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TaxTMI 
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TaxTMI 
2020 (7) TMI 302
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....nst the order passed by the Pr. CIT u/s 263 of the Act, wherein the impugned order has been assailed on the following grounds of appeal before us : "1. On the facts and the circumstances of the case and in law, the Learned Commissioner of Income-tax -2, Mumbai (hereinafter said "the CIT") erred in passing order under section 263 of the Income-tax Act, 1961 {Act}, dated 26th March, 2019 (hereinafter referred to as the "impugned order") despite the fact that the CIT was appraised of the fact that an appeal against the order under section 143(3) of the Act passed by the Assessing Officer is pending before the Hon'ble Income-tax Appellate Tribunal, Mumbai and hence CIT cannot assume jurisdiction under section 263 of the Act to pass the impugned order. Hence the impugned order is bad in law and may kindly be set aside/annulled. 2. The ld. CIT erred in not appreciating that in the present case the original assessment order was passed after considering all the details and the documents furnished by the appellant before the Assessing officer and hence the CIT was not justified in exercising the suo motto power of revision under the provisions of section 263 of the Income-tax Act, 1961 ....
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....561/- ..........do........ 2010-11 Rs. 19,49,290/- Rs. 25,74,379/- ..........do........ 2011-12 Rs. 32,03,444/- Rs. 38,31,890/- ..........do........ 2012-13 Rs. 34,66,596/- Rs. 38,20,579/- Repairs & Maintenance 2013-14 Rs. 33,99,949/- Rs. 33,99,949/- Total Rs. 3,82,24,590/- Being of the view, that the deduction of the interest expense would had been claimed by the assessee u/s 24(b) while computing its income under the head 'Income from house property', the A.O declined to accept the said amount as a part of the cost of acquisition/improvement for the purpose of working out the LTCG on the sale of the aforesaid property. It was observed by the A.O that though 'cost of improvement' as defined in Sec. 55 of the Act included all expenditure of a capital nature incurred in making of any addition or alterations to the capital asset by the assessee after it had became his property, however, the same would not include any such expenditure which was deductible while computing its income chargeable under the head "Income from house property". On the basis of his aforesaid reasoning the A.O scaled down the assesse's claim of Indexed cost of acquisition/improvement of Rs.....
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....and if so, the same have to be disallowed during the year under consideration. Failure of the Assessing Officer to do so has rendered the assessment order u/s 143(3) dated 28.12.2016 as erroneous in so far as it is prejudicial to the interests of the revenue." On the basis of his aforesaid observations, the Pr. CIT was of the view that the assessment order passed by the A.O was erroneous insofar it was prejudicial to the interest of the revenue on two grounds viz. (i). the A.O had failed to appreciate that as the assessee had sold the property for a sale consideration of Rs. 4,55,00,000/- which was less than the value assessed by the stamp valuation authority at Rs. 5,53,36,670/-, therefore, the provisions of section 50C were applicable; and (ii) the A.O had erred in failing to verify that now when the assessee for computing the indexed cost of acquisition/improvement had included interest paid on borrowed funds that were utilized for construction of property, therefore, whether the same was claimed by the assessee as an expenditure under any head viz. "business income" or "Income from house property" in the previous assessment years, and if so, the same were to be disallowed duri....
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....,00,690/-. In the backdrop of the aforesaid, the A.O taking cognizance of the fact that the assessee had taken the sale consideration of the property in question at Rs. 4,55,00,000/- which was higher than its ready reckoner value of Rs. 4,53,00,690/- as per the "deed of correction", therefore, accepted the same. On the contrary, the Pr. CIT observing that as the assessee had paid stamp duty on valuation of Rs. 5,53,36,670/-, therefore, it was incumbent on the part of the A.O to have verified as to whether or not the excess payment of stamp duty was refunded to the assessee. It was observed by the Pr. CIT that in case the excess payment of stamp duty was not refunded to the assessee, then for working the figure of valuation the A.O should have referred the matter to the DVO as per Sec. 50C(2) for determining the value of the property in question. (ii). We have perused the "deed of correction", dated 26.12.2016 (Page 31 - 35) of the assesse's 'Paper book' ('APB'), wherein both the parties i.e the assessee and the purchaser had mentioned that value of the property as per ready reckoner rate is Rs. 4,53,00,690/-. On a perusal of Sec. 50C, we find that the same reads as under (relevant....
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....onsideration was paid by the purchaser party viz. M/s SVG Investments Pvt. Ltd., therefore, the question of refund of any part of the excess stamp duty paid to the assessee would not arise. Accordingly, we to the said extent modify the directions of the Pr. CIT., and direct the A.O to verify as to whether or not the valuation adopted by the stamp valuation authority had been revised at Rs. 4,53,00,690/-. In case, the valuation adopted by the stamp valuation authority had not been revised, then for working the valuation of the property the A.O shall refer the matter to the DVO, as per Sec. 50C(2) of the Act. As such, in terms of our aforesaid observations we uphold the well reasoned view taken by the Pr.CIT and dismiss the objection raised by the assessee. (B). AS REGARDS VERIFICATION OF COST OF ACQUISITION/IMPROVEMENT: (i). We shall now advert to the observations of the Pr. CIT, wherein he had directed the A.O to verify the facts as regards allowing of the cost of acquisition/improvement of the property in question at Rs. 2,71,72,172/-. As per the facts borne on record the assessee had claimed deduction for cost of acquisition/improvement, as under: Particulars Financial Year ....
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....om house property" in the previous assessment years, and if so, the same were liable to be disallowed during the year under consideration. In our considered view there in no infirmity in the aforesaid observation of the Pr. CIT. As a matter of fact, the inconsistent approach adopted by the A.O for partly sustaining the interest expenses and partly excluding the same while determining the indexed cost of acquisition/improvement of the property under consideration is beyond our comprehension. Be that as it may, the Pr. CIT in our considered view had rightly directed the A.O to verify as to whether the expenses claimed by the assessee and allowed by him in the course of the assessment proceedings as part of the indexed cost of acquisition/improvement were claimed by the assessee as expenditure under any head viz. "business income" or "Income from house property" in the previous assessment years, and if so, to disallow the same during the year under consideration. Accordingly, finding no infirmity in the aforesaid observations of the revisional authority, we uphold the same. 6. We shall now advert to the claim of the assessee that as it had assailed before the Tribunal the order of th....
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....Gain, by rejecting the evidence placed on record. Hence, the order dated 8th November, 2017 (hereinafter said as "impugned order") passed by the learned CIT(A) is therefore bad in law and liable to be set aside. 2. The learned CIT(A) erred in disallowing the amount of Rs. 76,52,469/- i.e interest paid to Janalaxmmi Co-op Bank Ltd. on borrowed capital for construction of capital asset, by rejecting the evidence placed on record and without appreciating that the said interest was entirely towards the cost of acquisition. Hence, the impugned order passed by the learned CIT(A) is therefore bad in law and liable to be set aside. 3. The learned CIT(A) erred in disallowing the Cost of Improvement of Rs. 33,99,949/- which was incurred by the Appellant as repairs and maintenance, without considering the facts and documentary evidence submitted before the learned CIT(A). The learned CIT(A) further erred in concluding on mere surmises that the repair was routine in nature and did not bring in any benefit to the capital value of the building and cannot be considered as part of cost of improvement. The Appellant submits that the said expenditure should be considered as a Cost of Improvement....
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....ost of acquisition/improvement: Particulars Financial Year Cost (Rs.) Indexed Cost (Rs.) Interest expenses 2011-12 Rs. 32,03,444/- Rs. 38,31,890/- Interest expenses 2012-13 Rs. 34,66,596/- Rs. 38,20,579/- Repairs & Maintenance 2013-14 Rs. 33,99,949/- Rs. 33,99,949/- Total Rs. 1,10,52,418/- On the basis of his aforesaid reasoning the A.O scaled down the assesse's claim of Indexed cost of acquisition/improvement of Rs. 3,82,24, 590/- to an amount of Rs. 2,71,72,172/-. Accordingly, the LTCG on the sale of the aforesaid property was reworked out by the A.O at an amount of Rs. 1,73,27,828/-. 12. Aggrieved, the assessee assailed the assessment framed by the A.O vide his order passed u/s 143(3), dated 28.12.2016 in appeal before the CIT(A). It was the claim of the assesee that the A.O was in error in excluding the interest paid by the assessee on the loan funds which were utilized towards construction of the property in question, from its cost of acquisition. Also, the exclusion of the repair and maintenance expenses incurred on the aforesaid property was challenged before the appellate authority. Admitting, that the interest expenses were though claimed as a deductio....
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....B.L Lingaraju vs. ACIT [ITA No. 906/Bang/2014], the Hon'ble Bangalore Tribunal observed that in the case of CIT Vs. Maithreyi Pai [1985] 152 ITR 247 (Kar), Hon'ble Karnataka High Court had held that interest paid on borrowings for the acquisition of capital asset must fall for deduction as the cost of acquisition. But, if such sum was already allowed as a deduction under other heads, the same cannot be allowed as a deduction in computing capital gains. The Hon'ble High Court also held that 'No taxpayer under the scheme of the Act could be allowed deduction of the same amount twice over'. Relying on such decisions of Hon'ble Karnataka High Court, the Hon'ble ITAT, Bangalore in the case of Captain B.L Lingaraju vs. ACIT held that the tax payer was not eligible to claim interest paid on housing loan as part of the cost of acquisition in computing capital gains as the said interest was allowed as a deduction from house property. The facts of the case were that the tax payer has claimed a deduction on interest paid on housing loan while computing income from house property which was claimed to be self-occupied. The Tribunal also observed that even if the property had not been let out or....
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.... towards repair and maintenance which is routine in nature does not bring in any benefit to the capital value of the building, and the same cannot be considered as cost of improvement for the purpose of computing the capital gain u/s 48 of the Act. In this view of the matter, the contention regarding the expenses incurred towards repair and maintenance of Rs. 33,99,949/- not being allowed as cost of improvement by the A.O is found to be justifiable and contention of the assessee, is accordingly rejected." 14. We have deliberated at length on the observations of the CIT(A) and given a thoughtful consideration to the issue before us. Admittedly, the assessee while computing its income in the previous years under the head "Income from House Property" had claimed deduction u/s 24(b) of the interest paid on loan raised from "Janalaxmi Co-op Bank Ltd", which funds are stated to have been utilized in construction of the property in question. In our considered view, there is substance in the view taken by the CIT(A) that now when the interest expenditure was allowed as a deduction to the assessee while computing its income under the head "Income from house property", the same could not ha....
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....incurred and also as to how the same qualified as "cost of improvement". However, the assessee had taken us through the details of such expenses i.e invoices/bills evidencing the nature of the expenditure incurred [(Page 5-42) of the assesse's 'Paper book' ('APB')]. At this stage, we may herein observe that the assessee as per its certification of the 'APB', had claimed, that the copies of the aforesaid invoices/bills were furnished with the lower authorities. On a perusal of Sec. 55(2) of the Act, we find, that if an assessee had incurred an expenditure of a capital nature in making any addition or alterations to a capital asset after it had became his property, then the same would form part of the "cost of improvement" of such property. At the same time, there is a rider provided in the aforesaid statutory provision, which therein envisages that any such expenditure which is deductible in computing the income chargeable under the other heads of income is not to be included within the meaning of "cost of improvement". In our considered view, in all fairness, the aforesaid issue requires to be restored to the A.O with a direction to verify afresh the maintainability of the aforesai....
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.... the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the rule so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether or not the passing of this order, beyond a period of ninety days in the case before us was necessitated by any "extraordinary" circumstances. 19. We find that the aforesaid issue after exhaustive deliberations had been answered by a coordinate bench of the Tribunal viz. ITAT, Mumbai 'F' Bench in DCIT, Central Circle-3(2), Mumbai Vs. JSW Limited & Ors. [ITA No. 6264/Mum/18; dated 14/05/2020, wherein it was observed as under: "Let us in this light revert to the prevailing situation in....
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....ring which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribun....