOWER - I, ASHOK GARDENS, SEWRI, MUMBAI. ASSESSEE FILED COMP UTATION OF LONG TERM CAPITAL GAINS SHOWING LONG TERM GAINS AFTER INDEXATION OF RS.1,87,62,681/ - . THE LD. AO OBSERVED THAT HOWEVER IN THE RETURN OF INCOME THE SAME HAS BEEN TAKEN AT RS.1,90,80,664/ - . THE ASSESSEE HAS CLAIMED SET OFF OF BROUGHT FORWARD LONG TERM CAPITAL LOSS TO THE EXTENT OF LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME. THE ASSESSEE FILED PURCHASE AGREEMENT AND SALE AGREEMENT OF THE FLAT BEFORE THE LD. AO. THE FLAT WAS PURCHASED BY THE ASSESSEE FROM SWAN ENERGY LTD., AS PER THE PURCHASE DE ED DATED 30/05/2012, THE SELLER I.E. SWAN ENERGY LTD., AGREED TO SELL AND TRANSFER TO THE ASSESSEE THE APARTMENT NO.401, 14 TH FLOOR, B - WING, TOWER - I, HAVING CARPET AREA OF 1291 SQ.FT I.E. 119.94 SQ.MTRS ALONGWITH RIGHT TO USE ONE CAR PARKING SPACE FOR A TO TAL CONSIDERATION OF RS.83,03,500/ - . WE FIND THAT ASSESSEE MADE BOOKING OF THE FLAT BY MAKING DOWN PAYMENT OF RS.11,79,150/ - ON 09/06/2005. THE ASSESSEE WAS ALLOTTED THE APARTMENT NO.1401 ON 14 TH FLOOR OF B WING IN T OWER - I OF ASHOK GARDENS, SEWRI, MUMBAI 400 015 VIDE ALLOTMENT LETTER DATED 14/06/2005 BY THE VENDOR. AFTER THIS, THE ASSESSEE HAS BEEN MAKING PAYMENTS IN VARIOUS INSTALMENTS TO THE VENDOR AS PER THE PAYMENT SCHEDULE. THE LAST PAYMENT WAS MADE BY THE ASSESSEE ON 19/03/2011 AMOUNTING TO RS.6,14, 110/ - . THE ASSESSEE ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 3 SOLD THIS FLAT TO MR. ELTON MENEZES ON 30/07/2012 FALLING IN A.Y.2013 - 14 FOR A TOTAL CONSIDERATION OF RS.3,61,00,000/ - . THE CASE OF THE ASSESSEE IS THAT SINCE THE ASSESSEE HAD BOOKED THE FLAT WAY BACK IN JUNE 2005 AND ALLOTMENT LETTER W AS ISSUED TO HIM ON 14/06/2005 AND THEREAFTER , THE PAYMENTS WERE MADE BY HIM AS PER THE PAYMENT SCHEDULE AGREED UPON, THE PROPERTY WHICH WAS SOLD BY HIM ON 30/07/2012 CONSTITUTES LONG TERM CAPITAL ASSET AND ACCORDINGLY, THE RES ULTANT GAIN WOULD BE LONG TER M CAPITAL GAIN. THE CASE OF THE REVENUE IS THAT SINCE THE FLAT WAS REGISTERED IN THE NAME OF THE ASSESSEE ONLY ON 30/05 / 2 0 12 AND IMMEDIATELY THEREAFTER WITHIN TWO MONTHS, THE ASSESSEE HAD SOLD A FLAT AND HENCE, THE RES ULTANT GAIN WOULD ONLY BE SHORT TERM C APITAL GAINS. HENCE, THE ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE HOLDING PERIOD OF THE ASSET SHOULD BE RECKONED FROM THE DATE OF REGISTRATION OF THE PROPERTY OR FROM THE DATE OF ALLOTMENT OF THE PROPERTY FOR THE PURPOSE OF DECIDING WHETHER T HE ASSET TRANSFERRED IS A LONG TERM CAPITAL ASSET OR A SHORT TERM CAPITAL ASSET. WE FIND THAT THIS ISSUE IS NO LONGER RES INTEGRA IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. VEMBU VAIDYANATHAN REPORTED IN 413 IT R 248 WHEREIN IT WAS HELD THAT, DATE OF ALLOTMENT WOULD BE RELEVANT DATE FOR THE PURPOSE OF DETERMINING THE HOLDING PERIOD OF CAPITAL ASSET. IT WAS ALSO HELD THAT DATE OF ALLOTMENT SO MADE SHALL BE THE RELEVANT DATE FOR THE PURPOSE OF CAPITAL GAIN TAX AS DATE OF ACQUISITION. IT WAS ALSO NOTED THAT THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISSUE OF ALLOTMENT LETTER AND PAYMENT OF IN STALMENTS WAS ONLY A FOLLOW - UP ACTION AND TAK ING DELIVERY OF THE POSSESSION IS ONLY A FORMALITY. RESPECTFULLY FOLLOWING TH E AFORESAID DECISION, WE HOLD THAT THE ASSET HAS BEEN HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS AS COMPUTED FROM THE DATE OF ALLOTMENT AND ACCORDINGLY, THE ASSET TRANSFERRED WOULD BE A LONG TERM CAPITAL ASSET THEREBY RESULTING IN LONG ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 4 TERM CAPITAL GAI NS IN THE INSTANT CASE. ASSESSEE WOULD ALSO BE ELIGIBLE FOR BENEFIT OF INDEXATION. 3.1. HAVING HELD THAT THE ASSET TRANSFERRED IS A LONG TERM CAPITAL ASSET, THE NEXT QUESTION THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE INDEXATION BENEFIT FOR COST OF A CQUISITION SH OULD BE ALLOWED TO THE ASSESSEE, B ASED ON THE PAYMENTS MADE IN INSTALMENTS AND APPLYING THE COST INFLATION INDEX IN THE RELEVANT YEAR OF PAYMENT . WE FIND THAT ASSESSEE ITSELF HAD CLAIMED INDEXATION BENEFIT BY APPLYING THE COST INFLATION INDEX IN THE YEAR OF PAYMENT OF INSTALMENTS . HENCE, THERE IS NO DISPUTE THAT ARISES IN THIS REGARD. 3.2. IN VIEW OF THE AFORESAID OBSERVATIONS, WE DIRECT THE LD. AO TO ACCEPT LONG TERM CAPITAL GAINS RETURNED BY THE ASSESSEE ON SALE OF THIS FLAT AND DELETE THE A DDITION MADE ON ACCOUNT OF CAPITAL GAINS MADE IN THIS REGARD . ACCORDINGLY, THE GROUND NOS. I & II RAISED BY THE ASSESSEE ARE ALLOWED. 4. THE GROUND NO.III RAISED BY THE ASSESSEE IS WITH REGARD TO TREATMENT OF REPAIRS AND RENOVATION EXPENSES INCURRED BY TH E ASSESSEE ON THE LEASED PREMISES. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE WAS ASKED TO FURNISH DETAILS OF OFFICE RENOVATION EXPENSES ON LEASED PREMISES BY THE LD. AO DURING THE COURSE OF A SSESSMENT PROCEEDINGS WHICH WAS DULY FURNISHED BY THE ASSESSEE. THE DETAILS OF THE SAME ARE AS UNDER: - ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 5 SR. NO. NAME OF CONTRACTORS HEAD OF ACCOUNTS NATURE OF WORK FIXED ASSETS AJIT SHILPI'S EXPS. SERVICE TAX RENOVATION EXP. TOTAL 1 JA LARAM LIGHTS STUDIO ELECTRICITY EQUIPMENTS LIGHTS 124961 17551 142512 2 TSR ENTERPRISES ELECTRICITY EQUIPMENTS ELECTRICAL WORK 225893 31727 4938 264578 527136 3 AHMED INTERIORS FURNITURE CIVIL, CARPENTARY WORK 995393 139802 23624 2650292 3809111 4 C ONSOLIDATED CARPET IND. LTD., FURNITURE CARPET 149550 21005 170555 5 GRACE ENGINEERS FURNITURE CHAIRS 299784 42105 341889 6 ISHA SYSTEMS & SOFTWARE OFFICE EQUIPMENTS DOOR ACCESS CONTROL 17313 2431 19744 7 SHEMAROO CORPORATION OFFICE EQUIPMEN TS PROJECTOR 54,550 7662 62212 8 INDU ARTS & FRAMES P. LTD., PAINTING PAINTING 7312 1027 8339 9 BLUE STAR LIMITED PLANT & MACHINERY - OTHERS AIR CONDITIONING 943803 132557 1076360 10 MEGHDOOT PUMPS PLANT & MACHINERY - OTHERS WATER PUMP 24135 339 0 27525 11 OZONE AIRCONDITIONING & CONSULTANCY PLANT & MACHINERY - OTHERS AC INSTALLATION 286224 40200 6405 332829 12 ADDONIX TECHNOLOGIES PVT. LTD., RENOVATION EXPS DLINK RI 45 CONNECTOR 24560 24560 13 ART WORK RENOVATION EXPS POP WORK 278364 278364 14 CLASSIC FABRICS RENOVATION EXPS FABRICS 3300 3300 15 PANKAJ PANCHAL RENOVATION EXPS LABOUR CHARGES 3780 3780 16 PARADISE CERAMICA (INDIA) PVT. LTD., RENOVATION EXPS TILES, SINK, TABS ETC., 135337 135337 17 RAJ CREATIO NS RENOVATION EXPS FROSTED VINYL FILM TO BE STUCK ON GLASS 88750 88750 18 SHARADA INTEGRATED VENTURES RENOVATION EXPS ROLLER BLINDS 13636 13636 19 STANDARD PRINTING SOLUTION RENOVATION EXPS NAME PLATE 706613 706613 20 GVS CREATION RENO VATION EXPS 12.5% ON TOTAL PROJECT COST 7369 7369 21 AJIT SHILPI ARCHITECT 607455 607455 31 , 28 , 918 4 , 39 , 457 34 , 967 47 , 84 , 034 83 , 87 , 376 4.2. FROM THE AFORESAID DETAILS GIVEN IN TABULATION, THE LD. AO ACCEPTED ALL THE FIGURES EXCEPT THE RENOVATION EXPENSES INCURRED IN THE SUM OF RS.26,50,292/ - FOR CIVIL AND CARPENTRY WORK ETC., THROUGH THE CONTRACTOR M/S. AHMED INTERIORS SEEKING TO TREAT THE SUM AS CAPITAL IN NATURE. BEFORE THE LD. CIT(A), ASSESSEE FURNISHED ALL THE BILLS OF AHMED IN TERIORS AND ACCORDINGLY, THE LD. CIT(A) SOUGHT REMAND REPORT FROM THE LD. AO. IN THE REMAND PROCEEDINGS , WE FIND THAT THE AFORESAID TABULATION WAS DULY ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 6 FURNISHED BY THE ASSESSEE BEFORE THE LD. AO TOGETHER WITH ALL THE BILLS OF AHMED INTERIORS. THE BILLS OF AHMED INTERIORS ARE ENCLOSED FROM PAGES 291 - 302 OF THE PAPER BOOK FILED BEFORE US. WE FIND THAT FROM THE PERUSAL OF EACH OF THOSE BILLS WHICH ARE IN GREAT DETAIL, THE ASSESSEE HAD IDENTIFIED THE SPECIFIC ITEMS WHICH ARE GIVING ENDURING BENEFIT TO THE ASSE SSEE AND ACCORDINGLY , HAD CAPITALIZED THE SAME IN THE BOOKS OF ACCOUNTS AND CLAIMED DEPRECIATION ACCORDINGLY , BOTH UNDER THE COMPANIES ACT AS WELL AS UNDER THE INCOME TAX ACT. IN RESPECT OF ITEMS WHERE NO ENDURING BENEFIT IS AVAILABLE, THE ASSESSEE HAD DU LY CHARGED O F F AS REVENUE EXPENDITURE. FROM THE PERUSAL OF THE BILLS ENCLOSED IN PAGES 291 - 302, THIS FACT IS GLARING ON US AND HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE ASSESSEE ON TREATING THE SAID EXPENDITURE AS REVENUE EXPENDITURE. WE ALS O FIND THAT THE LD. CIT(A) HAD CATEGORICALLY GIVEN A FINDING THAT NONE OF THE EXPENDITURE ENT AILS ANY STRUCTURAL CHANGE OR EXTENSION OR IMPROVEMENT OF THE BUILDING. THIS FINDING HAS NOT BEEN CONTROVERTED BY THE LD. DR BEFORE US. HAVING GIVEN SUCH A FINDING , WE HOLD THAT THE LD. CIT(A) OUGHT NOT TO HAVE TREATED THE SAID EXPENDITURE AS CAPITAL IN NATURE. IN VIEW OF THE AFORESAID OBSERVATIONS, WE HOLD THAT THE EXPENDITURE INCURRED IN THE SUM OF RS.26,50,2 92 / - SHOULD BE ALLOWED AS REVENUE EXPENDITURE. RELIANCE IN THIS REGARD HAD BEEN RIGHTLY PLACED BY THE LD. AR ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TALATHI AND PANTHAKY ASSOCIATED (P) LTD., REPORTED IN 343 ITR 309 WHEREIN IT WAS HELD THAT COST OF REPAIRS / RECONSTRUCTION OF TENANTED PREMISES IS REVENUE IN NATURE AND ALLOWABLE AS DEDUCTION. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THE GROUND NO.III RAISED BY THE ASSESSEE IS ALLOWED. ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 7 5. THE GROUND NO.IV RAISED BY THE ASSESSEE IS CHALLENGING THE DISALLOWANCE OF FOREI GN TRAVEL EXPENDITURE @20% OF TOTAL EXPENDITURE ON AN ADHOC BASIS BY THE LD. AO. 5.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAD CLAIMED AN AMOUNT OF RS.21,05,758/ - AS FOREIGN TRAVEL EXPENSES O N ACCOUNT OF MANAGING DIRECTOR. SINCE, THE REQUISITE DETAILS WERE NOT FURNISHED BY THE ASSESSEE BEFORE THE LD. AO, THE LD. AO RESORTED TO DISALLOW 20% OF THE SAME ON ADHOC BASIS FOR ATTRIBUTING PERSONAL ELEMENT OF EXPENDITURE INCURRED THEREON AND DISALLOWE D RS.4,21,152/ - IN THE ASSESSMENT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FILED THE DETAILS OF THE NAMES OF THE EMPLOYEES WITH THEIR DESIGNATION AND DATE OF COMMENCEMENT OF TRAVEL TOGETHER WITH THE DETAILS OF FOREIGN TRAVEL OF MANAGING DI RECTOR. THE DETAILS OF ENTIRE FOREIGN TRAVEL OF EMPLOYEES ARE ENCLOSED IN PAGE 37 OF THE PAPER BOOK. THE DETAILS OF ENTIRE FOREIGN TRAVEL OF MANAGING DIRECTOR ARE ENCLOSED IN PAGE 116 OF THE PAPER BOOK AS UNDER: - ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 8 5.2. THE ASSESSEE ALSO ENCLOSED THE ENTI RE BILLS I N SUPPORT OF THE AFORESAID TABLE FROM PAGES 117 TO 289 OF THE PAPER BOOK. IT WAS PLEADED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE MANAGING DIRECTOR HAD INCURRED VARIOUS EXPENSES DURING HIS FOREIGN TRAVEL WHICH IS MEANT FOR BUSINESS PURPOSES AND HAD INCURRED VARIOUS EXPENSES ON BEHALF OF THE COMPANY. ACCORDINGLY, THESE EXPENSES WERE ALSO DULY REIMBURSED BY THE ASSESSEE COMPANY TO THE MANAGING DIRECTOR. THESE DETAILS WERE VERY MUCH AVAILABLE BEFORE THE LD. AO IN THE ASSESSMENT PROCEEDINGS. WE FIND THAT THE ENTIRE FOREIGN TRAVEL EXPENSES OF THE EMPLOYEES OF THE ASSESSEE COMPANY HAVE BEEN DULY ALLOWED IN FULL BY THE LD. AO. ADMITTEDLY, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY IS ALSO AN EMPLOYEE OF THE COMPANY AND HENCE, HE CANNOT BE TREATED IN A DIFFERENT MANNER WITH THAT OF THE OTHER EMPLOYEES WITH REGARD TO ALLOWABILITY OF FOREIGN TRAVEL EXPENDITURE FOR BUSINESS PURPOSES. ACCORDINGLY, WE DIRECT THE LD. AO TO ALLOW THE ENTIRE FOREIGN TRAVEL EXPENDITURE AND DELETE DISALLOWANCE OF ITA NO . 7111/MUM/2019 M/S. TOSHVIN ANALYTICAL P. LTD., 9 RS.4,21,152 / - MADE ON AN ADHOC BASIS. ACCORDINGLY, THE GROUND NO.IV RAISED BY THE ASSESSEE IS ALLOWED. 5.3. GROUND NO. V IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 30 / 08 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 30 / 08 / 2021 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//