SHRI C G UTHAPPA V. THE INCOME TAX OFFICER

ITA/406/2016

AI Insights

The case involves an appeal by Shri C.G. Uthappa against the order of the Income Tax Appellate Tribunal, Bangalore, which partly allowed his appeal regarding the assessment of capital gains for the assessment year 2010-2011. The primary contention was whether the cost of a shed constructed on the land should be considered in the assessment of capital gains. The Tribunal examined the ownership of the shed and concluded that it belonged to the HUF of which the assessee was the Karta, and thus, the cost of the shed could not be deducted from the capital gains of the assessee personally. The CIT(A) had directed the AO to consider the cost of the shed as shown by the HUF in its balance sheet, which was upheld by the Tribunal.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 755315 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-06-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JEEVAN J NEERALGI
• Assessee Lawyers: M R VANAJA
• Keywords: Assessment Year 2010-2011; Balance sheet; Capital Gains; Valuation report; Superstructures
• Section: 260A

Judgement Text

" -1- ITA.No.406/2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF JUNE 2017 PRESENT THE HON’BLE MR. JUSTICE H.G.RAMESH AND THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA INCOME TAX APPEAL NO.406/2016 BETWEEN : SHRI C.G.UTHAPPA PROP AKSHARA MUDRIKA NO.301/1, LAKSHMIVILASA ROAD DEVARAJ MOHALLA MYSORE ...APPELLANT (BY SMT. M.R.VANAJA, ADVOCATE) AND : THE INCOME TAX OFFICER MYSORE WARD 13(2) BANGALORE ...RESPONDENT (BY SRI JEEVAN J. NEERALGI, ADVOCATE) THIS ITA FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, ARISES OUT OF THE ORDER DATED 07.04.2016 PASSED BY THE TRIBUNAL IN ITA NO.786 (BNG)/2015 FOR THE ASSESSMENT YEAR 2010-2011. THIS ITA COMING ON FOR ADMISSION, THIS DAY, H.G.RAMESH J., DELIVERED THE FOLLOWING: -2- ITA.No.406/2016 J U D G M E N T H.G.RAMESH, J. (Oral): 1. Heard. This appeal is directed against the order dated 07.04.2016 passed by the Income Tax Appellate Tribunal, Bangalore ‘A’ Bench, Bangalore, by partly allowing the appellant’s appeal in ITA No.786(BNG.)/2015 (Assessment year 2010-11). 2. The sole contention urged by learned counsel for the appellant is that the capital gains should have been assessed taking into consideration both the cost of the land and the shed constructed thereon. This aspect has been examined by the Tribunal in detail. It is relevant to refer to the following reasoning of the Tribunal at para 8 of the impugned order: “8. It appears from the above that there were superstructures in the plot and consideration of Rs.46,851/- is also mentioned therein. As per the assessee there was a shed constructed in the land and cost thereof should be as per the valuation report. The ld. AO has mentioned that the return of income filed by the assessee for the assessment year 2009-10 had shown an amount of Rs.45,000/- as the cost of the shed in the balance sheet filed alongwith such return. As against this, the cost considered by the assessee for working out the capital gains was Rs.7,88,200/-. The AO had sought explanation how the cost increased from 45,000/- to Rs.7,88,200/-viz. a difference of Rs.7,43,200/- since the cost of the property as per the purchase deed was Rs.46,851/-. The ld.AO came to a conclusion that the amount reflected in the balance sheet was not the cost of the shed, but cost of the property, when the assessee purchased it from KIADB. This was the reason why the AO -3- ITA.No.406/2016 came to a conclusion that there was no expenditure incurred by the assessee for the construction of the shed. As against this, the assessee is relying on the valuation report dated 04-01-2010 of Shri yogis Rao, D.V in which it is mentioned that the cost of construction was Rs.2,55,000/-. As per the assessee this valuation report was obtained by the purchaser for raising a loan. Even if we accept the contention of the assessee that there was indeed a building in the plot, it is a fact that the balance sheet of the assessee did not reflect the cost of the building. On the other hand, it is an admitted position, that the HUF of which the assessee is the Karta had filed its return showing the cost of the shed in its balance sheet. The said HUF was also assessed to tax. When all these are seen together, in our opinion, it is clear that the building was owned by the HUF, whereas the land was owned by the assessee. In such a situation, for computing the capital gains the assessee could not have deducted the cost of construction, since the construction did not belong to the assessee. Nevertheless, we find that the ld., CIT(A) in all fairness, had directed the AO to give the benefit of the cost of shed, as shown by the HUF in its balance sheet, while computing the capital gains of the assesee. As already mentioned by us, we cannot accept the pleading of the assessee that the building belonged to him, but not to HUF. In the circumstances, we do not find any reason to interfere with the order of the ld.CIT(A) hence, ground no.3 & 3.1 of the assessee stands dismissed.” (underlining supplied) 3. We find no error in the above reasoning of the Tribunal to warrant interference. No substantial question of law arises for determination in this appeal. The appeal is accordingly dismissed. Appeal dismissed. Sd/- JUDGE Sd/- JUDGE hkh. "