Income Tax Appellate Tribunal - Amritsar
Shri Joginder Singh , Jammu vs Assistant Commissioner Of Income Tax ... on 9 February, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 87/Asr/2023
Assessment Year: 2019-20
Sh. Joginder Singh, Vs. ACIT/DCIT
Vill. Laham PO-Pallan Wali, Central Circle,
Akhnoor, Jammu, 181203, J&K Jammu
[PAN: CBXPS 7800J]
(Appellant (Respondent)
Appellant by : Sh. Rohit Kapoor, C.A. &
Sh. V.S. Aggarwal, I.T.P.
Respondent by : Sh. Bharat Bhushan Garg, CIT DR
Date of Hearing : 09.01.2024
Date of Pronouncement : 09.02.2024
ORDER
Per Dr. M. L. Meena, AM:
The captioned appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 21.01.2023 in respect of Assessment Year: 2019-20. 2 ITA No. 87/Asr/2023
2. The assessee has raised the following grounds of appeal:
"1. That the Ld. CIT(A) has erred in dismissing the appeal by passing order u/s 250(6) and sustaining the addition made by the AO.
2. That the order passed u/s 250(6) of the Income Tax Act, is bad in law as the same has been disposed off without examining the merits of the case.
3. That the CIT(A) has erred in confirming the addition of Rs. 368918/- on account of re-computation of long term capital gain ignoring the cost of improvement of Rs. 195000/- incurred in the FY 2009-10 [AY 2010-11] for construction of a concrete bridge on the rivulet in front of the shop which provided more accessibility to the shop from the road.
4. That the Ld. CIT(A) has erred in confirming the addition of Rs. 368918/- on the ground that the said cost of Rs. 195000/- was not incurred from the assessee's own sources and was incurred out of funds to the tune of Rs. 200000/- given by his friend Govind Lai. That the Ld. CIT(A) has erred in not appreciating that the said amount of Rs. 200000/- was obtained by way of loan from Sh. Govind Lai and same which has duly been confirmed by the lender Sh Govind Lal.
5. That the CIT(A) has erred in confirming the order passed by the AO on the ground that said cost of Rs. 195000/- was used for construction of bridge on rivulet in front of the shop and not for any improvement of the shop. That the CIT(A) has erred in not appreciating that the amount spent for construction of the bridge is a capital expenditure and was essential to provide access to the shop from the road and as such, provide improved accessibility to the shop to facilitate greater footfall.
6. That the Ld. CIT appeal has failed to consider the layout plan provided by the assessee during the course of assessment proceedings along with the photograph evidencing that there was no approach road to the shop of the assessee.
7. That the LD CIT has erred in confirming the addition made by the A.O. ignoring the hard core fact that the amount spent on road is part of building and assessee has rightly considered the same as cost of improvement while computing capital gains.3 ITA No. 87/Asr/2023
Joginder Singh v. ACIT
8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off."
3. The grounds of appeals are inter-connected to each other wherein the appellant challenged the common issue of confirming the addition of Rs. 368918/- on account of re-computation of long term capital gain ignoring the cost of improvement of Rs. 195000/- incurred in the FY 2009- 10 [AY 2010-11] for construction of a concrete bridge on the rivulet in front of the shop for the purpose of providing more accessibility to the shop from the road. Therefore, all the grounds are adjudicated together for brevity.
4. At the outset, the Ld. Counsel for the appellant submitted that the assessment was completed under section 153A r.w.s 144 of the Income Tax Act, 1961 ('the Act') vide order dated 26.09.2021making an addition of Rs. 368918/- by not allowing the benefit of Rs. 195000/- [Indexed cost Rs. 368918/-] incurred on construction of rivulet in the year 2009-10 by alleging that since the appellant had been conducting business since 2005-06, as such, the construction got completed in FY 2005-06 (APB, Pgs.97-
112).The Hon'ble CIT(A) confirmed the addition made by the Ld. AO, without appreciating the merits of the case. The Ld. Counsel contended that the appellant in order to increase business turn over constructed a 4 ITA No. 87/Asr/2023 Joginder Singh v. ACIT concrete bridge on the culvert in front of the shop so that the customers can have direct access to the shop. The total amount incurred on improvement for the approach road/bridge was to the tune of Rs195000/- in the financial year 2009 -10. Furthermore, as regard the source of construction, it was duly explained that the construction expense was incurred out of money borrowed amounting to Rs.2,00,000/- from his friend Sh. Govind Lal and the said fact has duly been confirmed by Sh. Govind Lal in the sworn affidavit filed before the AO and also before the Ld. CIT(A) (APB, Pgs. 84-86).
5. The Ld. AR argued that that the Ld. CIT(A) passed the order u/s 250(6) ignoring the fact that the said cost of Rs. 195000/- was used for construction of bridge on rivulet in front of the shop for further improvement in the shop and that the CIT(A) ignored to appreciate the fact that the amount spent for construction of the bridge was a capital expenditure and was essential to provide access to the shop from the road and to provide improved accessibility to the shop to facilitate greater footfall in turn. The AR further submitted that the appellant had duly explained during the course of assessment proceeding that the appellant had sold his land & building (Shop) together with all the assets for a total consideration of 5 ITA No. 87/Asr/2023 Joginder Singh v. ACIT Rs.16,80,000/- Furthermore, the appellant had duly disclosed the capital gain on sale of such land and building while filing the return of Income.
6. The AR further submitted that the Ld CIT(A) has not doubted the expenses incurred on construction of the bridge/rivulet in front of the shop but has only stated the amount expended is not for any improvement of the shop itself without appreciating the fact, that there was no direct access to the shop. Even otherwise the appellant was able to fetch better price only due to reason that there was proper approach to the shop otherwise no prudent person would have made the deal. The counsel further argued that it is a matter of record that the AO has not brought on record any evidence or finding to prove that the cost of improvement of Rs. 1,95,000/- incurred in 2009-10 has never been incurred. The cost of construction of Rs. 190000/- has been disallowed by the AO by merely relying upon the fact and presumption that the appellant had been running the business in the shop and therefore, there cannot be improvement in the building in the running business ignoring the fact that the expense was not incurred for the improvement of the shop itself but was in fact incurred to improve accessibility to the shop to enhance the business of the appellant. In this regard the appellant had duly furnished the site plan and the photograph of 6 ITA No. 87/Asr/2023 Joginder Singh v. ACIT the shop to prove the contention (APB, Pg. 26 and 27). In support, he placed reliance on various judicial precedent placed on record. He prayed that, it is very humbly submitted to delete the addition as confirmed by CIT(A).
7. Per contra, the Ld. CIT(A) stands by the impugned order. However, he failed to rebut the contentions of the counsel.
8. We have heard the rival contention, perused the material on record, impugned order and case law cited before us. Admittedly, the total amount incurred on cost of construction for the approach road/bridge was to the tune of Rs195000/- in the financial year 2009 -10 which has been sold as a part of sale transaction of the shop and shown capital gains in the return of income accordingly. It is seen that the appellant has constructed a concrete bridge on the culvert in front of the shop so that the customers can have direct access to the shop in order to increase business turn over. The counsel explained that the construction expense was incurred out of money borrowed amounting to Rs.2,00,000/- from appellant friend Sh. Govind Lal and the said fact has duly been confirmed by Sh. Govind Lal in the sworn affidavit filed before the AO and also before the Ld. CIT(A) (APB, Pgs. 84-
86).
7ITA No. 87/Asr/2023
9. From the record, it is evident that the Ld. CIT(A) ignored the fact that the disputed cost of Rs. 195000/- was used for construction of bridge/rivulet in front of the shop for improvement of the shop and that the CIT(A) failed to appreciate the vital fact that the amount spent for construction of the bridge was a capital expenditure and was essential to provide access to the shop from the road and to provide improved accessibility to the shop to facilitate greater footfall and capital value addition in turn. We appreciate the contention of the Ld. AR that there is no bar to incur the capital expenditure while the business is running. Further, the source of construction, was duly explained that the construction expense was incurred out of money borrowed amounting to Rs.2,00,000/-from its friend Sh. Govind Lal and the aforesaid fact has duly been confirmed by Sh. Govind Lal in the sworn affidavit filed before the AO and also before the CIT(A). The same has been placed before us (APB, Pgs. 84-86). The material facts of cost of construction of bridge are further supported by the appellant with the site plan and the photograph of the shop (APB, Pg. 26 and 27). Without prejudice to above, it is a matter of record that the AO has not brought on record any evidence or finding to prove that the cost of improvement/construction of Rs. 1,95,000/- incurred in 2009-10 has never been incurred. The cost of construction of Rs. 8 ITA No. 87/Asr/2023
Joginder Singh v. ACIT 1,95,000/- has been disallowed by the AO by merely relying upon the fact and presumption that the appellant had been running the business in the shop. In view of that matter, we hold that the documentary evidence on record were sufficient to prove that necessary construction was made. Thus, the decision of the authorities below are infirm and perverse to the facts on record in rejecting the claim of the appellant.
10. The Hon'ble High COURT OF KARNATAKA in the case of Commissioner of Income-Tax v. Karnataka Power Corpn. Ltd. 205 ITR 511 observed as per head note as follows:
Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of - Whether approach roads form part of buildings and, thus, entitled for depreciation allowance Held, yes Section 32A of the Income-tax Act, 1961 - Investment allowance - Whether generating station will have to be treated as a 'plant' for purpose of investment allowance - Held, yes Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from new industrial undertakings, ships, hotels, etc. - Whether where assessee-company commissioned new units and maintained separate accounts of it, assessee was entitled to deduction under section 80J - Held, yes
11. The ITAT JAIPUR BENCH 'B' in the case of Assistant Commissioner of Income-Tax v. Sjyaraj Singh [2020] 117 taxmann.com 424 (Jaipur -
Trib.) observed that where assessee transferred land alongwith wells, 9 ITA No. 87/Asr/2023 Joginder Singh v. ACIT baories, road, boundary wall etc. then proportionate cost of these structures (after indexation) against full value of consideration in terms of sale deed so executed would be allowable to assessee.
12. The Apex Court in the case of INDIA Arvind Mills Ltd. v. Commissioner of Income-tax[1992] 63 Taxman 493 197 ITR 422 106[19921 63 Taxman 493 (SC), as per Head note reads as under:
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of Assessment year 1972-73 - Assessee claimed deduction of betterment charges, being contribution made towards cost of Town Planning Scheme Betterment charge, provided general improvement of area and accordingly, enhanced value of land and resulted in providing better facilities for carrying out business of assessee - Whether, capital expenditure became revenue expenditure simply on reason that it was incurred in connection with business activities which ultimately resulted in efficiently carrying on day-to-day business - Held, no - Whether, question of voluntary and/or involuntary payment is material for determining capital/revenue nature of expenditure - Held, no Whether, therefore, on facts, High Court was justified in holding that betterment charges paid was capital expenditure and, thus, disallowable under section 37(1) - Held, yes.
13. In the present case, the capital expenditure would not become revenue expenditure merely for the reason that it was incurred in connection with cost of improvement to promotion of business activities which ultimately resulted in efficiently carrying on day-to-day business. The facts of cost of construction of bridge have been supported with the site plan and the photograph (APB, Pg. 26 and 27), which is a matter of 10 ITA No. 87/Asr/2023 Joginder Singh v. ACIT record, which has never been controverted either by the AO or by the CIT(A) or the CIT(DR), to disprove that the cost of improvement/construction of Rs. 1,95,000/- incurred in 2009-10 has never been incurred by him. Such, disallowance, of the cost of construction of Rs. 1,95,000/- by the AO, merely based on presumption is not tenable in the eyes of laws.
14. Considering the factual matrix, and judicial precedents, we accept the grievance of the appellant as genuine. Accordingly, we hold that the cost of improvement to shop by construction of rivulet was capital expenditure and the cost of in taxation of rivulet would be allowable deduction as claimed by the appellant. We, therefore, delete the addition of 1,95,000/-.
15. In the result, the appeal filed by the assessee is allowed.
Order is pronounced on 09.02.2024, under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules 1963.
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* 11 ITA No. 87/Asr/2023 Joginder Singh v. ACIT Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T. True Copy By Order