2017 (9) TMI 109 - AT - Income Tax

Cost of acquisition of the assets - acquisition of assets registered in the name of the assessee and his wife - entitlement to indexation benefit - Held that - The property was booked in the name of the assessee jointly with her wife in the FY 2008-09 and the substantively amount of the cost of property were also paid to vendors. Annual property has got registered in the FY 2003-04 effect to the issue for giving indexation benefit to the assessee because the substantial value of the property had already been paid at the time of booking of the capital assets. The Tri-party Agreement was also made with the ICICI bank at the time of sanctioning of the loans for the purchase/construction of the plot and the loan amount was directly paid to the vendors. In totality of the facts and circumstances of the case and considering the order of the lower authorities and submissions of the assessee, the assessee is entitled for the indexation benefit from the FY 1999-2000 and onwards in respect of interest paid to the banks in respect of his share in the property. Therefore, this ground is allowed in favour of the assessee. Addition on the car running expenses restricted to 10% During the scrutiny proceedings - Held that - the AO asked for the log book but the assessee submitted that no log book has been maintained. Therefore, the estimation made by the AO and restriction made upto 10% by the Ld.CIT(A) is justifiable. Once the AO or appellate authority raised certain queries and the assessee failed to properly respond the same, the authorities below were quite justified to disallow the expenditure, keeping in view the nature & size of assessee s business and other attending facts & circumstances of the case. - Decided partly in favour of assessee.

Summary

Issues involved:
1. Validity of the order passed by Ld. CIT (A)
2. Partial addition of interest paid on borrowed fund for property sale
3. Enhancement of long term capital gain with indexation benefit
4. Partial addition on adhoc basis for car running and entertainment expenses

Detailed analysis:
1. The appeal challenged the order of Ld. CIT (A) for being bad in law. The Tribunal noted that Ground No.1 was general and did not require adjudication. The subsequent grounds involved adhoc additions by the Assessing Officer on interest paid for property sale, enhancement of long term capital gain with indexation benefit, and partial addition for car running expenses. The AO made adhoc addition on car running expenses, which was later restricted to 10% by the Ld.CIT(A).

2. The case involved scrutiny under CASS for the assessment year 2009-10. The AO disallowed indexed interest paid on loans for property purchase, leading to additional long term capital gain. The AO also disallowed a portion of claimed car running expenses. The Ld.CIT(A) directed re-computation of capital gains with indexation benefit from the year the property was registered, not from the claimed year of acquisition.

3. The Ld.CIT(A) partially allowed the appeal, reducing the adhoc addition for car running expenses to 10%. The assessee then appealed to the ITAT, arguing for indexation benefit on interest paid for property acquisition. The ITAT considered the tri-party agreement, loan utilization, and registration details to allow indexation benefit from the year the property was registered.

4. The ITAT upheld the indexation benefit for interest paid on loans for property purchase but rejected the appeal regarding car running expenses. The Tribunal reasoned that failure to maintain a log book justified the AO's estimation and the Ld.CIT(A)'s restriction to 10% addition. The appeal was partly allowed, with the decision pronounced on 22nd August, 2017.