2014 (4) TMI 710 - AT - Income Tax

Tribunal grants relief to Assessee on capital gains, indexed cost, and interest calculations

The appeal by the Assessee was allowed by the Tribunal. The Tribunal directed the AO to adjust the claim for lower value of WDV of the building for ... Computation of capital gains - Adoption of lower value of WDV of building – Capitalization to building account and land ignored – Held that:- As it has been decided in earlier assessment year, the disallowances have been allowed – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. Calculation of indexed cost of acquisition - Adoption of date of acquisition – Held that:- The transaction of sale in the year 1992 is for conversion of lease hold rights into free hold rights by way of improvement of title – Relying upon CIT Vs. Smt. Rama Rani Kalia [2013 (9) TMI 962 - ALLAHABAD HIGH COURT] - the conversion of rights of lessee in the property from lease hold right into free hold only results in improvement of his/her rights over property and it would not have any effect on taxability of capital gains from such property which is related to period over which property is held - the property has been held by M/s. Tool Craft, on lease hold basis since 1974 and the assessee has acquired the partnership firm in the year 1978 to which the title over the property in question has been improvised by conferring free hold rights, the year of acquisition of the said property is to be held as 1974 and not the year 1992 – thus, the assessee is entitled for the indexed cost of acquisition since 1981 as claimed – Decided in favour of Assessee. Inclusion of interest on self-assessed tax u/s 234A of the Act – Held that:- For the purpose of calculating the interest u/s 234A, interest is to be charged on assessed tax after reducing the amount of tax paid before filing the return of income – Relying upon CIT Vs Pranay Roy [2008 (9) TMI 150 - SUPREME COURT] - the levy of interest u/s 234A is compensatory and not penal in nature – thus, the AO is directed to give credit of self-assessed tax paid before filing the return of income and thereby reduce the same for the purpose of charging interest u/s 234A of the Act – Decided in favour of Assessee. Issues:1. Lower value of WDV of the building for computation of capital gains.2. Date of acquisition of land for calculating indexed cost of acquisition.3. Charging of interest u/s 234A on self-assessed tax paid before filing the return of income.Analysis:1. The appellant contested the adoption of a lower value of WDV of the building for capital gains computation, citing earlier year disallowances. The AO was directed to consider the Tribunal's orders allowing relief in previous assessment years and adjust the claim accordingly. Grounds No. 1 & 2 were allowed for statistical purposes.2. Dispute arose over the date of land acquisition for indexed cost calculation. The appellant claimed acquisition in 1974, while the AO considered 1992. The Tribunal analyzed the lease and sale deeds, determining that the property was held since 1974, entitling the appellant to claim indexed cost from 1981. Citing legal precedents, the Tribunal allowed Ground No. 3 in favor of the appellant.3. The appellant challenged the charging of interest u/s 234A on self-assessed tax paid before filing the return. The AO disregarded the tax paid as advance tax, leading to interest imposition. Relying on judicial decisions, the Tribunal ruled in favor of the appellant, directing the AO to credit the self-assessed tax paid before filing the return for interest calculation under section 234A. Consequently, Ground No. 4 was allowed.In conclusion, the appeal by the Assessee was allowed, with the Tribunal providing detailed analysis and legal reasoning for each issue raised in the judgment.