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TMI Blog2013 (7) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... rom other sister concerns whether it be for the purchase of the land or for making improvements in land - It is a general practice that the vacant plot of land is fenced and boundary wall constructed for the safety of the property as also to separate the property from others. Considering the fact that at the time of purchase of the land, no such cost was incurred as could be seen from the debit note raised by VGP Housing P. Ltd., it would be fair and reasonable to allow the appellant some benefit of cost of improvement in absence of the direct evidences to this effect – Decided against the Revenue. Considering the total area of land of 80,400 sq. ft., I hold that it would meet the end of justice if the appellant is allowed total expenditure of Rs.20 lacs towards the fencing, main gate, etc., which amount is directed to be bifurcated by considering Rs.7 lacs in year ending on 31/3/1989 & Rs.13 lacs in the year ending on 31/3/1990 for the purposes of indexation benefit - Proportionate theory is to be applied, the total cost of improvement for the area of land sold of 66,000 sq. ft. would amount to Rs.16,41,791/- and thus, the expenses on improvement would be taken at Rs.5,74,627/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration of Rs.3,08,000/-. As mentioned hereinabove, the assessee claimed cost of improvement of land and after taking into account the indexation cost of the said improved land considered it at Rs.69,33,151/-, which the assessee reduced from the sale consideration to arrive at Long Term Capital Gains. 3. The AO did not accept the claim of the assessee towards cost of improvement of land on the ground that the assessee started filing the return of income only from assessment year 2005-06. That the assessee could not produce any evidence in support of the expenditure incurred towards improvement of land. AO has stated that the assessee was called upon to furnish the supporting evidences and explanation with regard to the expenses incurred for improvement of land, it was explained that the expenditure was incurred by making borrowings from the Directors and their related sister concern. It was stated that the Director R.K.Gulati was not having good terms with his wife and in fit of rage, the documents and other related papers were destroyed by his wife and this ultimately lead to divorce between the two. However, the AO disallowed the entire claim of the assessee towards cost of impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and the circumstantial evidences proving that the evidences were destroyed in fit of rage between the Director and his wife and ultimately leading to divorce between them. The appellant submits that whatever details it could gather from the records of the sister concern M/s. Crystal Shipping, the same were furnished to the A 0. 16. The appellant thus submits that the AO ought to have accepted the submission and explanation filed and ought to have appreciated that the fencing of boundaries and construction of main gate, etc. were normal expenses in order to safeguard the land purchased and hence, the appellant ought to be allowed the cost of improvement while computing the capital gains" 5. Ld. CIT(A) considered the above submissions of the assessee and vide para 5.6.3 to 5.6.5 directed the AO to take total cost of improvement of the total land at Rs.20,00,000/- i.e. Rs.7,00,000/- in the year ending on 31.3.1989 and Rs.13,00,000/- in the year ending 31.3.1990 for the purpose of indexation benefit. However, ld. CIT(A) has stated that the assessee has sold 66000 sq.ft. of land out of the total area of land 80,400 sq. ft and therefore total cost of improvement of the proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother sister concern MIs. Crystal Shipping. The evidence to the effect of borrowing of funds is established from the balance sheet of other sister concerns, even if the balance sheet of the appellant is to be ignored completely. Apart from this, it is a general practice that the vacant plot of land is fenced and boundary wall constructed for the safety of the property as also to separate the property from others. Considering the fact that at the time of purchase of the land, no such cost was incurred as could be seen from the debit note raised by VGP Housing P. Ltd., it would be fair and reasonable to allow the appellant some benefit of cost of improvement in absence of the direct evidences to this effect. Considering the total area of land of 80,400 sq. ft., I hold that it would meet the end of justice if the appellant is allowed total expenditure of Rs.20 lacs towards the fencing, main gate, etc., which amount is directed to be bifurcated by considering Rs.7 lacs in year ending on 31/3/1989 Rs.13 lacs in the year ending on 31/3/1990 for the purposes of indexation benefit. Since in the earlier part of the order, I have held that proportionate theory is to be applied, the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of land to Rs.3,40,751/- as against Rs.23,40,751/- stated by department in the grounds of appeal, ld. DR supported the order of the AO on the ground that the assessee could not produce any evidence to substantiate the incurring of the expenditure for improvement of land under consideration. On the other hand, ld.AR while supporting the order of ld. CIT(A) referred pages 36 to 63 of the paper book which contains copy of balance-sheet of assessee-company from year ending on 1989 to year ending as on 31.3.2006. Ld.AR invited our attention to page 36 of the paper book which is a copy of balance-sheet as on 31.3.1989. On perusal of the said balance-sheet, we observe that assessee has specifically stated that there was development expenditure of the land of Rs.8,54,325/-. The said page of balance-sheet is dated 28.8.1989 and is signed by the Directors as well as by the Auditor of the assessee-company. Ld.AR also referred page 37 of the paper book which is a copy of balance-sheet as on 31.3.1990 in which the cost of development of land is shown at Rs.14,86,671/-. Thus, total cost of the land is shown at Rs.30,27,546/-. We observe from subsequent pages of the paper book i.e. copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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