2016 (2) TMI 661 - AT - Income Tax

Tribunal decision: commission payments disallowed, premises payment rejected, electricity dues upheld, indexation remanded

M/s Sundaram Theatre Versus The Asstt. Commissioner of Income-Tax And Vica-Versa

M/s Sundaram Theatre Versus The Asstt. Commissioner of Income-Tax And Vica-Versa - TMI Issues Involved:1. Disallowance of commission payment.2. Disallowance of payment for enabling lessee to vacate the premises.3. Disallowance of payment of electricity dues.4. Granting of indexation on goodwill while determining capital gains.Issue-wise Detailed Analysis:1. Disallowance of Commission Payment:The first issue pertains to the disallowance of commission payment of Rs. 2,32,000 out of Rs. 3,12,000 on the sale of property. The assessee claimed to have paid brokerage to four persons, but could not provide adequate proof of payment. The Assessing Officer (AO) disallowed the entire brokerage amount due to lack of evidence. The CIT(A) allowed Rs. 80,000 based on the confirmation from one broker, Shri K. Ganesan, but disallowed the remaining Rs. 2,32,000. The Tribunal upheld the CIT(A)'s decision, stating that the assessee failed to prove the genuineness of the payments to the other three brokers.2. Disallowance of Payment for Enabling Lessee to Vacate the Premises:The second issue involves the disallowance of Rs. 10 lakhs claimed as payment to a lessee for vacating the property. The assessee argued that this payment should be considered as a cost of transfer under Section 48 of the Income-tax Act. However, the CIT(A) and the Tribunal found no evidence or clause in the sale deed to support this claim. Consequently, the Tribunal rejected the assessee's claim, emphasizing the absence of any contractual obligation in the sale deed to pay the lessee.3. Disallowance of Payment of Electricity Dues:The third issue concerns the disallowance of Rs. 12.50 lakhs claimed as payment towards electricity charges to the Electricity Board. The assessee contended that this amount was withheld by the buyer towards probable dues. However, the CIT(A) and the Tribunal found no evidence to support this claim, noting that the full sale consideration was received by the assessee. The Tribunal upheld the disallowance, stating that there was no clause in the sale deed authorizing the withholding of this amount for electricity charges.4. Granting of Indexation on Goodwill:The fourth issue raised by the Revenue involves the granting of indexation on goodwill while determining capital gains. The assessee claimed that goodwill was acquired during the year 1985-86 for Rs. 9 lakhs and indexed the cost to Rs. 30,18,045. The AO disallowed this, considering goodwill as a self-generated asset. The CIT(A) allowed the claim based on the trial balance and partnership deed, which indicated a cost of acquisition for goodwill. The Tribunal remitted this issue back to the AO for reconsideration, directing the AO to verify the documents and determine if there was actual payment for goodwill.Conclusion:The Tribunal dismissed the assessee's appeal and allowed the Revenue's appeal for statistical purposes, remanding the issue of indexation on goodwill back to the AO for further examination. The order was pronounced in the open court on 11.12.2015.