9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (9) TMI 759 - AT - Income TaxDisallowance while working out the capital gains - disallowance of brokerage expenses - HELD THAT - Hon'ble Allahabad High Court in the case of EMC (Works) Pvt. Ltd vs. ITO 1963 (4) TMI 79 - ALLAHABAD HIGH COURT wherein it has been held that where application is made by the assessee requesting the AO to issue notice u/s 131 and application was rejected by the AO summarily and assessment completed, action of the AO was held to be without jurisdiction. Reliance is also placed on the decision in the case of Munnalal Murlidhar 1970 (7) TMI 11 - ALLAHABAD HIGH COURT wherein it was held that the failure on the part of the AO to call for and examine the evidence which is offered by the assessee materially prejudices the assessee and it is denial to the assessee of opportunity to produce evidence in support of its case. As per our considered view when the assessee has duly filed confirmations from all the brokers to whom commission has been paid and they are also assessed to tax, adverse inference cannot be drawn against the assessee if the brokers to whom the brokerage amount has already been paid and the assessee even had no moral pressure. There is no justification for the disallowance on account of brokerage paid by the assessee. We direct the A.O. to delete the disallowance of brokerage - appeal of the assessee is allowed. Interest paid on money borrowed for purchase of asset - HELD THAT - The A.P High Court in case of Addl. CIT Vs. K.S. Gupta 1976 (8) TMI 9 - ANDHRA PRADESH HIGH COURT has following judgement of Delhi High Court in CIT Vs. Mithilesh Kumari 1973 (2) TMI 11 - DELHI HIGH COURT held that interest paid on amount borrowed for purchase of open plot of land forms part of cost of acquisition - the assessee has correctly claimed the interest paid on borrowings for purchase of plot as cost of improvements. The action of the A.O. and Ld. CIT(A) is contrary to law and thus cannot be sustained. Thus, the addition is grossly wrong and bad in law and accordingly deleted. Capital gain computation - brokerage payment disallowance - HELD THAT - Since, the assessee has duly filed confirmations from all the brokers to whom commission has been paid and they are also assessed to tax, adverse inference cannot be drawn against the assessee if the brokers to whom the brokerage amount has already been paid and the assessee even had no moral pressure. Accordingly, we direct the A.O. to delete the disallowance of brokerage - Decided in favour of assessee.
Issues Involved:
1. Disallowance of ?5,17,339/- as indexed cost of improvement. 2. Disallowance of brokerage expenses of ?10.50 lacs. Issue-wise Detailed Analysis: 1. Disallowance of ?5,17,339/- as Indexed Cost of Improvement: The assessee filed a return of income declaring long-term capital gains on the sale of agricultural land after claiming an indexed cost of improvement of ?5,17,339/-. The Assessing Officer (AO) disallowed this amount, leading to an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the AO's decision. The Tribunal examined the case and found that the assessee had borrowed funds for the purchase of agricultural land and had capitalized the interest on these borrowed funds as part of the cost of the land. The assessee provided ledger accounts showing the capitalization of interest from 1-4-2008 to 31-3-2013. The Tribunal noted that interest paid on money borrowed for the purchase of an asset is part of the cost of improvement, citing judicial precedents from various High Courts, including the A.P High Court in Addl. CIT Vs. K.S. Gupta, Delhi High Court in CIT Vs. Mithilesh Kumari, Madras High Court in CIT Vs. K. Raja Gopala Rao, and Karnataka High Court in CIT Vs. Maithreys Pal. The Tribunal concluded that the assessee correctly claimed the interest paid on borrowings for the purchase of the plot as the cost of improvements. The disallowance by the AO and CIT(A) was deemed contrary to law and was deleted. The AO was directed to delete the addition of ?5,17,339/-. 2. Disallowance of Brokerage Expenses of ?10.50 Lacs: The assessee claimed brokerage expenses of ?10,50,000/- paid to four brokers as transfer expenses in the computation of long-term capital gain. The AO disallowed these expenses, leading to an appeal before the CIT(A), who upheld the AO's decision. The Tribunal reviewed the case and found that the assessee had paid brokerage by account payee cheques and had filed confirmation letters from the brokers, including their complete addresses and IT PANs. The AO had asked the assessee to produce the brokers and submit their ITRs and bank statements. The assessee requested the AO to issue notices under Section 131 to enforce the brokers' attendance, as the assessee had no legal power to compel their appearance. The Tribunal referenced judicial precedents, including the Allahabad High Court in EMC (Works) Pvt. Ltd vs. ITO and Munnalal Murlidhar, which emphasized the AO's duty to call for and examine evidence offered by the assessee. The Tribunal held that the AO's failure to issue summons under Section 131 materially prejudiced the assessee and was a denial of the opportunity to produce evidence. Given that the assessee had filed confirmations from the brokers, who were also assessed to tax, the Tribunal found no justification for the disallowance of brokerage expenses. The AO was directed to delete the disallowance of ?10.50 lacs. Conclusion: The Tribunal allowed both appeals, directing the AO to delete the disallowances of ?5,17,339/- as indexed cost of improvement and ?10.50 lacs as brokerage expenses. The order was pronounced in the open court on 14th September 2020.
|
