Loading judgment…
Facts
The assessee, an individual, filed a return of income declaring Rs.1,20,41,040. The assessment order increased total income to Rs.1,79,36,182 by disallowing expenses on capital asset improvement, carry forward of losses, and denying a Section 80G deduction. The CIT(A) upheld these disallowances.
Held
The Tribunal allowed the indexed cost of improvement for the house property as it was an integral part of the property. It partly allowed the set-off of brought forward long-term capital loss, directing the AO to allow it after verification, and also partly allowed the claim for donation deductions under Section 80G and 80GGA, remanding the issue to the AO for re-adjudication based on new facts.
Key Issues
Whether expenses on furniture and fixtures are allowable as cost of improvement for capital gains? Whether brought forward capital losses can be set off against current year's capital gains when returns for some prior years were filed beyond the due date? Whether donation deductions under Section 80G and 80GGA are allowable when supporting documents were not initially filed with lower authorities.
Sections Cited
250, 80G, 80GGA, 139(1), 70, 271(1)(c), 35AC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
(ASSESSMENT YEAR 2016-17) Mukut Behari Lal Bhargava, ACIT, LCG 05, 04B Laburnum Complex, Circle-2(1), 1 4th Floor, Sushant Lok 1, Vs. Gurgaon. Block-A, Sector-28 Haryana-122009. PAN-ADIPB9356P (Appellant) (Respondent) Assessee by None Department by Shri Pradumna Kumar Singh, Sr. DR Date of Hearing 03.09.2025 Date of Pronouncement 26.11.2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A) in short] in Appeal No. CIT(A), Gurugaon-1/10738/2018-19 dated 05.02.2025 passed u/s 250 of the Income Tax Act, 1961 (the Act, in short) for Assessment Year 2016-17.
Brief facts of the case are that the assessee is an individual and filed its return of income declaring total income of Rs.1,20,41,040/-. The case of the assessee was selected for limited scrutiny and during the course of assessment proceedings, the Assessing Officer has issued various notices which were replied by the assessee.
Mukut Behari Lal Bhargava vs. ACIT 3. Thereafter, the assessment order was passed at a total income of Rs.1,79,36,182/- by making disallowance on account of expenses claimed on costs of improvement of capital asset, disallowance of carry forward of short term capital gains and long term capital loss and also denied the deduction claimed u/s 80G of the Act.
Against the said order, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee, thus, the assessee is in appeal before us by taking the following grounds of appeal: “Ground No, I That on the facts and circumstances of the case and in law, the Learned CIT (Appeals NFAC) has erred in confirming the addition of Rs .7,80,526/- made by the Learned ACIT, on account of not treating the indexed Cost of Furniture and Fixtures (Original Value Rs. 3,50,000/-), which is the Integral part that was sold along with the property. Ground No. II That on the facts and circumstances of the case and in law, the Learned CIT (Appeals NFAC) has erred in confirming the addition of Rs.24,80,877/- made by the learned ACIT, on account of disallowances of set off of B/f short term loss Rs. 3,09,191/- and long-term capital loss Rs. 21,71,686/-. Ground No. III During the year under review, a sum of Rs.2,36,35,657.00/- was given as a donation to the Letz Dream Foundation and Rs. 20,00,000/- to the Parivaar Education Society. The deductions were claimed u/s 80G and u/s 80GGA, respectively. Ground No. IV That the Ld. ACIT grossly erred in initiating penalty proceedings u/s 271 (1) (c) of the Act, which is consequential. That the above grounds of appeal are independent and without prejudice to each other.”
5. Heard both the parties and perused the material available on record.
In Ground of appeal No. 1 assessee has challenged the denial of deduction claimed towards indexed cost of improvement from the computation of long terms capital gains arising out of the sale of house property. From the perusal of appellate order, it is seen that Ld. CIT(A) dismissed the appeal of the assessee mainly for the Mukut Behari Lal Bhargava vs. ACIT reasons that the assessee has failed to file proper evidences of the expenses incurred towards renovation expenses of Rs.7,80,526/- claimed as cost of improvement of the house property sold during the year. The assessee also claimed renovation expenses on modular kitchen etc. which according to lower authorities were to facilitate the descent accommodation and thus are not part of the scheme of the Act, therefore, they were disallowed. After considering the facts and submissions of the assessee, we find that the assessee has incurred costs of Rs.3,50,000/- on the items like Cupboards, Modular Kitchen, Double Beds etc. which are part of the furniture and fixtures in the house situated at 603, Dhariawad Upasana Residency-25, Jaisingh Highway, Jaipur and claimed in the cost of improvement of Rs.7,80,526/- towards the same. These items are basic items without which a person cannot use the house property and therefore, they are integral component of total costs of house. Further, there is no restriction in the Act that the Furniture and Fixture which are essential for the use of the house property could not be allowed as deduction. In view of these facts, we hereby direct the AO to allow the cost of improvement as claimed by the assessee. Accordingly, Ground of appeal No.1 of the assessee is allowed.
Ground of appeal No. 2 is with respect to the disallowance of brought forward capital loss of Rs. 21,71,686/- from Assessment Years 2008-09, 2011-12 and 2012-13. Further the claim of set-off of short term capital loss of Rs.3,09,191/- brought forward preceding years was also disallowed. The AO as well as Ld. CIT(A) had dismissed the claim for the reason that return of income for Assessment Year 2013-14 and 2015-16 were filed after the due date and further no details were provided by the assessee with respect to the such claim. After considering the submissions put forth by both the parties, we find that the loss was claimed by the assessee brought forward from Assessment Year 2008-09, 2011-12 and 2012-13 in respect of long term capital gain however, short term capital gain was brought Mukut Behari Lal Bhargava vs. ACIT forward from Assessment Year 2009-10 and 2014-15. Section 70 of the Act prohibits the allowability of set off of losses where the return of filed for the relevant assessment year in which such losses is incurred, is filed beyond the due date prescribed u/s 139(1) of the Act. The assessee has claimed set off of brought forward long-term capital loss of Rs.21,76,686/- incurred in Assessment Years 2008-09 and 2011-12 and 2012-13. Since the return of income for these assessment years were filed within the due date as the AO himself has stated the returns of income for AYrs 2013-14 and 2014-15 filed beyond the due date, therefore, the assessee as rightly claimed the setoff of the loss against the current year’s long terms capital gain. Accordingly, we direct the AO to allow the same.
7.1 With respect to the short term capital gain of Rs.3,09,191/-, it is seen that the same is related to Assessment Years 2009-10 and 2014-15 however, the precise details were not available nor filed before us. In view of these facts, we set aside this issue to the file of the AO with directions that the AO should verify the loss pertaining to Assessment Year 2009-10 and allow the same against the long-term capital gains declared by the assessee. However, the loss pertaining to Assessment Year 2013-14 should not be allowed as return of income for this year was not filed within the stipulated time period. With these directions, ground of appeal No.2 of the assesse is partly allowed for statistical purposes.
Ground of appeal
No. 3 is regarding disallowance of donation given by the assessee and claimed u/s 80G and 80GGA of the Act.
9. Heard both the parties and perused the material available on record. From the perusal of orders of lower authorities, we find that donation was disallowed for the reason that assessee has failed to file the donation receipt in respect to be donation