2014 (6) TMI 428 - AT - Income Tax

Claim of repairs and maintenance renovation or extension of or improvement to the building - revenue or capital in nature - Held that - There is a confusion in the order of the CIT(A) - the AO has not examined item wise repairs claiming to finally hold that each of them are capital in nature - both the parties mentioned that the issue is required to be adjudicated by the AO once again after granting an opportunity of being heard to the assessee thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Calculation of LTCG Sale of shares u/s 55(2)(ab) of the Act Held that - Following M/s. Parag Parikh Financial Advisory Services Ltd. Versus ITO -4(2) (1), Mumbai 2014 (2) TMI 686 - ITAT MUMBAI - the shares are deemed to be acquired on the date of acquisition of BSE Card and not from the date of their conversion - the cost of acquisition of BSE card shall be the cost of acquisition of BSE shares and the shares are deemed to be acquired on the date of acquisition of BSE card and not from the date of their conversion - the date of holding/acquisition of an asset being equity shares allotted pursuant to demutualization or corporatization of a recognized stock exchange will be the date of acquisition of original BSE card thus, the order of the CIT(A) is set aside Decided in favour of Assessee.

Summary

Issues:
1. Disallowance of repair and maintenance expenses
2. Calculation of long term capital gain on sale of shares

Analysis:

Issue 1: Disallowance of repair and maintenance expenses
The appeals were filed by the assessee and the revenue against the order of the CIT(A) regarding the disallowance of repair and maintenance expenses. The counsel for the assessee argued that the repair and maintenance expenses were wrongly held to be capital in nature by the AO, resulting in an addition to the assessment. The CIT(A) partially allowed the appeal, restricting the disallowance to Rs.15,50,790 and confirming other disallowances. However, there was confusion regarding the specific disallowances confirmed. Both parties agreed that the issue required fresh adjudication by the Assessing Officer, with a detailed analysis of the nature of expenditures. Therefore, the Tribunal remanded the issue back to the AO for a comprehensive review, allowing the grounds for statistical purposes in both appeals.

Issue 2: Calculation of long term capital gain on sale of shares
The counsel for the assessee contended that the CIT(A) erred in confirming the calculation of long term capital gain on the sale of shares of BSE Ltd. The Tribunal referred to a previous decision regarding the acquisition date of shares in a similar case, where it was established that the shares were deemed to be acquired on the date of acquiring the 'BSE Card' and not from the date of conversion. Citing this precedent, the Tribunal decided in favor of the assessee, ordering the deletion of the income enhancement made by the CIT(A) on this account. Consequently, the issues raised by the assessee in ground 2 and 3 were allowed. As a result, the appeals of both the assessee and the revenue were partly allowed for statistical purposes.

This judgment highlights the importance of a detailed analysis of expenses and the correct application of legal provisions in determining capital nature expenditures and the acquisition date of assets for calculating capital gains.