2017 (9) TMI 845 - AT - Income Tax

Capital gain computation - fair market value issue as on 01.04.1981 qua the impugned capital asset sold in the relevant previous year - Held that - There is hardly any quarrel that both the lower authorities have made it clear in their respective orders that the very issue had arisen in preceding assessment years (supra). Mr. Soparkar at this stage refers to this tribunal s order in assessment year 2008-09 and 2009-10 pertaining to assessee s appeal itself has decided on 11.04.2016 adopting the said cost of acquisition as on 01.04.1981 has to be ₹ 980/- per sq.mtr. Both parties fail to indicate any distinguishing facts in the impugned assessment year. We therefore direct the Assessing Officer to adopt cost of acquisition on assessee s capital asset as on 01.04.1981 @ ₹ 980/- per sq.mtr. to be followed by re-computation of capital gains. The assessee partly succeeds in its grievance whereas Revenue s corresponding substantive ground is declined. Disallowing refund money paid back to its vendee within two days from both sale deed and MOU as expenditure u/s.48 (i) &(ii) - Held that - It emerges from assessee s registered agreement to sale dated 28.07.2008 at page 102 containing clause 9 that the vendee had agreed to purchase the land in the same zone i.e. industrial than commercial on as it is basis. The said vendee further undertook to bear all liabilities/responsibilities of costs and expenses etc. for the purpose getting approval relating to abovestated conversion. Page 106 reveals that the assessee had already received advance payment of ₹ 19,15,38,000/- by the date of agreement to sale forming more than half of the total sale price. It admittedly executed conveyance deed thereafter on 02.04.2009 without even an iota of mention therein about its MOU of the same date wherein it agreed to pay the amount in question of ₹ 2,33,98,605/- in the nature of retention money in case revised permission of conversion of the asset in question from industrial to commercial did not come within 180 days. We therefore see no merit in its contention raised that it had to part with the impugned sum as an obligation in the nature of retention money. Assessee has not been able to prove that the impugned expenditure to be falling under Section 48 (i) & (ii) of the Act for the purpose of computing consequential capital gains. Correctness of Section 14A disallowance followed by consequential addition in book profits u/s.115JB - Held that - CIT(A) deletes the impugned disallowance on the ground that the assessee has not derived any exempt income in the impugned assessment year. He follows hon ble jurisdictional high court s decision in CIT vs. Corrtech Energy Pvt. Ltd. s case 2014 (3) TMI 856 - GUJARAT HIGH COURT . The same factual position continues herein as well wherein the Revenue fails to quote any judicial precedent overruling the above legal proposition. We therefore see no reason to interfere in CIT(A) s conclusion deleting the impugned addition. The Revenue s fourth substantive ground is therefore declined whereas assessee s substantive ground is dismissed as rendered infructuous being consequential in nature. Expenditure on various heads like barricading of main gate side with material and labour work, scooter parking shed opposite main gate, waterproofing of civil work of boiler house - Held that - Uphold the CIT(A) s order treating the impugned repair expense as revenue in nature

Issues Involved:
1. Disallowance of ?1,20,097/- @ 5% of total expenditure.
2. Adoption of fair market value (FMV) of capital asset as on 01.04.1981.
3. Disallowance of refund money of ?2,33,98,605/- paid back to the vendee.
4. Disallowance of salary and wages pertaining to employees of Packart Press Unit.
5. Section 14A disallowance of ?49,03,488/- added for computing book profits.
6. Allowance of expenditure of ?4,91,318/- as revenue in nature.

Detailed Analysis:

1. Disallowance of ?1,20,097/- @ 5% of Total Expenditure:
The assessee initially contested the disallowance of ?1,20,097/- @ 5% of total expenditure. However, it later withdrew this ground. The Revenue also raised a corresponding ground seeking to revive the entire disallowance sum of ?8,04,813/- including telephone and vehicle expenses of ?6,84,716/-. The CIT(A) had followed the precedent set in the assessment year 1998-99, restricting the disallowance to 5%. The Tribunal upheld the CIT(A)’s order, and both parties failed in their first substantive ground.

2. Adoption of Fair Market Value (FMV) of Capital Asset as on 01.04.1981:
The assessee and Revenue disputed the FMV of the capital asset sold. The CIT(A) had enhanced the cost of acquisition from ?250/- per sq.mtr. to ?550/- per sq.mtr. The Tribunal noted that in previous assessment years, the FMV had been adopted at ?980/- per sq.mtr. The Tribunal directed the Assessing Officer to adopt the cost of acquisition at ?980/- per sq.mtr. for re-computation of capital gains, thereby partly allowing the assessee’s grievance and declining the Revenue’s corresponding ground.

3. Disallowance of Refund Money of ?2,33,98,605/- Paid Back to the Vendee:
The assessee claimed the refund money paid back to the vendee as expenditure under Section 48 of the Act. The Assessing Officer and CIT(A) disallowed this claim, noting that the sale consideration was ?33,53,80,000/- as per the registered sale deed, and no such conversion obligation was on the assessee. The Tribunal upheld the CIT(A)’s findings, stating that the assessee’s claim did not inspire confidence and was not in tune with the registered documents. The Tribunal found no merit in the assessee’s contention and upheld the disallowance.

4. Disallowance of Salary and Wages Pertaining to Employees of Packart Press Unit:
The assessee contested the disallowance of salary and wages amounting to ?28,78,876/-. The Tribunal referred to a co-ordinate bench order in the preceding assessment year, which had set aside the issue back to the Assessing Officer. Following the same course of action, the Tribunal remitted the issue back to the Assessing Officer for a fresh decision, treating this ground as accepted for statistical purposes.

5. Section 14A Disallowance of ?49,03,488/- Added for Computing Book Profits:
The CIT(A) deleted the Section 14A disallowance on the ground that the assessee had not derived any exempt income in the impugned assessment year, following the jurisdictional High Court’s decision in CIT vs. Corrtech Energy Pvt. Ltd. The Tribunal saw no reason to interfere with the CIT(A)’s conclusion, thereby declining the Revenue’s ground and dismissing the assessee’s corresponding ground as infructuous.

6. Allowance of Expenditure of ?4,91,318/- as Revenue in Nature:
The Revenue contested the CIT(A)’s order allowing expenditure of ?4,91,318/- as revenue in nature. The Tribunal noted that the assessee had incurred the expenditure on various heads like barricading, scooter parking shed, and waterproofing. The Revenue failed to indicate that these repairs created new assets. Following the jurisdictional High Court’s decision in Manoj B. Mansukhani’s case, the Tribunal upheld the CIT(A)’s order treating the expenditure as revenue in nature.

Conclusion:
The assessee’s appeal was partly accepted, and the Revenue’s appeal was dismissed. The Tribunal’s decision was pronounced on 13th September 2017.

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