2016 (7) TMI 386 - AT - Income Tax

Tribunal Decision: Capital Gain Computation Adjusted, Personal Expenses Upheld, Donations Limited

The Tribunal partly allowed the appeal by remanding the computation of capital gain, deleting the addition of Rs. 8,000 under 'Telephone expenses,' ... Capital gain computation - transfer of leasehold right - cost of acquisition - Held that:- The amount added by the AO is admittedly the sale consideration for the transfer of leasehold right which has been taken as short-term capital gain in the hands of the assessee. Any income chargeable to tax under the head ‘Capital gains’ is computed by reducing cost of acquisition, cost of improvement and expenses incurred in relation to the transfer of property from the full value of consideration received on the transfer of property. Under no circumstance, the entire sale consideration can be treated as the amount of capital gain, as has been done extantly. In view of the fact that the assessee acquired the ownership of property in satisfaction of his claims due from the company, it is this amount, being the claim due from the assessee company, in satisfaction of which the assessee was given lease hold right in the property, would become the cost of acquisition in the hands of the assessee. There is no material available on record to show the amount representing such cost of acquisition of the property in the hands of the assessee. As such, the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of AO for computing the capital gain in the hands of the assessee, after reducing the cost of acquisition, etc. from the full value of consideration. Addition under the head ‘Telephone expenses' - Held that:- After considering the submissions made on behalf of the assessee and the relevant material, it is observed that the AO made addition @ 20% of telephone expenses at ₹ 14,600/-. When the assessee himself disallowed 20% of telephone expenses on account of personal user in his computation of income, there remains no valid reason for making or sustaining any further addition on this score. Addition towards personal expenses in the purchases made through credit cards - Held that:- We are not inclined to disturb the sustenance of this addition because it was the assessee himself who agreed for the addition when certain personal expenses were found to have been incurred through his credits that were debited in the books of account of the assessee. Therefore, uphold this addition. Addition of conveyance expenses, staff welfare, inward remittance, printing, advertisement and sale promotion, etc. - Held that:- AO made disallowance of ₹ 10,000/- out of such expenses. No ground was taken before the ld.CIT(A) against such disallowance. The ld. AR has placed on record the copy of a letter dated 24.2.2012 shown to have been addressed to the CIT(A) raising additional ground challenging the sustenance of addition of ₹ 10,000/-. There is no reference of this letter in the impugned order. This letter dated 24.2.2012 also does not bear any stamp of the office of the ld. CIT(A). This shows that either this letter was not filed before the ld. CIT(A) or it was not admitted for adjudication. Since the ground for disallowance of ₹ 10,000/- out of the above referred five expenses does not arise from the impugned order, the same cannot be entertained. Even otherwise, the disallowance of ₹ 10,000/- out of the above expenses due to lack of proper evidence, etc., appears to be reasonable Addition on account of donations u/s 80G - no documentary evidence was filed in support of this claim - Held that:- A copy of the computation of income filed on page 1 of the paper book that the assessee voluntarily added back Donation of ₹ 3,000/-. As such, there could have been no reason for making a further disallowance of ₹ 3,000/-. The ld. AR contended that only a sum of ₹ 1,000/- was actually claimed as deduction for which there was no receipt and, hence, the disallowance may be sustained to this extent. Therefore agree with the contention so advanced and, accordingly, restrict the addition to ₹ 1,000/-. Decided partly in favour of assessee Issues involved:1. Addition of Rs. 6,93,000 as short-term capital gain.2. Sustenance of addition of Rs. 8,000 under 'Telephone expenses.'3. Confirmation of addition of Rs. 50,000 towards personal expenses from credit card purchases.4. Confirmation of addition of Rs. 10,000 from various expenses.5. Disallowance of Rs. 3,000 on account of donations under section 80G.Detailed Analysis:1. The first issue pertains to the addition of Rs. 6,93,000 as short-term capital gain. The dispute arose from the cash deposit in the bank account. The assessee claimed to have sold a property on behalf of a company, but the resolution passed by the company indicated otherwise. The Tribunal found that the sale amount should be considered as the cost of acquisition in the hands of the assessee. The matter was remanded to the AO for proper computation of capital gain after considering the cost of acquisition.2. The second issue concerns the sustenance of addition of Rs. 8,000 under 'Telephone expenses.' The AO had disallowed a portion of telephone expenses, which the assessee voluntarily disallowed in his computation. The Tribunal held that there was no valid reason for further addition, and thus, the addition of Rs. 8,000 was deleted.3. The third issue revolves around the confirmation of addition of Rs. 50,000 towards personal expenses from credit card purchases. The assessee admitted to incurring personal expenses through credit cards and agreed to surrender Rs. 50,000. The Tribunal upheld this addition as the assessee had acknowledged the personal nature of the expenses incurred.4. The fourth issue relates to the confirmation of addition of Rs. 10,000 from various expenses like conveyance, staff welfare, etc. The AO had disallowed this amount, and the Tribunal observed that since no ground was taken before the CIT(A) against this disallowance, it could not be entertained. The Tribunal dismissed this ground of appeal.5. The final issue involves the disallowance of Rs. 3,000 on account of donations under section 80G. The AO disallowed the deduction claimed due to lack of documentary evidence. The Tribunal noted that the assessee voluntarily added back Rs. 3,000 and restricted the disallowance to Rs. 1,000, which was the actual claimed amount without a receipt.In conclusion, the Tribunal partly allowed the appeal, remanding the computation of capital gain, deleting the addition of Rs. 8,000 under 'Telephone expenses,' upholding the addition of Rs. 50,000 towards personal expenses, dismissing the addition of Rs. 10,000 from various expenses, and restricting the disallowance of donations to Rs. 1,000.