2010 (9) TMI 1253 - AT - Income Tax

Summary

Issues Involved:
1. Indexation Benefit on NCPA Flat
2. Capitalization of Brokerage
3. Disallowance of Interest Expense
4. Calculation of Book Profit u/s 115JB
5. Levy of Interest u/s 234A, 234B, and 234C

Summary:

1. Indexation Benefit on NCPA Flat:
The assessee contended that the indexation benefit should be calculated from the date of the agreement for the purchase of the NCPA flat, not from the dates of actual payments. The AO and CIT(A) disagreed, stating that indexation should be based on actual payments. The Tribunal, referencing various case laws, ruled in favor of the assessee, stating that the indexation benefit should be given from the date of the agreement. The order of the CIT(A) was set aside, and the ground raised by the assessee was allowed.

2. Capitalization of Brokerage:
The assessee claimed brokerage of Rs. 1,31,000/- paid to Rupal Estate should be capitalized. The AO disallowed this, noting the receipt did not mention the assessee or the NCPA flat. The CIT(A) upheld this decision. The Tribunal agreed with the lower authorities, stating that without evidence linking the brokerage to the purchase of the flat, it could not be included in the cost of the asset. The ground raised by the assessee was dismissed.

3. Disallowance of Interest Expense:
The CIT(A) confirmed the disallowance of interest expense amounting to Rs. 8,09,700/-. Both parties agreed that a similar issue had been restored to the CIT(A) for fresh adjudication in the assessee's own case for the assessment year 2005-06. The Tribunal restored this ground to the CIT(A) for fresh adjudication, following the direction of the Tribunal in the assessee's own case and other group concerns. This ground was allowed for statistical purposes.

4. Calculation of Book Profit u/s 115JB:
The assessee argued that the calculation of book profit u/s 115JB amounting to Rs. 3,71,17,948/- was consequential to the disallowance of interest expense. The Tribunal restored this ground to the CIT(A) for fresh adjudication, in line with the decision on the interest expense.

5. Levy of Interest u/s 234A, 234B, and 234C:
The CIT(A) upheld the levy of interest u/s 234A, 234B, and 234C, stating it was mandatory and consequential. The assessee argued, referencing the Tribunal's decision in Orion Travels P. Ltd., that interest should not be levied on a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. The Tribunal agreed, directing the AO to delete the interest levied under these sections. This ground was allowed.

Conclusion:
The appeal filed by the assessee was partly allowed, with the Tribunal ruling in favor of the assessee on the issues of indexation benefit and levy of interest, while dismissing the claims related to brokerage capitalization and restoring the issues of interest expense and book profit calculation for fresh adjudication.