INDORIGIN ELECTRIC LTD,WADALA MUMBAI vs. ACIT CENTRAL CIRCLE 4 4 MUMBAI , MUMBAI

Having considered the submissions of both sides and perused the material available on record, we find that there is no dispute regarding the fact that during the year under consideration, the assessee earned dividend income of INR 1,26,250, which was claimed as exempt under section 10(34) of the Act. The Hon’ble Jurisdictional High Court in the case of Nirved Traders Pvt. Ltd. vs. DCIT, in of 2017, vide judgment dated 23/04/2019, has held that disallowance under section 14A of the Act cannot be more than the exempt income. Thus, respectfully following the decision of the Hon’ble Jurisdictional High Court cited supra, we direct the AO to restrict the disallowance made under section 14A of the Act to the exempt income earned by the assessee. Accordingly, Ground No.1 raised in assessee’s appeal is allowed for statistical purposes.

Ground No.2, raised in assessee’s appeal, pertains to the computation of long-term capital gains.

We have considered the submissions of both sides and perused the material available on record. During the assessment proceedings, the assessee was asked to justify the long-term capital loss of INR 13,79,942 and submitted bills/invoices for the claim of the cost of acquisition. In response, the assessee furnished the details of the cost of acquisition and improvement along with documentary evidence. The assessee further submitted that the long-term capital loss is on account of the sale of land purchased from the Gujarat Industrial Development Corporation on 13/03/2008 for INR 99,83,423, which was sold later to M/s Nagindas Hiralal (A.Y. 2014/15) 4 Bhayani, vide agreement dated 16/03/2013, at INR 2,25,67,587. As per the assessee, it incurred various costs towards the improvement of the plot aggregating to INR 21,57,631.

The AO, vide order passed under section 143(3) of the Act, held that the assessee has not submitted any documentary evidence for payment of expenses incurred in cash amounting to INR 24,853. Accordingly, the cost of acquisition was taken at INR 99,58,572, as against the claim of the assessee at INR 99,83,425. Further, it was observed that the assessee has submitted expenses to the tune of INR 62,91,583. Accordingly, the assessee was asked to produce proof of such payments. Upon perusal of the details filed by the assessee, it was observed that the assessee has not submitted any proof with respect to the payments amounting to INR 3,62,520. Further INR 41,34,052 was paid as transfer charges, which is to be adjusted from the sale proceeds and does not form part of the cost of improvement. With respect to the balance amount of INR 17,95,011, it was observed that the expenses are on account of lease rate, tax paid, utilisation charges, revised plan fee, foreclosure charges, etc., and none of these expenses are of a capital nature incurred in making any additions or alterations to the capital asset. Accordingly, the AO computed the long-term capital gains at INR 30,34,800.

The learned Addl./Joint CIT(A), vide impugned order, partly allowed the ground raised by the assessee on this issue, observing as follows: – “6.2.3. I have carefully considered the facts of the case. In this case, the appellant has not submitted the proof of expenses with documentary evidences for improvement to the property either during the scrutiny (A.Y. 2014/15) 5 proceedings or during the appellant proceedings. Further, The appellant also claimed expenses of Rs. 17,95,011/-related to lease rent, tax paid, utilization fee, plan fee. As per provisions of the section 55 of the IT Act, these expenses are not capital in nature and thus cannot form part of cost of improvement as none of these expenses are incurred for making any improvement, addition or alteration to the said land. The assessee it self submitted during assessment proceedings that nothing was constructed on the land and it was transferred in same stat as it was received from GIDC. In view of the above, the appellant cannot claim above expenses as cost of improvement to the property. Hence, the ground of the appellant on this issue is dismissed. However, the AO has applied cost inflation index for F. Y.2012-13 instead of F.Y. 2013-14 while computing the capital gain. In this regard, AO is directed to take cost inflation index for F.Y. 2013-14 and directed to re compute the capital gain. Hence, this ground of the appellant is partly allowed.”

During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee filed the appeal before the learned CIT(A) on 30/01/2017 and before its migration to the faceless appellate mechanism, the assessee filed various submissions during the physical hearing along with necessary documentary evidence in support of its claim of cost of improvement. In this regard, the learned AR made a specific reference to the written submission dated 19/12/2018 filed before the learned CIT(A)-12, Mumbai, in support of its submission that the expenditure is in the nature of capital expenditure along with necessary documentary evidence.

From the perusal of the paper book filed by the assessee before us, we find that the assessee also filed written submissions before the learned CIT(A) on 16/07/2018, 25/07/2018, 21/08/2018, 25/09/2018 and 08/10/2018. However, from the perusal of the impugned order, it is evident that none of these submissions or the documentary evidence filed by the assessee were taken into consideration by the learned Addl./Joint CIT(A),

On the other hand, the learned Departmental Representative (“learned DR”) submitted that these evidences were furnished by the assessee for the first time before the learned CIT(A), and the same have not been examined by the AO.

Thus, having considered the submissions of both sides and perused the material available on record, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after examination/verification of the details submitted by the assessee in support of its claim of incurring the cost towards the improvement of the plot. We order accordingly. As a result, the impugned order on this issue is set aside, and Ground No.2, raised in assessee’s appeal, is allowed for statistical purposes.

Ground No. 3, raised in assessee’s appeal, was not pressed during the hearing. Accordingly, the said ground is dismissed as not pressed.

In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 10/02/2026