2012 (12) TMI 286 - AT - Income Tax

Capital receipt - compensation - surrender of tenancy rights - matrimonial disputes between the assessee and her husband - pursuant to the agreement arrived at between the parties hereto and in consideration of the Landlord agreeing to the Tenant an amount of Rs. 1,40,00,000/- (Rupees One Crore Forty Lacs only) by way of compensation in lieu of permanent alternate accommodation to be provided by the Landlord in the proposed new building to be constructed on the said property, the Tenant hereby surrenders and relinquishes free from all encumbrances, all her right, title, interest and claim into or upon the said property - consideration received by the assessee against surrender of tenancy right is assessable as capital gain In favor of revenue Addition in the capital gain Held that - Assessee has estimated the cost of acquisition of the tenancy right at Rs.10 lacs which was rejected by the Assessing Officer as the Assessing Officer adopted cost of tenancy right at nil - claim of the assessee of adopting cost of acquisition of asset as on 1.4.81 at Rs.10 lacs is not allowable - In favor of revenue Disallowance on account of expenses incurred for conducting the activity of nursery school - Assessing Officer disallowed 25% of the expenditure for want of evidence to prove the same Held that - Assessee failed to produce any evidence to prove the claim of expenses disallowance upheld

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Taxability of the amount received by the assessee.
3. Addition to capital gains.
4. Disallowance of expenses for conducting nursery school.
5. Levy of interest under sections 234B and 234C.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed the appeal 37 days late, citing reasons such as being out of the country and the hospitalization of the assessee's mother. After considering the affidavit and hearing both parties, the Tribunal condoned the delay, finding the reasons satisfactory.

2. Taxability of the Amount Received by the Assessee:
The assessee argued that Rs. 1,40,00,000 received was a capital receipt and not taxable. The Tribunal admitted additional evidence, including High Court orders and consent terms, to understand the dispute and the terms of the settlement. The Tribunal found that the amount was received as compensation for surrendering tenancy rights, which were considered a capital asset under section 55(2)(a) of the Income Tax Act. The Tribunal held that the consideration received for surrendering tenancy rights is assessable as capital gain, rejecting the assessee's plea.

3. Addition to Capital Gains:
The assessee estimated the cost of acquisition of tenancy rights at Rs. 10 lakhs, which the Assessing Officer rejected, adopting a nil cost. The Tribunal upheld the Assessing Officer's decision, dismissing the assessee's claim.

4. Disallowance of Expenses for Conducting Nursery School:
The assessee claimed expenses of Rs. 4,07,846 for running a nursery school, of which 25% (Rs. 1,01,962) was disallowed by the Assessing Officer due to lack of evidence. The Commissioner of Income Tax (Appeals) confirmed this disallowance, as the assessee failed to provide supporting evidence. The Tribunal found no reason to interfere with this finding and dismissed the ground.

5. Levy of Interest Under Sections 234B and 234C:
The levy of interest under sections 234B and 234C was deemed consequential, and no specific finding was required.

Conclusion:
The appeal filed by the assessee was dismissed, with the Tribunal upholding the decisions of the lower authorities on all grounds.