Income Tax Appellate Tribunal - Bangalore
Smt. Ginni Devi Tainwala,, Bangalore vs Assessee on 7 May, 2012
IN THE INCOME-TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'B', BANGALORE
BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI JASON P BOAZ, ACCOUNTANT MEMBER
I.T.A. No.1232(Bang.)/2010
(Assessment Year : 2006-07)
Smt. Ginni Devi Tainwala,
Prop: M/s Tainwala Enterprises,
No.44, Robertson Road,
Frazer Town,
Bangalore-560 005
PAN No.AAQPT3695L Appellant
Vs
The Income-tax Officer,
Ward-1(2),
Bangalore Respondent
Assessee by : Smt. Sheetal Borkar, Advocate
Revenue by : Smt. Susan Thomas Jose, JCIT
Date of hearing : 07-05-2012
Date of pronouncement : 16-05-2012
ORDER
PER SMT. P. MADHAVI DEVI, JM;
This is assessee's appeal for the assessment year : 2006-
07. In this appeal, the assessee has raised the following grounds of appeal;
2 ITA No.1232(B)2010
"i) On the facts and in the circumstances of the case, the impugned addition as sustained by the learned CIT(A) is not maintainable in law.
ii) The ld. CIT(A) ought to have appreciated that in respect of inherited land from the husband, the cost inflation indexation was required to be considered right from 1985-86 since the land was originally owned by her husband and by virtue of Sec.2(42A) read with Sec.49 of the Act, the claim as made by the appellant was correct.
iii) The ld. CIT(A) ought to have appreciated that the appellant was deemed to have owned the land right from 1985-86 and the appellant had rightly computed the cost inflation index accordingly an the impugned additions made in this regard in respect of computation of capital gains on sale of Rozipula land and Arradhalli land are uncalled for.
iv) The ld. CIT(A) ought to have appreciated that the appellant had invested a sum of Rs.32,00,000/- in REC bonds subsequent to the sale of Arradhalli lands, i.e. out of the sale proceeds received by the appellant and thus the appellant is entitled to the benefit under section 4EC of the Act.
v) The ld. CIT(A) ought to have appreciated that with regard to the claim of benefit under sec.54EC of the Act, the appellant had produced 3 ITA No.1232(B)2010 sufficient documents before the CIT(A) and thus the claim as made by the appellant under sec.54EC was liable to be allowed.
vi) The ld. CIT(A) after considering the facts and supporting documents furnished by the appellant before the CIT(A) and thus the claim as made by the appellant under sec.54EC was liable to be allowed.
vi) The ld. CIT(A) after considering the facts and supporting documents furnished by the appellant before him, ought to have held that disallowance of 20% of Rs.11,77,019/- as made by the AO was incorrect and ought not to have restricted the disallowance to 10% of such expenses.
vii) Without prejudice, the additions and disallowances as confirmed by the ld. CIT(A) are arbitrary, excessive and ought to be reduced substantially.
viii) The ld. CIT(A) erred in confirming the levy of interest under sec.234B & 234D of the Act".
ix) For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed.
2. The assessee has also raised the following additional grounds in its appeal;
4 ITA No.1232(B)2010
"i) The ld. CIT(A) ought to have appreciated that in respect of inherited land from her husband the cost of inflation indexation was required to be considered from 1991-92 since the land was originally owned by her husband and by virtue of Sec.2(42A) read with sec.49 of the Act, the claim as made by the appellant was correct.
ii) The ld. CIT(A) ought to have appreciated that the appellant was deemed to have own the right from 1991-92 and the appellant had rightly computed cost inflation index accordingly and the impugned additions made in respect of computation of capital gain on sale of Arradhalli land is uncalled for.
iii) The ld. CIT(A) erred in further disallowing the expenditure incurred on Government conversion fine, Brokerage and Mandal Development Cess paid by the appellant which were part of cost and expenses of land and liable for deduction u/s 40A(2) of the Act".
2.1 In the application to admit the additional grounds of appeal, it is mentioned by the assessee that though these issues are arising out of the CIT(A)'s order, inadvertently these were not raised in the grounds of appeal filed before the Tribunal and therefore, they may be admitted for adjudication. 5 ITA No.1232(B)2010
3. The learned DR also confirmed that these issues arise out of the order of the CIT(A). In view of the same, we admit the additional grounds of appeal and proceed to dispose of the same as under;
3.1. At the time of hearing, the learned counsel for the assessee submitted that ground nos.1 & 9 are general in nature hence, needs no adjudication.
3.2 As regards ground nos.2,3,4 & 5 learned counsel for the assessee submitted that the assessee is not interested to pursue the same. These grounds are accordingly rejected as not pressed.
4. Ground nos.6 & 7; The brief facts of the case are that the assessee had claimed an amount of Rs.11,77,019/- as business expenditure. During the assessment proceedings, the assessee was required to produce expenditure vouchers. On verification of the same, the AO found that the expenditure is partly supported by self vouchers and partly involve an element of personal expenditure. He also held that some of the expenses were not fully vouched, and that many of the vouchers were not signed by persons receiving the amount and the self vouchers were not supported by the supporting bills or evidences. He 6 ITA No.1232(B)2010 therefore, disallowed an amount of Rs.2,35,404/- being 20% of the expenditure claimed and brought it to tax.
4.1 Aggrieved, the assessee preferred an appeal before the CIT(A) who restricted the disallowance to 10% of the claim of expenditure and the assessee is in appeal before us against the confirmation of 10% of the disallowance.
4.2. The learned counsel for the assessee Smt. Sheetal Borkar, while reiterating the submissions made before the authorities below submitted that the details called for by the AO were all furnished alongwith the supporting evidence. She submitted that the assessee's books of account were duly audited and therefore, they may not be found fault with. She also drew our attention to the details of the expenditure claimed by the assessee to reiterate the submissions that there cannot be any element of personal expenditure as far as the expenses regarding electrical repairs, homali & weight charges, packing materials, crushing charges, factory maintenance, screening charges, transport inwards, grinding charges, office maintenance, traveling expenses, vehicle repairs, office expenses, sales promotion etc. are concerned. She submitted that all the above expenditures were supported by the vouchers and the 7 ITA No.1232(B)2010 disallowance without pointing out any defect in any particular expenditure is not called for.
5. The learned DR on the other hand, supported the orders of the authorities below and submitted that when the assessee makes a claim, the burden is on her to prove it with necessary evidence. She submitted that the assessee has failed to substantiate with necessary evidence and therefore, the claim is rightly disallowed at 10% of the claim.
5.1. Having heard both the parties and having considered the rival contentions, we find that the AO and the CIT(A) have disallowed part of the expenditure on the ground that they are not supported by vouchers and partly on the ground that they involve an element of personal expenditure. However, as rightly pointed out by the learned counsel for the assessee there cannot be any personal element involved in electrical repairs, hamali & weight charges, packing materials, crushing charges, factory maintenance, screening charges, transport inwards, grinding charges, telephone charges, office maintenance, traveling, vehicle repairs, office expenses, sales promotion charges etc., The AO has not pointed out any particular expenditure which are not supported by the vouchers and which is not signed by the 8 ITA No.1232(B)2010 persons receiving the amount. In view of the same, we are of the opinion that the expenditure mentioned above cannot be disallowed without pointing out any particular claim as not substantiated.
6. Coming to the other expenditure like telephone charges, traveling, office expenses, conveyance etc., we agree with the findings of the AO and the CIT(A) that they might involve an element of personal expenditure. Therefore, we confirm the disallowance restricted by the CIT(A) to 10% of these expenditure only. The assessee's grounds of appeal no.6 and 7 are accordingly partly allowed.
6.1 Coming to the additional grounds of appeal nos.1 & 2 the learned counsel for the assessee submitted that the assessee's husband had purchased a property in the year 1991- 92 and later on, on his demise, the assessee had inherited the land. She submitted that this land was sold by her in the year 2002-03 and the assessee has offered the income under the head 'Long term capital gains" and also claimed exemption u/s 54EC of the IT Act, 1961. She submitted that while computing the capital gains from the sale of the said property the date of acquisition should be considered as 1991-92 by considering the 9 ITA No.1232(B)2010 period the previous owner i.e. the assessee's husband held the property by virtue of Sec.2(42A)(b) r.w.s.49 of the IT Act, whereas the AO has taken the year 2002-03 as the date of acquisition of the property by the assessee and has computed the capital gains accordingly.
6.2 Aggrieved by the order of the CIT(A), who confirmed the order of the AO, the assessee is in second appeal before us.
6.3. The learned DR however, supported the order of the authorities below and submitted that the assessee has not been able to provide a copy of the gift or will or any inheritance certificate or succession relating to the property sold by her stated to be belonging to her husband and for want of such evidence, it is difficult on the part of the AO to decide in favour of the assessee that the property has devolved on her, on the death of her husband by acquisition or inheritance. He also held that the property has come to her ownership only in the year 2002-03 and therefore, provisions of Sec.49(1) are not applicable and Explanation (iii) to Sec.48 is applicable and the computation of capital gains in the hands of the assessee is justified and correct. Thus, according to the learned DR the order of the CIT(A) is to be confirmed.
10 ITA No.1232(B)2010
7. Having heard both the parties and having considered their rival contentions, we find that the claim of the assessee is that the assessee has inherited the property from her husband, after his demise. Now the question before us is that for computing the capital gains, what is the year of acquisition from which the period of acquisition is to be considered.
7.1 According to the learned counsel for the assessee Sub- Sec.1 of Sec.49 of the IT Act is applicable to the assessee according to which the period of holding a capital asset should be deemed to include the period for which he asset was held by the previous owner of the property referred in the Sub-sec.(1) of Sec.49 of the Act. In the case before us, the property was owned by the assessee's husband and was acquired by him in the year 1991-92. It is on his death that the property devolved on his wife, i.e. the assessee herein. Sec.49 of the IT Act, deals with the computation of cost of acquisition of an asset with reference to certain modes of acquisition as provided in Sub-sec.(1) thereof. Sub-sec(1) of Sec.49 provides that where the capital asset became the property of the assessee (i) On any distribution of assets on the total or partial partition of a Hindu undivided family; ii) Under a gift or will...iii) By succession, inheritance or 11 ITA No.1232(B)2010 devolution, then the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner of the assessee as the case may be. However, we find that neither the AO nor the CIT(A) have considered the issue in accordance of Sub-sec.1 of Sec.49 of the IT Act. After examining the assessee's case u/s 49(1) of the Act, the AO is required to give the benefit of indexed cost of acquisition in accordance with the Explanation (iii) to Sec.48. In view of the same, we deem it fit and proper to set aside the order of the CIT(A) and remand the issue to the file of the AO for reconsideration of the issue in accordance with law after considering the documents produced by the assessee in support of her contention that the property devolved on her after the death of her husband. The AO may also call for any documents required by him before concluding the issue and the asseseee shall co-operate with the AO for expeditious conclusion of the proceedings. However, if it is found that the property has devolved on the assessee on the death of her husband, then the AO shall consider 1991-92 as the period of acquisition and compute the capital gain after giving the 12 ITA No.1232(B)2010 benefit of cost indexation. This ground is accordingly allowed for statistical purposes.
8. As regards the additional ground of appeal no.3, the learned counsel for the assessee submitted that while computing the capital gains relating to Arradhalli land i.e. the land relating to additional ground nos.1 & 2 above, the assessee had claimed Municipal tax of Rs.1,08,600/- Govt.conversion fee of Rs.12,480/-and Mandal Development cess tax of Rs.2,67,510/- as cost of improvement which has been disallowed by the AO and confirmed by the CIT(A). She submitted that these expenses are in relation to the above land and hence should be allowed.
8.1 The learned DR, however, supported the order of the AO and the CIT(A) and submitted that only the cost of improvement made to the property is allowable and not any expenditure incurred by the assessee which would confirm or improve her title of the property. In support of her contention, she placed reliance upon the following decisions;
1. Emerald Valley Estates Ltd., Vs CIT(1996) 22 ITR 799, wherein the Hon'ble Karnataka High Court has held that the only expenditure incurred wholly and exclusively in connection with such transfer of property is allowable and 13 ITA No.1232(B)2010 the expression 'cost of improvement' as defined in Sec.55 of the IT Act is capital expenditure incurred in making any additions or alterations to the capital asset in question.
2. Idiculla (KV) Vs CIT (1995) 214 ITR 386 wherein the Hon'ble Kerala High Court has held that the improvement cost which is liable to be deducted should be an improvement to the asset itself, and not an improvement of the owner's title to the asset .
9. Having heard both the parties and having considered the rival contentions, we find that the expenses claimed as cost of improvements are Municipal tax, Land conversion and Mandal development cess tax, which cannot be said to be expenditure incurred for the improvement of or addition to the asset. Municipal tax is revenue in nature to be paid year after year, whereas the Govt. Conversion fine and Mandal Development cess tax are levied by the local authority for converting the land and develop the area, where the property is located. Therefore, these expenses also cannot be said to be for the additions or for the improvement of the asset. In view of the same, we do not see any reason to interfere with the order of the CIT(A). 14 ITA No.1232(B)2010
9.1 As regards ground no.8 of the original grounds of appeal, we find that it is only consequential in nature and therefore, the AO is directed to give consequential relief, if any, to the assessee.
10. In the result, the assessee's appeal is partly allowed for statistical purposes.
Order pronounced in the open court on the 16th May, 2012.
Sd/- Sd/-
(JASON P BOAZ) (SMT. P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Place: Bangalore
Dated: 16-05-2012
am*
Copy to :
1. The Assessee
2. The Revenue
3. CIT(A)
4. CIT
5. DR
6. GF(B'lore)
By Order
AR, ITAT, BANGALORE