9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (2) TMI 998 - AT - Income TaxScope of Rectification of application - while computing capital gains deduction may be given for cost of acquisition the tenancy rights by adopting fair market value of tenancy right as on 01/04/1981 - entitlement to deduct index cost of acquisition of tenancy rights - Held that - CIT(A) has rightly pointed out that the A.O has not given correct appeal effect to the order of the ITAT. The Ld. CIT(A) has further pointed out that the A.O has been committing legal mistake again and again by applying the provisions of section 55(2)(a)(ii) instead of the provisions of section 55(2)(a)(i) of the Act because appellant firm had purchased the cloth business along with the tenancy rights vide deed of assignment dated 21/11/1950 for ₹ 9,500/- This amount of ₹ 9,500/- paid for acquiring ongoing concern also included amount paid by the appellate firm for acquiring the tenancy rights. We also agree with the Ld. CIT(A) that the A.O has not given correct effect to the order of the Tribunal. It is apparent form the deed of assignment that a sum of ₹ 9,500/- was paid by the appellant firm in 1950 towards the acquisition of business including tenancy rights. We further noticed that copies of Agreement dated 19/09/1950, Letter dated 21/11/1950 indicting therein transfer of business along with benefit of tenancy right, Power of Attorney dated 21/11/1950 given by Assignor, Mr. Dhansing Netram referring to Deed of Assignment dated 21/11/1950 to carry on correspondence with Landlord, etc., Letter dated 17/10/1950 addressed to Bombay Samachar and Government Gazzette for Public Notice, Public notice dated 19/09/1950, Suit filed by landlord for eviction of the premises and Consent terms and order of the small causes court in regard to surrender of premises by the appellant firm etc. were made available by the assessee to the AO during assessment proceedings. On the basis of the said documents the AO could have safely concluded that the assessee firm had paid ₹ 9,500/- in 1950 towards acquisition of business including tenancy rights. Hence, in our considered view the AO has wrongly treated the cost of acquisition of tenancy as NIL. CIT(A) has rightly directed the A.O. to work out capital gain on surrender of tenancy rights after taking into account the cost of acquisition of tenancy right as worked out by the registered approved valuer and allow the benefit of indexation of the cost of acquisition as per the provisions of section 48 of the Act.
Issues:
1. Correct computation of capital gains on surrender of tenancy rights. 2. Whether the assessee is entitled to deduct index cost of acquisition of tenancy rights. 3. Interpretation of provisions of section 55(2)(a)(i) and section 55(2)(a)(ii) of the Income Tax Act, 1961. Issue 1: Correct computation of capital gains on surrender of tenancy rights The appeal was filed by the revenue against the order passed by the CIT(Appeals)-2, Mumbai, for the assessment year 1996-97. The appellant firm, engaged in running a nursing home, had declared total income of ?2,23,012. The Assessing Officer (AO) determined the total income at ?74,07,590, including long-term capital gain on the transfer of tenancy rights. The CIT(A) confirmed the assessment order, leading the assessee to file a second appeal before the ITAT. The ITAT remitted the issue of the cost of acquisition of tenancy rights and indexation benefit back to the AO. The AO rejected the claim for considering ?3,80,000 as the cost of acquisition. The CIT(A) upheld the assessment order, prompting the assessee to file a rectification application. The CIT(A) advised the assessee to file a rectification application before the AO. The AO passed a rectification order without changing the income determined under section 143(3) of the Act. The Ld. CIT(A) allowed the appeal of the assessee, holding that the assessee is entitled to deduct the index cost of acquisition of tenancy rights. Issue 2: Entitlement to deduct index cost of acquisition of tenancy rights The department appealed before the Tribunal, challenging the Ld. CIT(A)'s order on the grounds that the AO should not have considered the acquisition right as NIL and should not have been directed to work out capital gain on the surrender of tenancy rights after considering the cost of acquisition. The Ld. DR argued that the Ld. CIT(A) erred in his decision. However, the Ld. Counsel for the assessee contended that the Ld. CIT(A)'s order was in accordance with the ITAT Mumbai's direction in a previous case. The Tribunal examined the facts, noting that the AO had not correctly applied the order of the ITAT. The Tribunal agreed with the Ld. CIT(A) that the AO had made a legal mistake by treating the cost of acquisition of tenancy as NIL. The Tribunal found that the assessee had provided sufficient evidence to demonstrate the cost of acquisition of tenancy rights, and the AO should have given a proper deduction from the capital gain. Issue 3: Interpretation of provisions of section 55(2)(a)(i) and section 55(2)(a)(ii) The Tribunal referred to a similar case where the issue was whether indexation on the cost of acquisition of tenancy rights should be allowed. The Tribunal considered the submissions and relevant case law, ultimately dismissing the revenue's appeal and confirming the order of the Ld. CIT(A). The Tribunal upheld the Ld. CIT(A)'s direction to work out capital gain on the surrender of tenancy rights after considering the cost of acquisition and allowing the benefit of indexation. The Tribunal found no legal or factual infirmity in the Ld. CIT(A)'s order and dismissed the appeal filed by the revenue for the assessment year 1996-97. In conclusion, the Tribunal upheld the findings of the Ld. CIT(A) and dismissed the revenue's appeal, emphasizing the correct computation of capital gains on the surrender of tenancy rights and the entitlement of the assessee to deduct the index cost of acquisition of tenancy rights.
|
