USHA SRICHAND MATTA, MUMBAI V. ITO 19(1)(2), MUMBAI

ITA 988/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3282 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 12-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AIRIJU JAIKARAU
• Keywords: Capital asset; Cost of acquisition; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI RAMIT KOCHAR, A M ITA NO.988/MUM/2014 ASSESSMENT YEAR : 2009-10 MRS. USHA SRICHAND MATTA, SANNIDHI PLOT NO.721, 4 TH FLOOR, FLAT NO.401, 12 TH ROAD, KHAR (W) MUMBAI- 400 052. PAN AEVPM4813Q VS. ITO 19(1)(2) MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI PRITESH MEHTA RESPONDENT BY : SHRI AIRIJU JAIKARAU DATE OF HEARING : 11.01.2016 DATE OF PRONOUNCEMENT : 29.01.2016 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER THE AFORESAID APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 02.12.2013 OF THE LEARNED CIT(A)-30, MUMBAI, FOR A. Y. 2009-10. 2. GROUND NO.1 WITH ITS SUB GROUNDS RELATES TO DISA LLOWANCE OF INDEXATION OF COST OF IMPROVEMENT OF RS.1,25,000/- WHILE COMPUTIN G LONG TERM CAPITAL GAINS ON SALE OF FLAT. BRIEFLY, THE FACTS ARE THAT THE ASSE SSEE, AN INDIVIDUAL, FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 02.09.2009 DECLARING LOSS OF RS.4,40,368/-. IN THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER FOUND THAT DURING THE RELEVANT PREVIOUS YEAR THE AS SESSEE HAD SOLD CAPITAL ASSET IN THE FORM OF A FLAT AT PLOT NO. 721, MATTA HOUSE BUN GLOW, 1 ST FLOOR, KHAR (W), MUMBAI, AND RECEIVED SALE CONSIDERATION OF RS.46,33 ,400/-. FROM THE WORKING OF ITA NO.988/MUM/2014 2 LONG TERM CAPITAL GAINS FURNISHED BY THE ASSESSEE, THE AO NOTED THAT HE HAD CLAIMED INDEXATION OF RS.7,27,500/- ON COST OF IMPR OVEMENT OF RS.1,25,000/-. HE THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH PROO F OF COST OF IMPROVEMENT CLAIMED OF RS.1,25,000/-. AS OBSERVED BY THE AO, IN RESPON SE TO THE QUERY THE ASSESSEES AR SUBMITTED LETTER ON 28.12.2011 STATING THAT NO S UPPORTING EVIDENCE IN RESPECT OF COST OF IMPROVEMENT IS AVAILABLE. THE AO FURTHER O BSERVED, IN THE SAID LETTER ASSESSEES AR ALSO AGREED FOR REMOVAL OF INDEXED CO ST OF IMPROVEMENT. THIS FACT WAS ALSO RECORDED IN ORDER SHEET ENTRY DATED 25.12. 2015. ON THE BASIS OF THE AFORESAID FACT, THE AO WORKED OUT LONG TERM CAPITAL GAIN AFRESH. IN THE RE-WORKING OF LONG TERM CAPITAL GAIN, THOUGH, THE AO ALLOWED C OST OF IMPROVEMENT OF RS.1,25,000/-, HE DISALLOWED ASSESEES CLAIM OF IND EXED COST OF IMPROVEMENT. AS A RESULT, NET LONG TERM CAPITAL GAIN WAS COMPUTED AT RS.6,02,500/-. BEING AGGRIEVED OF THE AFORESAID DECISION OF THE AO, THE ASSESSEE C HALLENGED THE SAME IN APPEAL PREFERRED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LEARNED CIT(A) WHILE DISPOSING OF THE APPEAL EX-PARTE VIDE ORDER DATED 02.12.2013 SUSTAINED THE COMPUTATION OF LONG TERM C APITAL GAIN MADE BY THE AO BY OBSERVING THAT THE ASSESSEE DURING ASSESSMENT PROC EEDINGS HAS AGREED AND ACCEPTED THE WORKING OF THE AO. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT LONG TERM CAPITAL GAIN HAS TO BE COMPUTED AS PER STATUTORY PROVISIONS. HE SUBMITTED, ONCE THE AO ALLOWS COST OF IMPROVEMENT THEN AS A NATURAL CONSEQUENCE I NDEXATION OF COST OF IMPROVEMENT HAS TO BE ALLOWED. HE SUBMITTED, A DED UCTION PROVIDED UNDER THE STATUTE CANNOT BE TAKEN AWAY BY AN AGREEMENT BETWEE N THE AO AND THE ASSESSEES AR. THE LEARNED DR, ON THE OTHER HAND SUBMITTED SI NCE THE ASSESSEE IN THE COURSE ITA NO.988/MUM/2014 3 OF ASSESSMENT PROCEEDINGS HIMSELF AGREED FOR DISALL OWANCE OF INDEXED COST OF IMPROVEMENT, THE COMPUTATION OF LONG TERM CAPITAL G AIN BY THE AO IS CORRECT. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD. THE MODE OF COMPUTATION OF LONG TERM CA PITAL GAINS HAS BEEN PROVIDED U/S. 48 OF THE INCOME TAX ACT 1961. AS PER THE SAI D PROVISION INCOME CHARGEABLE UNDER THE HEAD LONG TERM CAPITAL GAIN SHALL BE COMP UTED AFTER DEDUCTING THE FOLLOWING AMOUNTS - I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN C ONNECTION WITH SUCH TRANSFER II)THE COST OF ACQUISITION OF THE ASSET AND THE COS T OF ANY IMPROVEMENT THERETO. THE SAID PROVISION FURTHER PROVIDES THAT IN CASE OF LONG TERM CAPITAL GAINS ARISING FROM THE TRANSFER OF LONG TERM CAPITAL ASSET IN CAS E OF A RESIDENT, COST OF ACQUISITION AND COST OF ANY IMPROVEMENT WOULD MEAN INDEXED COST OF ACQUISITION AND INDEXED COST OF ANY IMPROVEMENT. KEEPING IN VIEW THE AFORE SAID STATUTORY PROVISION IF WE EXAMINE THE FACTS OF THE PRESENT CASE, IT IS NOTICE D THAT THE AO HAS ACCEPTED THE ASSESSEES CLAIM OF COST OF IMPROVEMENT OF RS.1,25, 000/-, WHICH IS EVIDENT FROM THE WORKING OF LONG TERM CAPITAL GAINS MADE BY THE AO. THEREFORE, THE AO IN PRINCIPLE HAVING ACCEPTED ASSESSEES CLAIM OF COST OF IMPROVE MENT OF RS.1,25,000/- AS A NATURAL CONSEQUENCE INDEXED COST OF IMPROVEMENT HAS TO BE ALLOWED IN TERMS WITH SECTION 48 OF THE ACT. A DEDUCTION ALLOWED UNDER T HE PROVISIONS OF A STATUTE CANNOT BE TAKEN AWAY/DISALLOWED BY MUTUAL AGREEMENT BETWEE N THE ASSESSEE AND THE DEPARTMENT, IF AT ALL THERE IS ANY. MOREOVER, THE AO BEING A CREATURE OF THE STATUTE HAS TO ACT WITHIN THE FOUR CORNERS OF THE STATUTORY PROVISIONS. SINCE AS PER MODE OF COMPUTATION PROVIDED U/S. 48 OF THE ACT COST OF ANY IMPROVEMENT WOULD MEAN ITA NO.988/MUM/2014 4 INDEXED COST OF ANY IMPROVEMENT, WHICH IS TO BE RED UCED FROM THE FULL CONSIDERATION, WHILE COMPUTING LONG TERM CAPITAL GA INS, IN OUR VIEW, THE AO CANNOT DISALLOW ASSESSEES CLAIM OF INDEXED COST OF ANY IM PROVEMENT. ACCORDINGLY, WE DIRECT HIM TO ALLOW ASESSEES CLAIM OF INDEXED COST OF IMPROVEMENT. THIS GROUND IS ALLOWED. 6. IN GROUND NO.2 ALONG WITH THE SUB GROUNDS, THE A SSESSEE HAS CHALLENGED THE ADDITION OF RS.2,26,600/-. FROM THE COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAD SHOW N A COMPENSATION OF RS.2,66,600/- AS INCOME FROM HOUSE PROPERTY AND AFT ER DEDUCTING THE RENT PAID BY HIM TOWARDS ALTERNATIVE ACCOMMODATION AND STANDARD DEDUCTION OF 30%, NET INCOME OF RS.14,691/- WAS SHOWN. THE AO HOWEVER, D ID NOT AGREE WITH THE ASSESSEE. HE WAS OF THE VIEW THAT THE AMOUNT RECEI VED BY THE ASSESSEE TOWARDS ALTERNATE ACCOMMODATION FROM THE BUILDER IS IN THE NATURE OF INCOME FROM OTHER SOURCES, FROM WHICH NO DEDUCTION IS ALLOWABLE. ACC ORDINGLY, HE ADDED THE ENTIRE AMOUNT OF RS.2,66,600/- AS INCOME FROM OTHER SOURCE S. BEING AGGRIEVED, THE ASSESSEE CHALLENGED THE SAME BEFORE THE CIT(A). TH E CIT(A) ALSO CONFIRMED THE ADDITION BY REJECTING THE CLAIM OF THE ASSESSEE. 7. THE LEARNED COUNSEL REITERATED THE STAND TAKEN B EFORE THE AO AND REFERRING TO THE STATEMENT OF FACTS SUBMITTED BEFORE THE CIT( A) CONTENDED THAT THE AMOUNT OF RS.2,66,600/- RECEIVED BY THE ASSESSEE IS IN THE NA TURE OF COMPENSATION TOWARDS COST INCURRED BY THE ASSESSEE FOR RENT PAID FOR ALT ERNATE ACCOMMODATION. HE SUBMITTED, THOUGH COMPENSATION IS CAPITAL IN NATURE BUT CONSIDERING THE FACT THAT THE ASSESSEE HAS RECEIVED MORE THAN THE COST ACTUAL LY INCURRED BY HIM TOWARDS ALTERNATE ACCOMMODATION, HE HAS OFFERED THE EXCESS AMOUNT OF INCOME UNDER THE ITA NO.988/MUM/2014 5 HEAD INCOME FROM HOUSE PROPERTY AFTER DEDUCTING THE RE FROM ACTUAL RENT PAID ON NET BASIS AND STATUTORY DEDUCTION U/S. 24(A). 8. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE REASONING OF THE AO. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. AS COULD BE SEEN FROM THE SUBMISSIONS OF T HE LEARNED AR, THE ASSESSEE IS CHALLENGING THE NATURE OF RECEIPT AS CAPITAL. HOWE VER, IT IS SEEN THAT THE ASSESSEE HAS HERSELF SHOWN THE RECEIPT AS INCOME UNDER THE H EAD HOUSE PROPERTY AND CLAIMED DEDUCTION OF NET RENT PAID ALONG WITH STATU TORY DEDUCTION AS AVAILABLE U/S. 24(A). CONSIDERING SUCH FACT, ASSESSEES CLAIM OF CAPITAL RECEIPT HAS TO BE EXAMINED. FURTHER, IF AT ALL THE AMOUNT HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WHETHER ASSESSEE CAN STILL CLA IM DEDUCTION OF RENT PAID OVER AND ABOVE THE STATUTORY DEDUCTION U/S. 24(A) REQUIR ES TO BE EXAMINED. SINCE THE CIT(A) HAS DISPOSED OF ASSESSEES APPEAL EXPARTE, M ERELY ACCEPTING THE AOS VIEW ON THIS ISSUE WITHOUT RECORDING AN INDEPENDENT OPIN ION, IN THE INTEREST OF FAIRPLAY JUSTICE, WE DEEM IT PROPER TO REMIT THIS ISSUE BACK TO THE FILE OF THE CIT(A) FOR DECISION AFRESH AFTER DUE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9 TH JANUARY 2016. SD/- SD/- (RAMIT KOCHAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED :29 TH JANUARY, 2016. SA ITA NO.988/MUM/2014 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI