TOSHVIN ANALYTICAL PVT LTD.,MUMBAI vs. DY CIT CIRCLE-1 (3)(2), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

M/s. Toshvin Analytical P. Ltd.,

M/s. Toshvin Analytical P. Ltd., sold this flat to Mr. Elton Menezes on 30/07/2012 falling in A.Y.2013-14 for a total consideration of Rs.3,61,00,000/-. The case of the assessee is that since the assessee had booked the flat way back in June 2005 and allotment letter was issued to him on 14/06/2005 and thereafter, the payments were made by him as per the payment schedule agreed upon, the property which was sold by him on 30/07/2012 constitutes long term capital asset and accordingly, the resultant gain would be long term capital gain. The case of the Revenue is that since the flat was registered in the name of the assessee only on 30/05/2012 and immediately thereafter within two months, the assessee had sold a flat and hence, the resultant gain would only be short term capital gains. Hence, the issue that arises for our consideration is whether the holding period of the asset should be reckoned from the date of registration of the property or from the date of allotment of the property for the purpose of deciding whether the asset transferred is a long term capital asset or a short term capital asset. We find that this issue is no longer res integra in view of the decision of the Hon’ble Jurisdictional High Court in the case of PCIT vs. Vembu Vaidyanathan reported in 413 ITR 248 wherein it was held that, date of allotment would be relevant date for the purpose of determining the holding period of capital asset. It was also held that date of allotment so made shall be the relevant date for the purpose of capital gain tax as date of acquisition. It was also noted that the allottee gets title to the property on the issue of allotment letter and payment of instalments was only a follow-up action and taking delivery of the possession is only a formality. Respectfully following the aforesaid decision, we hold that the asset has been held by the assessee for more than three years as computed from the date of allotment and accordingly, the asset transferred would be a long term capital asset thereby resulting in long

M/s. Toshvin Analytical P. Ltd., term capital gains in the instant case. Assessee would also be eligible for benefit of indexation. 3.1. Having held that the asset transferred is a long term capital asset, the next question that arises for our consideration is whether the indexation benefit for cost of acquisition should be allowed to the assessee, based on the payments made in instalments and applying the cost inflation index in the relevant year of payment. We find that assessee itself had claimed indexation benefit by applying the cost inflation index in the year of payment of instalments. Hence, there is no dispute that arises in this regard.

3.2. In view of the aforesaid observations, we direct the ld. AO to accept long term capital gains returned by the assessee on sale of this flat and delete the addition made on account of capital gains made in this regard. Accordingly, the ground Nos. i & ii raised by the assessee are allowed.

4.1. We have heard rival submissions and perused the materials available on record. We find that assessee was asked to furnish details of office renovation expenses on leased premises by the ld. AO during the course of assessment proceedings which was duly furnished by the assessee. The details of the same are as under:-

M/s. Toshvin Analytical P. Ltd., Sr. Fixed Ajit Shilpi's Service Renovation No. Name of Contractors Head of Accounts Nature of Work Assets Exps. Tax Exp. Total

Electricity 1 Jalaram Lights Studio Equipments Lights 124961 17551 142512 Electricity 2 TSR Enterprises Equipments Electrical work 225893 31727 4938 264578 527136 Civil, Carpentary 3 Ahmed Interiors Furniture work 995393 139802 23624 2650292 3809111 Consolidated Carpet Ind. 4 Ltd., Furniture Carpet 149550 21005 170555 5 Grace Engineers Furniture Chairs 299784 42105 341889 Door Access 6 Isha Systems & Software Office Equipments Control 17313 2431 19744 7 Shemaroo Corporation Office Equipments Projector 54,550 7662 62212 8 Indu Arts & Frames P. Ltd., Painting Painting 7312 1027 8339 Plant & Machinery- 9 Blue Star Limited Others Air conditioning 943803 132557 1076360 Plant & Machinery- 10 Meghdoot Pumps Others Water pump 24135 3390 27525 Ozone Airconditioning & Plant & Machinery- 11 Consultancy Others AC installation 286224 40200 6405 332829 Addonix Technologies Pvt. Dlink RI 45 12 Ltd., Renovation Exps connector 24560 24560 13 Art Work Renovation Exps POP work 278364 278364 14 Classic Fabrics Renovation Exps Fabrics 3300 3300 15 Pankaj Panchal Renovation Exps Labour charges 3780 3780 Paradise Ceramica (India) Tiles, sink, tabs 16 Pvt. Ltd., Renovation Exps etc., 135337 135337 Frosted vinyl film to be stuck on 17 Raj Creations Renovation Exps glass 88750 88750 18 Sharada Integrated Ventures Renovation Exps Roller Blinds 13636 13636 19 Standard Printing Solution Renovation Exps Name Plate 706613 706613 12.5% on total 20 GVS Creation Renovation Exps project cost 7369 7369 21 Ajit Shilpi Architect 607455 607455 31,28,918 4,39,457 34,967 47,84,034 83,87,376 4.2. From the aforesaid details given in tabulation, the ld. AO accepted all the figures except the renovation expenses incurred in the sum of Rs.26,50,292/- for civil and carpentry work etc., through the contractor M/s. Ahmed Interiors seeking to treat the sum as capital in nature. Before the ld. CIT(A), assessee furnished all the bills of Ahmed Interiors and accordingly, the ld. CIT(A) sought remand report from the ld. AO. In the remand proceedings, we find that the aforesaid tabulation was duly

M/s. Toshvin Analytical P. Ltd., furnished by the assessee before the ld. AO together with all the bills of Ahmed Interiors. The Bills of Ahmed Interiors are enclosed from pages 291-302 of the paper book filed before us. We find that from the perusal of each of those bills which are in great detail, the assessee had identified the specific items which are giving enduring benefit to the assessee and accordingly, had capitalized the same in the books of accounts and claimed depreciation accordingly, both under the companies Act as well as under the Income Tax Act. In respect of items where no enduring benefit is available, the assessee had duly charged off as revenue expenditure. From the perusal of the bills enclosed in pages 291-302, this fact is glaring on us and hence, we do not find any infirmity in the action of the assessee on treating the said expenditure as revenue expenditure. We also find that the ld. CIT(A) had categorically given a finding that none of the expenditure entails any structural change or extension or improvement of the building. This finding has not been controverted by the ld. DR before us. Having given such a finding, we hold that the ld. CIT(A) ought not to have treated the said expenditure as capital in nature. In view of the aforesaid observations, we hold that the expenditure incurred in the sum of Rs.26,50,292/- should be allowed as revenue expenditure. Reliance in this regard had been rightly placed by the ld. AR on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Talathi and Panthaky Associated (P) Ltd., reported in 343 ITR 309 wherein it was held that cost of repairs / reconstruction of tenanted premises is revenue in nature and allowable as deduction. Respectfully following the aforesaid decision, the ground No.iii raised by the assessee is allowed.

M/s. Toshvin Analytical P. Ltd.,

5.1. We have heard rival submissions and perused the materials available on record. We find that assessee had claimed an amount of Rs.21,05,758/- as foreign travel expenses on account of Managing Director. Since, the requisite details were not furnished by the assessee before the ld. AO, the ld. AO resorted to disallow 20% of the same on adhoc basis for attributing personal element of expenditure incurred thereon and disallowed Rs.4,21,152/- in the assessment. During the course of appellate proceedings, the assessee filed the details of the names of the employees with their designation and date of commencement of travel together with the details of foreign travel of Managing Director. The details of entire foreign travel of employees are enclosed in page 37 of the paper book. The details of entire foreign travel of Managing Director are enclosed in page 116 of the paper book as under:-

M/s. Toshvin Analytical P. Ltd., 5.2. The assessee also enclosed the entire bills in support of the aforesaid table from pages 117 to 289 of the paper book. It was pleaded by the assessee before the ld. CIT(A) that the Managing Director had incurred various expenses during his foreign travel which is meant for business purposes and had incurred various expenses on behalf of the company. Accordingly, these expenses were also duly reimbursed by the assessee company to the Managing Director. These details were very much available before the ld. AO in the assessment proceedings. We find that the entire foreign travel expenses of the employees of the assessee company have been duly allowed in full by the ld. AO. Admittedly, the Managing Director of the assessee company is also an employee of the company and hence, he cannot be treated in a different manner with that of the other employees with regard to allowability of foreign travel expenditure for business purposes. Accordingly, we direct the ld. AO to allow the entire foreign travel expenditure and delete disallowance of M/s. Toshvin Analytical P. Ltd., Rs.4,21,152/- made on an adhoc basis. Accordingly, the ground No.iv raised by the assessee is allowed.

5.3. Ground No. v is general in nature and does not require any specific adjudication.

Order pronounced on 30/08/2021 by way of proper mentioning in the notice board.