2017 (12) TMI 134 - HC - Income Tax

Adopting the cost of acquisition of flat on the basis of gift deed - Held that - There is nothing on record to doubt the correctness of the report or its contents. The Tribunal has found that in absence of any evidence to doubt the correctness of the approved valuer s report the same should have been accepted by the department. Once, the Act had given the option to the assessee and the assessee had acted in accordance thereof and exercised her option to rely on the fair market value of the assets as on 1.4.1981 which she duly supported with evidence, it was not open to the Assessing Officer to take a different view. Further, the fact that in the gift deed value of the asset was mentioned at ₹ 10,00,000/- is of no consequence. That valuation is irrelevant and extraneous to the issue involved Section 55 (2) (b) (ii) does not require such value to be considered or even be relevant. In any case that value was relevant only for purpose of determination of stamp duty payable on the gift deed and not to determine capital gains. The finding of the Tribunal does not suffer from any infirmity. - Decided in favour of the assessee and against the revenue. Allowance of expenditure incurred in the business of share trading - Held that - Expenditure incurred in trading shares; cost of improvement of the flat and; legal expenses incurred were claimed by the assessee on the basis of evidence found existing on record. The Tribunal has considered the same and thereafter allowed the claim of expenditure incurred in the business of share trading as also cost of improvement of the flat and litigation expenditure. The findings recorded by the Tribunal have not been shown to be perverse or based on no evidence. Being pure findings of fact recorded on the basis of evidence existing on record, the same do not warrant any interference merely because a different conclusion was also possible to be drawn. Questions of law A, C and D as raised are therefore answered accordingly i.e. the same are on questions of fact and therefore do not warrant any interference in this appeal.

Summary

Issues:
1. Valuation of flat for computation of capital gains.
2. Allowance of cost of improvement for the flat.
3. Allowance of legal expenses incurred.
4. Allowance of expenditure incurred in trading shares.

Issue 1 - Valuation of flat for computation of capital gains:
The judgment revolves around the valuation of a flat in Mumbai for the computation of capital gains. The assessee claimed the cost of acquisition of the flat as &8377; 1,05,02,677 based on a valuation report prepared by an approved valuer. The Assessing Officer disbelieved the report due to lack of supporting evidence. The CIT (Appeals) allowed the appeal, and the Tribunal affirmed the decision. The Tribunal held that the approved valuer's report should have been accepted by the department as there was no evidence to doubt its correctness. The judgment emphasized that the assessee had the right to choose the fair market value of the asset as on 1.4.1981, supported by evidence, and the Assessing Officer could not take a different view. The judgment concluded that the valuation mentioned in the gift deed was irrelevant for determining capital gains, and the Tribunal's decision was upheld.

Issue 2 - Allowance of cost of improvement for the flat:
The assessee claimed to have incurred a cost of improvement of &8377; 15,80,464 for the flat, which was initially disallowed by the Assessing Officer and the CIT (Appeals). However, the Tribunal allowed the claim based on existing evidence. The judgment highlighted that the Tribunal's decision was based on factual findings supported by evidence on record. It concluded that since the findings were not shown to be perverse or unsupported, there was no basis for interference. Therefore, the claim for the cost of improvement was upheld.

Issue 3 - Allowance of legal expenses incurred:
The assessee claimed to have incurred legal expenses of &8377; 13,00,000 related to a civil litigation involving the flat. The Assessing Officer disallowed the expenses entirely, but the CIT (Appeals) allowed 50% of the claim. Upon appeal, the Tribunal allowed the entire amount of legal expenses. The judgment noted that the Tribunal's decision was based on the evidence presented and factual findings. It emphasized that the Tribunal's findings were not perverse and did not lack evidence, leading to the dismissal of the appeal against the allowance of legal expenses.

Issue 4 - Allowance of expenditure incurred in trading shares:
The assessee claimed an expenditure of &8377; 4,52,530 related to trading in shares, which was initially disallowed by the Assessing Officer. The CIT (Appeals) allowed 50% of the claim, and upon further appeal, the Tribunal allowed the entire expenditure. The judgment highlighted that the Tribunal's decision was based on existing evidence and factual findings. It concluded that since the findings were not baseless or unsupported, there was no ground for interference. Therefore, the appeal against the allowance of expenditure in trading shares was dismissed.