9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (6) TMI 1156 - AT - Income TaxCost of improvement eligible for deduction u/s 48(2) - cost of the new asset which is provided to RFC on long term irrevocable lease - Held that - Hon ble Mumbai High Court in the case of CIT Vs. Piroja C. Patel reported in 1999 (3) TMI 38 - BOMBAY High Court held that payment made to hutment dwellers for vacation of property amounted to cost of improvement and accordingly allowable as expenditure within the meaning of section 48 r.w.s. 55 of the I.T. Act, 1961. Thus we are of the considered view that the cost of the new asset which is provided to RFC on long term irrevocable lease against the vacation of assessee s property from its possession has a direct nexus with the property sold during the year and therefore the cost of ₹ 1,01,97,208/- paid by the assessee for the acquisition of new property is the cost of improvement eligible for deduction u/s 48(2) of the Act out of the total sale consideration for the purpose of computing the capital gain. Accordingly the Ground is allowed in favour of assessee.
Issues Involved:
1. Addition to capital gain without basis. 2. Miscomputation of indexed cost of acquisition. 3. Disallowance of construction/expenses claimed under Section 48(1) of the I.T. Act, 1961. 4. Disallowance of car expenses, depreciation on car, and interest paid on car loan. Issue-wise Detailed Analysis: 1. Addition to Capital Gain Without Basis: The assessee challenged the addition of ?49,63,278/- for A.Y. 2006-07 and ?4,76,203/- for A.Y. 2008-09 made by the AO by enhancing the capital gain declared by the assessee. The assessee argued that the AO did not point out any specific defect in the capital gain computation and used imaginary figures for the indexed cost of acquisition. The Tribunal observed that the AO did not provide reasons for disallowing the claimed costs, and the CIT(A) also did not address this issue. Consequently, the Tribunal set aside this issue to the AO for re-examination with necessary evidence and providing the assessee a reasonable opportunity to be heard. Thus, these grounds were allowed for statistical purposes. 2. Miscomputation of Indexed Cost of Acquisition: The assessee contended that the AO miscomputed the capital gain by wrongly calculating the indexed cost of acquisition, not applying the prescribed formula, and considering imaginary figures. The Tribunal noted that the AO did not provide reasons for disallowing the indexed costs claimed by the assessee. The Tribunal directed the AO to re-examine the claim after taking necessary evidence on record and providing the assessee a reasonable opportunity of being heard. Thus, these grounds were allowed for statistical purposes. 3. Disallowance of Construction/Expenses Claimed Under Section 48(1) of the I.T. Act, 1961: The assessee claimed deduction for expenses incurred in getting possession of a property leased to RFC, which was necessary for the development and sale of another property. The AO disallowed ?1,01,97,208/- claimed as expenses, and the CIT(A) upheld the disallowance, stating that the assessee did not part with ownership rights. The Tribunal observed that the expenses had a direct link with the sale of the property and were incurred wholly and exclusively in connection with the transfer. The Tribunal relied on judicial precedents, including CIT vs. Eagle Theatres and CIT vs. Piroja C. Patel, which allowed similar expenses as cost of improvement. Therefore, the Tribunal allowed the deduction of ?1,01,97,208/- as cost of improvement under Section 48(2) of the Act. 4. Disallowance of Car Expenses, Depreciation on Car, and Interest Paid on Car Loan: For A.Y. 2008-09, the assessee claimed that the CIT(A) erred in upholding an addition of ?2,30,671/- on account of disallowance of car expenses, depreciation on car, and interest paid on car loan. The Tribunal noted that this issue was not raised before the CIT(A) during the first appeal. Therefore, the Tribunal found no reason to entertain this ground and dismissed it. Conclusion: The appeals were partly allowed for statistical purposes, with directions to the AO to re-examine certain claims and deductions. The Tribunal allowed the deduction of expenses incurred for getting possession of the property leased to RFC as cost of improvement, while the issue of car expenses and related claims was dismissed for not being raised earlier.
|
