DCIT 12(2)(1), MUMBAI V. D C POLYESTER P. LTD, MUMBAI

ITA 7181/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6756 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 06-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARISR ARCIT
• Assessee Lawyers: SUBRAMANIAN
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -DBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./I.T.A./7181/MUM/2016, /ASSESSMENT YEAR: 2013-14 DCIT-12(2)(1) ROOM NO.223, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD-400 020. VS. M/S. D.C. POLYESTER PVT. LTD. 1071/SOLITAIRE CORPORATE PARK GURU HAR GOVIND MARG, CHAKALA, ANDHERI(E), MUMBAI 400 093. PAN : AAACD 3816 C ( /APPELLANT ) ( / RESPONDENT ) / REVENUE BY: SHRI RAM TIWARI-SR.AR-CIT /ASSESSEE BY: SHRI SUBRAMANIAN / DATE OF HEARING: 13/06/2018 / DATE OF PRONOUNCEMENT: 27/06/2018 , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DATED, 29/09/2016 OF CIT(A)- 20 MUMBAI, THE ASSESSING OFFICER (A.O) HAS FILED THE PRESENT APPEAL.ASSESSEE COMPANY,ENG AGED IN THE BUSINESS OF LEASING OF BUILDING, PLANT AND MACHINERY, FILED RETURN OF INCO ME ON 28/09/2013, DECLARING INCOME AT RS. 3.67 LAKHS.THE AO COMPLETED THE ASSESSMENT,ON 25/01 /2016,U/S. 143(3) OF THE ACT, DETERMIN -ING THE INCOME OF THE ASSESSEE AT RS.6.98 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE AD DITION OF RS.68.36 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSES SEE HAD SHOWN SHORT-TERM CAPITAL GAINS (STCG) OF RS. 6.26 CRORES. AS PER HIS DIRECTION,THE ASSESSEE FURNISHED DETAILS IN THAT REGARD. IT WAS FOUND BY HIM THAT THE ASSESSEE HAD SOLD OFFICE PREMISES FOR A CONSIDERATION OF RS. 7.05 CRORES, THAT IT HAD CLAIMED EXPENDITURE OF RS.76.28 LAKHS (RS. 68.36 LAKHS UNDER THE HEAD MAINTENANCE AND INTEREST + RS.7.92 LAKHS UNDER THE HEAD BROKERAGE). HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE MAINTENANCE AND INTEREST PAID BY IT SHOULD NOT BE DISALLOWED SINCE THAT WAS THE LIABILITY WHICH REMAINED UNPAID OVER SEVERA L YEARS. AFTER CONSIDERING THE SUBMISSION, HE DISALLOWED AN AMOUNT OF RS. 68,36,313/- U/S.48 O F THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) AND MADE DETAILED SUBMISS IONS. IT ALSO RELIED UPON CERTAIN CASE LAWS.AFTER DELIBERATING UPON THE ASSESSMENT ORDER A ND THE SUBMISSIONS OF THE ASSESSEE,HE OBSERVED THAT THE CLAIM WAS DISALLOWED BY THE AO BE CAUSE THE DISPUTED LIABILITY REMAINED UNPAID OVER SEVERAL YEARS,THAT THE ASSESSEE HAD A D ISPUTE WITH THE SOCIETY ABOUT THE 7181/M/16 M/S. D.C. POLYESTER P.LTD. 2 MAINTENANCE CHARGES OF ITS OFFICE PREMISES,THAT IT HAD NOT PAID MAINTENANCE TO THE SOCIETY FOR MANY YEARS, THAT AT THE TIME OF SALE OF PROPERTY TH E SOCIETY HAD,VIDE ITS LETTER DATED 02/06/ 2012, AGREED TO TRANSFER THE PREMISES ON THE CONDIT ION THAT OLD MAINTENANCE WITH INTEREST HAD TO BE PAID,THAT THE BUYER OF THE PREMISES DIRECTLY PAID THE ARREARS OF MAINTENANCE CHARGES OF RS.66.97 LAKHS UPTO THE MONTH OF MARCH 2012, THAT T HE BUYER DEDUCTED THE SAME FROM THE SALE PROCEEDS, THAT THE FACT OF DIRECT PAYMENT WAS EVIDE NT FROM THE SALE AGREEMENT, THAT THE MAINTENANCE AND INTEREST FROM THE PERIOD APRIL 2012 -JUNE, 2012, AMOUNTING TWO RS. 1.38 LAKHS WAS PAID BY THE ASSESSEE DIRECTLY TO THE SOCI ETY, THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS. 68.36 LAKHS FROM THE WORKING OF THE STCG. REFERRING TO THE PROVISIONS OF SECTION 48 OF THE ACT, THE FAA OBSERVED THAT EXPENS ES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY, WHILE COMPUTI NG CAPITAL GAINS HAD TO BE ALLOWED. HE REFERRED TO THE ORDER OF THE TRIBUNAL, DELIVERED IN THE CASE OF RAM & CO MUMBAI (ITA/ 3050/MUMBAI/2015, DATED 08/01/2016). HE ALSO RELIED UPON THE CASE OF SHAKUNTALA KANTILAL (190ITR56) AND HELD THAT THE EXPENSES INCURRED BY T HE ASSESSEE,IN ORDER TO EFFECT THE TRANSFER OF PROPERTY TO THE BUYER,WERE ALLOWABLE AND WERE CO VERED UNDER SECTION 48 OF THE ACT, THAT THE DISPUTED AMOUNT WAS INCURRED IN CONNECTION WITH TRANSFER OF PROPERTY. FINALLY, HE ALLOWED THE APPEAL OF THE ASSESSEE. 4. BEFORE US,THE DEPARTMENTAL.REPRESNETATIVE(DR)SUPPO RTED THE ORDER OF THE AO AND RELIED UPON THE CASE OF SMT.SMITI GOLIYAN(ITA/556/DEL/2013 ,DTD.21.02.1014).THE AUTHORISED REPRESENTATIVE(AR)STATED THAT EXPENDITURE INCURRED BY THE ASSESSEE / PURCHASER OF THE PREMISES WAS DIRECTLY RELATED WITH THE TRANSFER OF THE CAPITAL ASSET.HE REFERRED TO THE CASE OF SHAKUNTALA KANTILAL(190 ITR56). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.SECTION 48 OF THE ACT,PROVIDES FOR THE COMPUTATION OF INCOME CHARGEAB LE UNDER THE HEAD CAPITAL GAINS.IT STIPULATES THAT INCOME CHARGEABLE UNDER THAT HEAD H AS TO BE COMPUTED IN A PARTICULAR MANNER. FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED O R ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS: VIZ., (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVE LY IN CONNECTION WITH SUCH TRANSFER; AND (II) THE COST OF ACQUISITION OF THE ASSET AND THE C OST OF ANY IMPROVEMENT THERETO,HAVE TO BE REDUCED. 7181/M/16 M/S. D.C. POLYESTER P.LTD. 3 IN OTHER WORDS,WHAT CAN BE DEDUCTED UNDER SECTION 4 8(I) IS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER OF PROPERTY . IT IS SAID THAT THE WORDS 'IN CONNECTION WITH' USED IN CL. (I) OF S. 48 OF THE ACT,DEALING WITH THE DEDUCTIONS IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS', ARE VERY WIDE IN THEIR AMBIT AND HENCE THERE IS NO WARRANT FOR IM PORTING A RESTRICTION TO QUALIFY FOR DEDUCTION.THE CRUCIAL TEST TO BE APPLIED IS WHETHER THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER.IN THE CASE UNDER CONSIDERATION,THE AO HAS NOT CHALLENGED THE FACT THAT,BECAUSE OF THE DISPUTE WIT H THE SOCIETY,THE ASSESSEE HAD TO PAY EARLIER DUES ON ACCOUNT OF MAINTENANCE CHARGES AND THAT PRE CONDITION LAID DOWN BY THE SOCIETY FOR TRANSFER OF THE PROPERTY TO THE PURCHASER WAS CLEAR ANCE OF EARLIER DUES.IT IS A FACT THAT THE PURCHASER HAD PAID RS. 66. 97 LAKHS TO THE SOCIETY TOWARDS PENDING MAINTENANCE CHARGES, SO THAT IT COULD HAVE A CLEAR TITLE.THE ASSESSEE HAD P AID RS 1.38 FOR MAINTENANCE CHARGES AND INTEREST.CLEARLY,THE EXPENDITURE INCURRED BY THE AS SESSEE AND THE PURCHASER TOWARDS EARLIER DUES WAS INTRINSICALLY LINKED WITH THE TRANSFER OF THE ASSET. THEREFORE,IN OUR OPINION THE FAA HAD RIGHTLY HELD THAT THE DISPUTED AMOUNT WAS AN EX PENDITURE THAT WAS INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF A CA PITAL ASSET BY THE ASSESSEE AND THAT THE SAME HAD TO BE ALLOWED U/S. 48(I) OF THE ACT. WE WOULD LIKE TO MENTION THAT THE FACTS OF THE CASE OF SMT.SMITI GOLIYAN(SUPRA)WERE DIFFERENT FROM THE PRESENT CASE.IN THAT MATTER EXPE NDITURE WAS INCURRED TO IMPROVE THE VALUATION OF THE PROPERTY.IN THE INSTANT CASE DISPU TED MAINTENANCE CHARGES WERE PAID BY THE PURCHASER AND THE ASSESSEE.WITHOUT THE PAYMENT OF C HARGES THE SOCIETY WOULD HAVE NOT TRANSFERRED THE PROPERTY. IN LIGHT OF ABOVE,WE CONFIRM THE ORDER OF THE FAA A ND DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . !'#$%&' . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2018. ($ 27 , 2018 SD/- SD/- ( . . / C.N.PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : . 06 .2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 7181/M/16 M/S. D.C. POLYESTER P.LTD. 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.