Income Tax Appellate Tribunal - Mumbai
Scindia Investments P. Ltd., Mumbai vs Department Of Income Tax
1
ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 )
&
4748/Mum/2006 (Asst Year 2001-02)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI 'J' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI PRAMOD KUMAR, AM & SHRI VIJAY PAL RAO, JM
ITA No. 9284/Mum/2004 (Asst Year 2001-02)
Scindia Investments P Ltd Vs The DyCommr of Income Tax
B-431 Phoenix House Range 7(2), Mumbai
462 Senapati Baat Marg
Lower Parel
Mumbai 400 013
(Appellant) (Respondent)
PAN NO.AAACS8590C
ITA No. 2287/Mum/2006 (Asst Year 2001-02 )
&
ITA No. 4748/Mum/2006 (Asst Year 2001-02)
The DyCommr of Income Tax Vs Scindia Investments P Ltd
Range 7(2), Mumbai B-431 Phoenix House
462 Senapati Baat Marg
Lower Parel
Mumbai 400 013
(Appellant) (Respondent)
Assessee By Shri J D Mistry/Mr K K Ved
Revenue By Shri S K Singh
PER VIJAY PAL RAO, JM
The appeal in ITA No.9284/M/09 by the assessee is directed against the order dated 1.11.2004 of the CIT(A) for the AY 2001-02.
2 The assessee has raised the following effective grounds in this appeal:
1) The CIT(A) has erred in confirming the view of the Assessing Officer that the Bungalow at New Friends Colony, Delhi was a business asset and in thereby not considering the loss on sale of the same as a long term capital loss.2 ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02)
2) The CIT(A) has erred in holding that the appellant is not entitled to claim indexation of the registration charges paid for registration of the purchase documents of its property at Ushant Lok, Delhi.
3) The CIT(A) has erred in confirming the view of the Assessing Officer that staff training expenses of Rs.32,30,590/- incurred by the appellant were not deductible while computing its total income.
4) The CIT(A) has erred in confirming the view of the Assessing Officer that an expenditure of Rs. 23,236/- was incurred by the appellant in earning income by way of tax free dividends and hence disallowable u/s 14A as against a sum of Rs.4647/- suo-moto disallowed by the appellant while arriving at its total income for the year.
5. The CIT(A) has erred in upholding the levy of interest u/s 234B of the I T Act, 1961.
6. The CIT(A) has erred in upholding the levy of interest u/s 234D of the I T Act, 1961.
3 Ground no.1 regarding the disallowance of Long Term Capital Loss and treating the bungalow at New Friends Colony, Delhi was a business asset. 3.1 The assessee claimed Long Term Capital Loss (LTCL) on sale of the bungalow at New Friends Colony, Delhi. The Assessing Officer held that the loss on sale of the bungalow is not LTCL because the assessee has never shown this property as long term investment in the balance sheet and the income from the bungalow has not been shown as income from house property.
3.2 On appeal, before the CIT(A), the assessee contended that the bungalow was not a business asset and the assessee has never claimed any deprecation on the same. Therefore, the loss on sale of the bungalow should be allowed as LTCL after considering the indexation of the cost of acquisition. The CIT(A) has confirmed the disallowance made by the Assessing Officer and held that when the assessee treated the bungalow as business asset after the introduction of the concept of the block of assets there is no provision for computing the capital loss, in the event of the sale of depreciable asset unless the entire block of assets is wiped out. 3 ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) 4 Before us, the Sr counsel for the assessee has submitted that the assessee has never claimed any depreciation and no depreciation has ever allowed on the bungalow in question. Therefore, when no depreciation either claimed or allowed, then, the provisions of sec 50 cannot be applied. He has further contended that the issue is covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in the case of M/s Divine Construction Company vs ACIT in ITA No.5396/Mum/2009 dated 20.12.2010.
4.1 On the other hand, ld DR, has submitted that the assessee himself has treated the above bungalow as business asset and has never shown as investment. He has further contended that the assessee was never admitted any rent income from the bungalow and the same was shown as business asset in all the records even in the Municipal records for the purpose of house property tax. Therefore, the lower authorities have justified in treating the bungalow as business asset and disallowing the claim of LTCL.
5 We have considered the rival contention and perused the relevant material on record. It is an undisputed fact that neither the assessee ever claimed any depreciation on the said bungalow nor it was allowed by the department. At the outset, we find that a similar issue was considered and adjudicated by the Co-ordinate Bench of the Tribunal in the case of M/s Divine Construction Company (supra) and one of us -Judicial Member - is the party to the said order. The Tribunal in para 4 have decided the issue as under:
"4. On going through the mandate of this section it can be easily noticed that in order to treat capital gain arising from the transfer of capital assets in 4 ITA No. 9284/Mum/2004 (Asst Year 2001-02) 2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) the circumstances mentioned in the section as short term capital gain, it is necessary that the conditions mentioned in the opening lines of section 50 be fulfilled viz. (i) the capital asset should be an asset forming part of block of asset and (ii) depreciation should have been allowed on it under this Act or under the Indian Income Tax Act, 1922. It is only on the fulfillment of these twin conditions that the prescription of section 50 gets activated. Adverting to the facts of the instant case it is noted that the assessee included the property in its Schedule of fixed assets for this year at Rs.8,91,460. No depreciation was claimed in this year. We are in agreement with the ld. DR that merely not claiming depreciation in one year is not sufficient to push a case out of the purview of section 50. It is necessary that the depreciation should have never been allowed on such capital asset. The learned A.R. was directed to file purchase deed of this premises in 1999 and subsequent balance sheets. Today such details have been placed on record. It can be noticed that the value of this property as appearing in the balance sheet for assessment year under consideration at Rs.8,91,460 continues to remain the same since its purchase in 1999. It shows that no depreciation was ever claimed or allowed on this property. In that view of the matter the provisions of section 50 cannot be applied. We, therefore, overturn the impugned order on this issue and hold that the long term capital gain declared by the assessee be accepted as such, since no infirmity was pointed out by the Assessing Officer in the calculation shown by the assessee."
6 In order to maintain the consistency, we decide this issue in favour of the assessee and against the revenue.
7 Next issue regarding the claim of indexation of the registration charges paid for registration purposes.
7.1 During the year the assessee sold its property at Sushantlok. The said property was acquired on 1.11.1989 for a sum of Rs. 6.25 lacs. The assessee paid a sum of Rs.1,02,125/- as registration charges during the financial year relevant to Assessment Year under consideration. The Assessing Officer held that the registration charges were not part of cost of the property while computing the LTCG. 7.2 On appeal, the CIT(A) though accepted the claim of the assessee for the registration charges as part of the cost of acquisition of the property; however, the 5 ITA No. 9284/Mum/2004 (Asst Year 2001-02) 2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) cost of indexation of Rs. 1,02,125/- on account of registration was denied. The CIT(A) has observed that these charges were paid in the financial year relevant to the Assessment Year under consideration; therefore, the assessee is not entitled for the indexation.
8 The Sr counsel for the assessee contended that the registration charge is part and parcel of the cost of acquisition of the property and the cost of acquisition needs to be indexed while computing the capital gain. Therefore, registration charges should be considered for giving benefit of the indexation for the purpose of computation of capital gain. He has relied upon the decision of the Tribunal in the case of Smt Lata G Rohra vs DCIT reported in 21 SOT 541 (Mum) and in the case of Charnbir Singh Jolly reported in 5 SOT 89 (Mum).
8.1 `On the other hand, the ld DR has submitted that when the assessee has incurred the expenditure for the purpose of registration only during the year under consideration then, the same cannot be included for the purpose of indexation. He has supported the orders of the authorities below.
9 We have considered the rival submissions and perused the relevant material on record. The cost of registration charges is not a part of purchase consideration as agreed between the parties at the time of purchase of the property. Though, the registration charges incurred by the assessee could be included in the cost of acquisition of the property; but the said cannot be merged into the purchase consideration of the property.
6ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) 9.1 In the case of Charan Singh Jolly (supra), the issue before the Tribunal was the indexation cost of acquisition of the property at the time of first instalment or the total amount paid by the assessee for acquiring the said property. 9.2 The issue in the case of Smt Lata G Rohra (supra), again was the time of indexation of cost of acquisition whether at the time when the property was purchased or in the year when it was registered in the name of the assessee. 10 In the case in hand, the issue is not the payment towards the purchase of the property but the expenditure is in the nature of registration of the property and the indexation cost of the said expenditure will be on the basis of cost inflation influenced for the year in which such expenditure is incurred. The registration charges were not the cost towards acquisition of the property as agreed between the parties; but these charges are incurred for the better title of the property. The transaction of purchase/transfer of the property in the name of the assessee was deemed to be completed when the assessee purchased in the year 1989. The registration of the said property does not change the status of the property in the hands of the assessee and does not relate to the cost of purchase of the property in the year 1989. The registration charges are therefore, incurred for the better title of the same rights and interest in the property; but do not give any new right or title or transfer of any right of property, which was purchased in the year 1989. Even otherwise, the benefit of indexation cost of acquisition or improvement charges is based on the principle of off-setting inflation effect. The registration charges were not accrued or determined in the year of purchase of property. There is no change in the purchase value of the money as the assessee incurred the registration charges 7 ITA No. 9284/Mum/2004 (Asst Year 2001-02) 2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) during the year under consideration and therefore, the benefit of indexation cost cannot be allowed from ante date of purchase in the year 1989. 10.1 In view of the above discussion, we are of the considered opinion that the decision relied upon by the assessee are not applicable to the facts of the present case and accordingly, we do not find any error or illegality in the order of the ld CIT(A) to the extent of not allowing indexation or registration charges. 11 Next issue regarding the disallowance of staff training expenses. 11.1 We have heard the Sr counsel for the assessee as well as the ld DR and considered the relevant material on record.
12 At the outset, we find this issue is covered by the decision of the Tribunal in the case of the assessee in ITA No. 3759/Mum/2006 for the Assessment Year 2000-01 vide order dated 13.5.2009. The Tribunal for the Assessment Year 2000-01 allowed the claim of the assessee regarding the staff training expenses. Accordingly, following the order of the Tribunal for the earlier year, we allow the claim of the assessee for the year under consideration also.
13 Next issue regarding disallowance u/s 14A.
14 At the time of hearing, the Sr counsel for the assessee has stated that the assessee does not press this issue and may be dismissed as not pressed. The ld DR has no objection, if the ground is dismissed as not pressed. Accordingly, we dismiss this ground of the assessee being not pressed.
15 Next issue regarding levy of interest u/s 234B.
8ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) 16 The levy of interest u/s 234B being consequential issue; therefore, it does not require any adjudication and the Assessing Officer is directed to compute the interest as per the outcome of the other issues.
17 Next issue relates to interest u/s 234D.
18 We have heard the Sr counsel for the assessee and the ld DR and considered the relevant material on record. In view of the decision of the jurisdictional High Court in the case of CIT vs Bajaj Hindustan Ltd in ITA No.198 of 2009 dt 15.4.209 as well as the decision of the Special Bench of the Tribunal in the case of ITO vs Ekta Promoters P Ltd reported in 113 ITD 719(SB) Delhi, interest u/s 234D cannot be levied retrospective. Accordingly, this issue is decided in favour of the assessee. ITA No.2287/Mum/2006 ( by the revenue) 19 This appeal by the revenue is directed against the order dated 13.12.2005 of the CIT(A) for the Assessment Year 2001-02 .
20 While passing the original order dated 1.11.2004, the CIT(A) has disallowed the claim of the assessee regarding the Long Term Capital Loss in respect of the Bungalow at New Friends Colony, Delhi. The assessee subsequently filed a petition/application on which the CIT(A) has passed the impugned order dated 13.12.2005 and directed the Assessing Officer to compute the deemed short term capital loss. Thus, in the revenue's appeal, the issue raised is a consequential issue as involved in the appeal of the assessee against the original order of the CIT(A. Since we have decided the issue of Long Term Capital Loss in favour of the assessee; therefore, the consequential issue in the appeal of the revenue has become infructuous and the same is dismissed.
9ITA No. 9284/Mum/2004 (Asst Year 2001-02)
2287/Mum/2006 (Asst Year 2001-02 ) & 4748/Mum/2006 (Asst Year 2001-02) ITA No.4748/Mum/2006( by the Revenue) 21 This appeal by the revenue is directed against the order dated 29.6.2006 of the CIT(A arising from the penalty order u/s 271(1)( of the I T Act. 22 We have heard the ld DR and the Sr counsel for the assessee and perused the relevant material on record. In the quantum appeal of the assessee, we have allowed the claim of the assessee regarding the capital loss as well as staff training expenses. Therefore, the penalty levied to the extent of addition/disallowance in respect of Long Term Capital Loss and staff training expenses does not survive in view of our order in quantum appeal.
23 In the result, the appeal of the assessee is partly allowed whereas the appeals of the revenue are dismissed.
Order pronounced on the 6th July 2011.
Sd/- Sd/-
( PRAMOD KUMAR ) ( VIJAY PAL RAO )
Accountant Member Judicial Member
Place: Mumbai : Dated: 6th July 2011
Raj*
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai