2021 (5) TMI 587 - AT - Income Tax

Rectification of mistake u/s 254 - applicability of provisions of Sec.50 in respect of transaction involving transfer of an immoveable property by the assessee has been dismissed by the bench observing that the assessee could not demonstrate that deprecation was never claimed against the said property since its acquisition - AR submitted that during hearing various evidences were submitted in support of the fact that depreciation was never claimed on immoveable property - HELD THAT - A conclusion was reached that the assessee could not establish that the property was not part of block of asset and depreciation against the same was never claimed in earlier years. The perusal of record would reveal that the assessee had purchased the property on 31/12/2010 and the question of claiming depreciation would arise in AYs 2011-12 onwards. However, except for computation of AY 2013-14, no computation of income for AYs 2011-12 2012-13 was placed on record. Similar was the observation of Ld. CIT(A) in the impugned order. Hence, the observation of the bench in para-4 of the order. Therefore, we do not find any mistake in the order, on this issue. Allowance of property tax and BEST deposit (electricity) - The expenditure was capitalized or not, would not be much germane to decide the deductibility of such expenditure while computing capital gains since the deduction would be available only as per computational mechanism provided in law. These two expenditures could not be said to be part of cost of acquisition or improvement. The issue of deductibility of other expenditure has already been restored back on the facts of the case since the assessee had failed to substantiate the same. No error in the order in terms of Section 254(2). The application stands dismissed.

Summary

Issues:
1. Applicability of provisions of Sec.50 in a transaction involving transfer of an immoveable property.
2. Disallowance of direct expenditure while computing capital gains.

Analysis:

Issue 1: Applicability of Sec.50 in Property Transaction
The assessee sought recall/rectification of the order partly allowing the appeal for statistical purposes. The Ld. AR argued that the bench dismissed Ground No.1 regarding the applicability of Sec.50 due to the failure to demonstrate that depreciation was never claimed on the property. Various evidences were presented during the hearing to support this claim. Additionally, the statement of accounts for the years 2011 to 2014, which were omitted from consideration, were highlighted as crucial. The bench found that the assessee could not prove that the property was not part of the block of assets and depreciation was never claimed in earlier years. The absence of income computations for certain assessment years further supported the bench's decision. The order was deemed not erroneous on this issue.

Issue 2: Disallowance of Direct Expenditure
The Ld. AR contended that the bench failed to consider the capitalization of property tax and BEST deposits against the sale proceeds while adjudicating the disallowance of direct expenditure. However, the bench clarified that these expenditures were not relevant for determining the deductibility of expenses in computing capital gains. The deductibility of other expenses was sent back for further substantiation by the assessee. Ultimately, the bench found no error in the order under Section 254(2) and dismissed the application.

In conclusion, the judgment addressed the issues of Sec.50 applicability and disallowance of direct expenditure in a property transaction. The decision was based on the evidence presented, the bench's analysis of relevant documents, and the legal provisions governing the deductibility of expenses in computing capital gains. The application for recall/rectification was dismissed, and the order was pronounced on 18th May 2021.