2014 (1) TMI 80 - AT - Income Tax

Cost of acquisition - succession or inheritance - cost of improvement - Held that - Following Salay Mohamad Ibrahim Sait v. ITO 1994 (5) TMI 18 - KERALA High Court - The capital asset had become the property of the assessee by succession or inheritance on the death of the previous owner under section 49(1) of the Act and the cost of acquisition of the asset is to be deemed to be the cost for which the previous owner acquired it, as increased by the cost of any improvement of the assets incurred or borne either by the previous owner or by the assessee - Having regard to the definition of the expression cost of improvement contained in section 55(1)(b) of the Act - In order to claim cost of acquisition - The expenditure should have been incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner and if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset that was originally purchased by the previous owner - Decided against assessee. Applicability of section 50C - Held that - Following Smt. Farida Alladin V/s. Asst. CIT 2014 (1) TMI 101 - ITAT HYDERABAD - The claim of the assessee that land has been sold by the an agreement of sale in the earlier years has not been substantiated by evidence - The only material is available with the assessee is that the preamble of the document, which states that the agreement has been entered into at a prior date and this by itself cannot be sufficient to conclude that the agreement has been honoured by the assessee and acted upon prior to the enactment of section 50C - Decided against assessee.

Summary

Issues Involved:
1. Delay in filing the appeal and condonation of delay.
2. Allowability of deductions for expenditure incurred for perfecting title and taking possession of the property as cost of acquisition.
3. Consideration paid to confirming party as part of cost of acquisition.
4. Applicability of Section 50C of the Income Tax Act.

Analysis:

1. Delay in filing the appeal and condonation of delay:
The appeal was filed with a delay of 5 days, attributed to the misplacement of appeal papers by the assessee residing abroad. The Tribunal, considering the reason cited and the marginal delay, condoned the delay and proceeded to hear the appeal on merits.

2. Allowability of deductions for expenditure incurred for perfecting title and taking possession of the property as cost of acquisition:
The Tribunal examined the issue of deductions for such expenditures in computing long-term capital gains. Referring to a previous Tribunal decision, it was held that the cost of acquisition for the property, in this case, could not include expenses incurred for perfecting title or taking possession of the property. The Tribunal upheld the order of the CIT(A) and dismissed the grounds of the assessee related to these deductions.

3. Consideration paid to confirming party as part of cost of acquisition:
Similarly, the Tribunal addressed the consideration paid to the confirming party as part of the cost of acquisition. Citing relevant legal precedents, the Tribunal concluded that such payments could not be considered as part of the cost of acquisition. Consequently, the Tribunal upheld the order of the CIT(A) on this issue and rejected the grounds of the assessee.

4. Applicability of Section 50C of the Income Tax Act:
The Tribunal also analyzed the applicability of Section 50C of the Income Tax Act in the case. Referring to a previous decision, it was established that the argument presented by the assessee regarding the sale of land in earlier years was not substantiated with evidence. Therefore, the Tribunal upheld the CIT(A)'s decision on this issue, in line with the precedent set in the earlier case. As a result, the Tribunal dismissed the appeal of the assessee.

In conclusion, the Tribunal dismissed the appeal of the assessee after thorough consideration of the issues related to delay in filing, deductions for property-related expenditures, consideration paid to confirming parties, and the applicability of Section 50C of the Income Tax Act. The Tribunal's decision was based on legal interpretations, precedents, and the specific circumstances of the case, leading to the rejection of the grounds raised by the assessee.