2013 (11) TMI 1775 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of short-term capital gain.
2. Allowance of expenses towards levelling and developing cost.
3. Sharing ratio in the surplus on sale of capital asset.
4. Application of section 50C in property sale.
5. Deletion of addition on account of undisclosed investment.

Summary:

1. Deletion of Addition on Account of Short-Term Capital Gain:

Ground Nos. 1 to 4 relate to the issue as to whether the CIT (A) was justified in deleting the addition made on account of short-term capital gain amounting to Rs. 68,80,076/-. The Assessing Officer treated the land as a capital asset u/s 2(14)(iii) because it fell within the Hyderabad Airport Development Authority (HADA) area. However, the CIT (A) held that the land was agricultural and not a capital asset as per section 2(14)(iii). The ITAT upheld the CIT (A)'s decision, referencing the jurisdictional High Court's ruling that HADA is not a local authority or municipality as defined u/s 2(14)(iii).

2. Allowance of Expenses Towards Levelling and Developing Cost:

The next issue as raised in ground Nos. 5 and 6 relates to the CIT (A) allowing 40% out of the total expenses claimed by the assessee towards levelling and developing cost. The Assessing Officer disallowed the claim, but the CIT (A) allowed 40% of the total cost claimed. The ITAT upheld the CIT (A)'s decision, noting that the department had accepted a similar allowance in the case of the assessee's husband.

3. Sharing Ratio in the Surplus on Sale of Capital Asset:

In ground No.2, the assessee has challenged the order passed by the CIT (A) confirming the Assessing Officer's view with regard to sharing ratio in the surplus on sale of capital asset. The CIT (A) upheld the Assessing Officer's finding that the assessee was a 2/3rd owner and his wife a 1/3rd owner, based on the values shown in their balance sheets. The ITAT dismissed the assessee's appeal, noting that the CIT (A)'s decision in the case of the assessee's wife had attained finality.

4. Application of Section 50C in Property Sale:

The CIT (A) confirmed the Assessing Officer's application of section 50C, which mandates that the value adopted by the Stamp Valuation Authority for stamp duty purposes should be considered for computing capital gains if it exceeds the sale consideration. The ITAT upheld this decision, rejecting the assessee's argument that the sale should be considered as having occurred on the date of an earlier agreement of sale cum GPA, which predated the introduction of section 50C.

5. Deletion of Addition on Account of Undisclosed Investment:

The only issue in the present appeal of the department is with regard to CIT (A) deleting an amount of Rs. 14,20,000/- out of the total addition of Rs. 51,35,000/- made by the Assessing Officer. The Assessing Officer treated the differential amount as undisclosed investment based on a loose sheet found during a search. The CIT (A) restricted the addition to Rs. 14,20,000/-, considering the assessee had already declared additional income of Rs. 37,15,000/- and paid tax on it. The ITAT upheld the CIT (A)'s decision.

Conclusion:

In the result, all the appeals of the department and the assessee were dismissed.