2015 (5) TMI 1061 - AT - Income Tax

Disallowance of indexed cost of improvement - Held that - The Assessing Officer, after examining the bills and vouchers and other documents, came to a conclusion that the claim could not be accepted. The fact remains that the bills and vouchers were produced before the CIT(Appeals) and the same were sent to the Assessing Officer. The assessee s claim was only a sum of ₹ 3,07,946/- as cost of improvement. Improvement can be made even to the farm land. It is not necessary that the improvements should be made only to the building. Suppose, the vacant land is low lying and it requires fencing, the assessee has to necessarily incur expenditure to keep the land to a marketable condition. Under normal circumstances, this Tribunal would have remitted back the matter to the file of the Assessing Officer for verification. Since what was claimed was only ₹ 3,07,946/-, this Tribunal is of the considered opinion that it may not be necessary to remit back the matter in view of the smallness of the amount claimed by the assessee. Accordingly, this Tribunal is of the considered opinion that the assessee would have spent ₹ 3,07,946/- as per the letter filed before the lower authorities with regard to improvements. Therefore, there is no justification in disallowing the claim of the assessee. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the claim of the assessee towards cost of improvements to the extent of ₹ 3,07,946/-. Computation of capital gain - whether the sale consideration disclosed in the sale deed has to be taken or the value adopted by the Sub- Registrar for registering the document has to be taken - Held that - This Tribunal is of the considered opinion that for the purpose of granting deduction under Section 54F of the Act, the value disclosed in the sale deed has to be adopted rather than the value determined by the Sub-Registrar on the basis of guideline value. Actual sale consideration as reflected in the sale deed has to be adopted in the absence of any other material to indicate that the assessee has received any on-money over and above the amount disclosed in the sale deed. In this case, it is nobody s case that the assessee received on-money over and above the sale consideration disclosed in the sale deed. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has to adopt the actual sale consideration of ₹ 90 lakhs for the purpose of considering the claim of exemption under Section 54F of the Act. The orders of the lower authorities are set aside and the Assessing Officer is directed to adopt the actual sale consideration for the purpose of considering exemption under Section 54F of the Act.

Summary

Issues:
1. Disallowance of indexed cost of improvement.
2. Computation of capital gain.
3. Levy of interest under Section 234B and 234C.

Issue 1: Disallowance of indexed cost of improvement
The appellant's appeal was against the Commissioner of Income Tax (Appeals)-16's order regarding the disallowance of the indexed cost of improvement amounting to Rs. 3,07,946 for the assessment year 2010-11. The appellant sold an immovable property and claimed indexed cost of acquisition and cost of improvement. The Assessing Officer disallowed the claimed improvement cost as the appellant failed to provide evidence. The appellant argued that evidence was produced, including a letter from the person who made the improvements. The Tribunal noted that the bills and vouchers were submitted to the CIT(Appeals) and then to the Assessing Officer. It was observed that improvements could be made to farm land, not just buildings. The Tribunal held that the appellant likely spent Rs. 3,07,946 on improvements based on the evidence provided, overturning the lower authorities' decision.

Issue 2: Computation of capital gain
The next issue was the computation of capital gain. The appellant sold the property for Rs. 90 lakhs, but the Assessing Officer considered Rs. 1,06,17,750 as per Section 50C of the Act, leading to excess capital gain calculation. The appellant argued that for exemption under Section 54F, the sale consideration in the deed should be used, not Section 50C. The Departmental Representative supported the Assessing Officer's decision. The Tribunal determined that the actual sale consideration in the deed should be used for exemption purposes unless there was evidence of additional undisclosed money. Therefore, the Assessing Officer was directed to consider the actual sale consideration of Rs. 90 lakhs for the exemption under Section 54F.

Issue 3: Levy of interest under Section 234B and 234C
Regarding the levy of interest under Sections 234B and 234C, it was noted that such levy is mandatory and consequential. The Assessing Officer was instructed to re-compute the interest under these sections while implementing the Tribunal's order. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 29th May 2015 in Chennai.