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2022 (3) TMI 133 - AT - Income TaxDisallowance of 20% of depreciation on car on the ground that the possibility of usage of car for personal purpose - Non considering the revised return filed by the assessee for rectifying the mistake in claim of depreciation - HELD THAT - Admittedly, original return filed on 30.03.2013 was belated and as per Sec.139(5) of the Act, if any person having furnished a return under Sub-Sec. (1) or Sub- Sec.(4) discovers any omission or any wrong statement therein, he may furnish revised return at any time before the end of the relevant AY or before completion of the assessment, whichever is earlier. In this case, the original return was not filed under Sub-Sec.(1) or Sub-Sec.(4) and thus, the belated return filed by the assessee is an invalid return. Therefore, the AO is not bound to consider invalid return. Hence, we are of the considered view that there is no error in the reasons given by the AO in not considering the revised return filed by the assessee for rectifying the mistake in claim of depreciation. Accordingly, we reject the ground taken by the assessee. Computation of long term capital gains derived from transfer of property in pursuant to JDA - ownership of property by three co-owners and their respective share in right and interest in the property - HELD THAT - Since, the assessee has 42.5% share in the property, the AO is right in considering 42.5% of consideration in the hands of the assessee for the purpose of computation of long term capital gains as a result of transfer of property in pursuant to JDA. The arguments of the assessee that, he had received consideration separately, as specified in the JDA, we find that receipt of entire non-refundable deposit by the assessee s father and one flat each by the assessee and his wife is an internal arrangement and which is nothing to do with computation of capital gains by adopting respective share of full value of consideration. As per law, when a property transferred, consideration received or accrued as a result of transfer should be taken into account according to their share in the property, but not as per the internal arrangement between the parties. Hence, the arguments of the assessee is rejected. Computation of capital gain - Admittedly, the assessee has transferred 50% of UDS in the property in favour of the developer and the remaining 50% of the UDS is with the land owners. Therefore, when 50% UDS only has been transferred in favour of the developer, then the cost of acquisition in respect of 50% UDS should be considered for the purpose of determining the cost of acquisition in the hands of the assessee. Therefore, 50% of the FMV of the property comes to ₹ 2 lakhs. Out of which, the assessee s share at 42.5%, works out to ₹ 85,000/-. Therefore, the AO should adopt ₹ 85,000/- cost of acquisition in the hands of the assessee and further, should allow the benefit of indexation from the year 01.04.1981, because as per the provisions of Sec.49(1) read with Explanation (iii) below sec.48 of the Act, when a property is owned by the assessee by anyone of the modes specified therein, then the benefit of indexation should be allowed from the date when the previous owner held the asset. In this case, the assessee has inherited property from his grandfather by one of the mode specified u/s.49(1) of the Act and thus, he is entitled benefit of indexation from the date his grandfather held the property i.e. from the year 1962. Since, base year is 1981-82 for computing the benefit of cost of acquisition, the AO is directed to adopt the cost of acquisition as arrived at herein above and allow the benefit of indexation from the year 1981-82. Benefit of deduction u/s.54 - We ourselves do not subscribe to the reasons given by the AO to allow exemption u/s.54 of the Act to the extent of 42.5% of cost of construction of two flats, because what was invested by the assessee in new asset is cost of one flat, which is at ₹ 1,76,60,525/-. Although, the AO is correct in principle to allow the benefit of exemption u/s.54 of the Act to the extent of 42.5% share of the assessee, because one flat is registered in the name of the assessee, the benefit of exemption should be allowed to the extent of cost of one flat which is at ₹ 1,76,60,525/-. Therefore, we direct the AO to allow deduction u/s.54 of the Act to the extent of cost of one flat which is at ₹ 1,76,60,525/-. To sum up, the AO is directed to re-compute the long term capital gains derived from transfer of property in pursuant to JDA in terms of our observation given herein above.
Issues Involved:
1. Disallowance of 20% depreciation on car usage. 2. Computation of long-term capital gains (LTCG) from the Joint Development Agreement (JDA). 3. Consideration of non-refundable deposit in LTCG computation. 4. Determination of indexed cost of acquisition. 5. Eligibility for exemption under Section 54 of the Income Tax Act. Detailed Analysis: 1. Disallowance of 20% Depreciation on Car Usage: The primary issue was the disallowance of 20% depreciation on the car, assuming potential personal use. The appellant argued that the revised return, which corrected the depreciation claim, should be considered. However, the tribunal upheld the decision of the AO, stating that the original return was belated and thus invalid under Sec.139(5) of the Act. Consequently, the AO was not obligated to consider the revised return. The tribunal found no error in the AO's decision to disallow the revised depreciation claim. 2. Computation of Long-Term Capital Gains (LTCG) from the Joint Development Agreement (JDA): The tribunal examined the LTCG computation arising from the JDA between the assessee, his wife, and his father with the developer. The AO had re-computed the LTCG by including the cost of two flats and a non-refundable deposit of ?2.25 Crores as the full value of consideration received. The AO's computation considered the total cost of construction incurred by the developer and determined the LTCG in the hands of the assessee based on his 42.5% share in the property. The tribunal upheld this approach, rejecting the appellant's argument that the non-refundable deposit should not be included in the assessee's LTCG computation. 3. Consideration of Non-Refundable Deposit in LTCG Computation: The assessee contended that the non-refundable deposit received by his father should not be included in his LTCG computation. However, the tribunal noted that the non-refundable deposit and the cost of two flats should be considered as part of the full value of consideration for the transfer of property. The tribunal found that the AO correctly included the non-refundable deposit in the LTCG computation, proportionate to the assessee's share in the property. 4. Determination of Indexed Cost of Acquisition: The tribunal addressed the method of determining the indexed cost of acquisition. The AO had considered the Fair Market Value (FMV) of the property as of 01.04.1981 and allowed the benefit of indexation from AY 2007-08. The tribunal, however, found that the AO should have considered the indexation from the year 1981-82, as the property was inherited from the assessee's grandfather. The tribunal directed the AO to adopt ?85,000 as the cost of acquisition (42.5% of 50% UDS) and allow the benefit of indexation from 1981-82. 5. Eligibility for Exemption under Section 54 of the Income Tax Act: The assessee claimed exemption under Section 54 for the cost of one flat received from the builder. The AO allowed the exemption to the extent of 42.5% of the cost of two flats, amounting to ?1,50,11,446. The tribunal disagreed with the AO's approach and directed that the exemption be allowed for the full cost of one flat, which is ?1,76,60,525. The tribunal instructed the AO to re-compute the LTCG considering this revised exemption amount. Conclusion: The appeal was partly allowed. The tribunal upheld the AO's computation of LTCG, including the non-refundable deposit and the cost of two flats, proportionate to the assessee's share. However, the tribunal directed the AO to re-compute the indexed cost of acquisition from 1981-82 and allow the exemption under Section 54 for the full cost of one flat. The disallowance of 20% depreciation on car usage was upheld.
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