2021 (7) TMI 619 - AT - Income Tax

Capital gain computation - allowability of deduction u/s 48 towards cost of improvement with respect to amount paid by the assessee towards his share towards conversion of aforesaid property from leasehold to freehold - HELD THAT - Order passed in the case of brother of the assessee 2021 (2) TMI 29 - ITAT ALLAHABAD who is also one of the co-owners of the aforesaid property , shall be applicable in the case of the assessee also , as the facts are identical and the same property was sold by brother of the assessee namely Mr. Sanjay Majumdar (share in the property 25%), wherein the assessee was also one of the co-owner of the aforesaid property with 25% share. CIT(A) erred in holding in the case of the assessee that cost of improvement by way of amount paid for conversion of property from leasehold to freehold in the instant case shall not be available to the assessee in ay 2012-13. Thus, we allow the appeal of the assessee to that extent by holding that the assessee will be allowed as cost of improvement of the amount paid towards his share for conversion of aforesaid leasehold land to freehold. Chargeability of interest income on NHAI bonds which assessee claimed that the same was offered for taxation on receipt basis - AO brought to tax said income on accrual basis in the year under consideration - HELD THAT - The assessee has raised this ground specifically before ld. CIT(A) and the learned CIT(A) refers to this issue being raised by the assessee but while adjudicating appeal, the learned CIT(A) did not adjudicate this issue. Thus, keeping in view facts and circumstances of the case and in the interest of justice , this issue is restored to the file of ld. CIT(A) for fresh adjudication on merits in accordance with law. The ld. CIT(A) shall give proper and adequate opportunity of being heard to the assessee while adjudicating this issue. Thus, ground of appeal number 3 raised by assessee before tribunal is allowed for statistical purposes.

Summary

Issues Involved:

1. Taxation Year for Capital Gains
2. Allowability of Freehold Conversion Charges
3. Addition of Interest on NHAI Bonds
4. Charging of Interest under Sections 234A, 234B, and 234C
5. General Legality of the CIT(A) Order

Detailed Analysis:

1. Taxation Year for Capital Gains:
The primary issue was whether the capital gains from the sale of the property should be taxed in the assessment year (AY) 2012-13 or AY 2013-14. The Commissioner of Income Tax (Appeals) [CIT(A)] concluded that the capital gains should be taxed in AY 2012-13, the year in which the agreement to sell was executed. This finding was not contested by either the assessee or the Revenue, thus attaining finality.

2. Allowability of Freehold Conversion Charges:
The CIT(A) directed that Freehold Conversion Charges of ?1,43,62,000 should not be allowed as either cost of improvement or expenses related to the transfer of the property. The assessee argued that converting the property from leasehold to freehold was essential to cure the title before transfer, as stipulated in the agreement to sell dated 11.07.2011. The Tribunal referred to a similar case involving the assessee's brother, where it was held that such conversion charges should be allowed as a deduction under Section 48 of the Income-tax Act, 1961. The Tribunal concluded that the CIT(A) erred in disallowing these charges and allowed the appeal on this ground, directing that the conversion charges be considered as a cost of improvement.

3. Addition of Interest on NHAI Bonds:
The assessee contested the addition of ?2,76,000 on account of interest received on NHAI Bonds, which the Assessing Officer (AO) had added on an accrual basis. The assessee claimed that this interest was included as income on a receipt basis in AY 2014-15. The CIT(A) did not adjudicate this issue. Therefore, the Tribunal restored this issue to the file of the CIT(A) for fresh adjudication on merits, ensuring proper and adequate opportunity for the assessee to be heard.

4. Charging of Interest under Sections 234A, 234B, and 234C:
The assessee challenged the charging of interest under Sections 234A, 234B, and 234C of the Income-tax Act. The Tribunal found this issue to be consequential in nature and did not require separate adjudication, thereby dismissing this ground.

5. General Legality of the CIT(A) Order:
The assessee claimed that the order of the CIT(A) was bad in law and facts. The Tribunal found this ground to be general in nature and did not require separate adjudication, dismissing it accordingly.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the CIT(A) to reconsider the interest on NHAI Bonds and allowing the deduction for freehold conversion charges. The other grounds relating to the charging of interest and the general legality of the CIT(A) order were dismissed. The order was pronounced on 09/07/2021 through video conferencing mode.