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Income Tax Appellate Tribunal, D/“SMC” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-4, Chennai dated 14.07.2017 pertaining to assessment year 2011-12.
There was a delay of 07 days in filing this appeal. Consequent to this, the assessee filed a condonation petition dated 04.10.2017 for condoantion of delay. I have gone through the condonation petition stating that the delay was occurred on the reason that the first appellate order of Ld.CIT(A) received was misplaced in her home due to her old aged 66 years. Hence, she requested that the ld.A.R was not able to prepare the paper for filing the appeal in time. Therefore, ld.A.R prayed that delay of 07 days is condoned. In my opinion, the reasons shown are justified and hence, delay in filing the appeal belatedly for 07 days before the Tribunal is condoned and appeal is admitted for adjudication.
The first issue in this appeal is with regard to confirming the disallowance of cost of repairs and improvement amounting to `9 lakhs.
The brief facts of the case are that the assessee had sold a property located at No.4/25, Kanniyakudi, 94, Karlyamanikam Post, Mannachanallur taluk, Trichy District on 10.03.2011, in the year 2011, for a sale consideration of `1,15,00,000/- together with Smt.
Rajalakshmi and Smt. P. Nachiar. The property under question was acquired by the assessee by means of a Registered Settlement Deed, dated 06.07.2006 executed by her father late Sri R.A Govindaraj Chettiar. The assessee holds one third share in the above property.
4.1 During the course of assessment proceedings, the AO found that the property had been acquired by the assessee’s father,late Sri R.A Govindaraj Chettiar, in the year 2001 for a consideration of `9,60,000/- which was settled in favour of the assessee and two others by late Sri R.A Govindaraj Chettiar by way of registered- settlement deed in the year 2006. In the computation of capital gains, the cost of acquisition was arrived at by the assessee by adopting 426 as the cost inflation index, which was the cost inflation index for the year 2001, the which the property was acquired by the assessee’s AO relied on Explanation (iii) to section 48 of the Act stipulates that the Indexed cost of acquisition which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the set was held by the assessee or for the year beginning on the 1st day of April 1981, whichever is later.
Accordingly, in the instant case, the first year in which the asset was held by the assessee was the year 2006, as the property in question was settled by her father by way of settlement deed in the year 2006 only. Therefore, the cost inflation index for the year 2006-07 i.e. 519 was adopted by the AO for working out the indexed cost of acquisition.
4.2 Further, the assessee had deducted a sum of `4,00,000/- from the sale consideration of `1,15,00,000/- being the expenses relating to transfer of capital asset. Similarly, while working the indexed cost of acquisition, the assessee had deducted the following sums. (i) `1,35,000I- being improvement and other expenses.
(ii) `9,00,000l- being additional construction.
4.3 On a perusal of the parent document relating to the purchase of the property in the year 2001, it was seen by the AO that the total extent of the property was 3750 sft. with a building thereon measuring 38 sqms of Madras Terrace roof and 70 sqm of RCC roof in the ground floor and 100 sqm of Madras terraced roof in the first floor.
Thus, the property under question consisted of both land and building at the time of purchase in the year 2001. On a perusal of the sale deed executed for the sale of the property in 2011, the extent of the land and building remained the same and there was no addition either to the building or to the land building, there was no addition either to the building or to the land subsequent to the purchase in the year 2001. Thus, the assessee’s claim of `9,00,000/- being the cost of additional construction, was found to be false and was not supported by any documentary evidence.
4.4 On being confronted with the above, the assessee claimed that a sum of `9,00,000/- was incurred in the year of purchase for carrying out repair works and improvement of the building. In the computation of income, the assesse had claimed the above sum towards additional construction, while in the letter filed on 09.03.2016, the assessee had submitted that the above amount was spent towards repair and improvement. The assessee’s statements were found to be contradictory. Similarly, no documentary evidences had been filed in proof of the claim of expenses of `4,00,000/- being shown as expenses on transfer of capital asset. Therefore, the AO disallowed a sum of `13,00,000/- (`9,00,000+`4,00,000/-). Accordingly, the taxable Long Term Capital Gain was calculated at `7,33,3041-and the income was also assessed at the same amount as against the returned income of NIL. Aggrieved by this order of the AO, the assessee had filed the appeal before the Ld.CIT(A). On appeal, Ld.CIT(A) observed that there is no evidence incurring cost of improvement at `9 lakhs. Further, the assessee claimed expenditure of `4 lakhs towards transfer of assets, which was disallowed by the lower authorities on the reason that there was no evidence for the same. Hence, the ld. Assessing Officer confirmed the action of the ld. Assessing Officer. Against the order of Ld.CIT(A), now the assessee is in appeal before Tribunal.
Before us, the ld.A.R submitted that the re-doing of kitchens, toilets, flooring, wall plastering were utmost importance and inevitable to put the purchased residential property in order and in a position to be occupied. Further, ld.A.R submitted that the assessee was not able to produce the bills in support of the repairs and improvement expense incurred as the said amount was incurred by the assessee’s father who had passed away. The ld.A.R submitted that the assessee while making her submission before Ld.CIT(A) had furnished documentary evidence issued by sub-registrar office vide annexure 1A) disclosing the value of the building and other items as on the date of the purchase (9th July, 2001) and also on the date of sale (10theMarch, 2011). The Ld.CIT(A) failed to consider a substantial increase in the fair market value of building and other items between the gap of 2001 and 2011 which by itself is a conclusive proof that the repairs and improvement expenses incurred by the assessee.
Thus, ld.A.R pleaded that the claim of assessee is genuine one in normal maintenance of the building and additions may be dropped.
On the other hand, ld.D.R submitted that there is no quantitative and qualitative change in the items enumerated therein.
The comparative figures are shown in Annexure-1A as follows:-
Sl. Description of items Annexure 1A as on Annexure 1A as on No. 9.7.2001 10.3.2011 1 Construction of structure Sand, brick, lime Brick and cement mortar and partly cement
2 Depth of foundation 4 feet 4 feet 3 Thickness of walls 1 feet 1 feet 4 Whether teak wood used throughout Nil, country wood ordinary 5 Flooring Ordinary ordinary 6 Age of building 41 years 50 years
7 Length of compound wall 43 RM 4 feet high, 43 RM ordinary compound wal, South and Western sides full right northern side half right 8 Length of Barbed wire or chain or link Nil Nil fence 9 Well, if any One corporation Water tap water tap connection 10 Is there a separate latrine or septic Two FOLs Septic tank, plus out tank connected with drainage under-ground drainage
11 Electric installations Yes provided Yes 12 Number of points 20 20 13 Number of fans Nil Nil 14 Number of electric motor pump sets Nil ½ HP motor,OHT-1
`3,000/- `3,000/- 15 Annual Rental value Ground floor 38 m2 Ground floor 38 m2 16 Floor Madras terraace roof
17 Floor Madras terrace roof First floor hundred First floor hundred Square metre Square metre 70 m2 70 m2 18 RCC roof Accordingly, there is no evidence to show that the assessee has incurred any additional amount towards improvement of capital assets. Hence, ld.D.R submitted that the order of Ld.CIT(A) may be sustained.
I have heard both the parties and perused the material on record. In this case, admittedly the assessee purchased a property on 09.07.2001 and sold the same on 10.03.2011. The comparative cost mentioned in the purchase deed and sales deed as follows:-
Particulars As per As per sale purchase deed deed Extent of site 3750 Sq.ft. 3750 Sq.ft. 348.39 sq.mt. Value of site/Sq.ft Rs.137/- Rs.27,000/- Value of thesite 5,13,750/- 94,06,530/- Building and other items Rs.4,46,250/- Rs.20,93,470/- value total 9,60,000/- 1,15,00,000/- The above table shows that there is a substantial increase in the value of assets sold from `4,46,250/- to `20,93,470/-, which is considered for registration purpose. Hence, it may not be said that the assessee has not incurred any expenditure for repairs and improvement. The plea of the assessee is that in view of long period of ten years, the assessee has not maintained the regular bills, towards incurring of above expenditure, so there was a substantial increase in the value of capital assets sold. Considering these facts, non-availability of the relevant bills and vouchers towards incurring of expenditure, I am of the opinion that it is not possible to reject the claim of assessee that she has incurred expenditure. However, at all probability, the assessee must have incurred certain expenditure and in the interest of justice, I direct the ld. Assessing Officer to consider an amount of `9 lakhs incurred towards the improvement of the capital asset which was subject matter of capital gains. This ground of appeal of assessee is partly allowed.
The next ground is disallowance of `4 lakhs. The assessee 8. claimed an expenditure of `4 lakhs towards transfer of capital asset.
Considering the market conditions and trade practices of buying and selling of the property, I direct the ld. Assessing Officer to allow the expenditure of 2% on the value of consideration received by the assessee as incurred towards the transfer of the capital asset. Hence, this ground of appeal of assessee is partly allowed.
9. In the result, the appeal of assessee is partly allowed. Order pronounced on 22nd January, 2018.