×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
08-03-2019, Somnath Vaijanath, Section 74, 70, 48, 55, Tribunal Pune
1. These cross-appeals filed by assessee and Revenue are emanating out of the order of Commissioner of Income-Tax (A) – 2, Aurangabad dt.19.10.2016 for A.Y. 2012-13.
2. The relevant facts as culled out from the material on record are as under :-
Assessee is an individual and is stated to be Proprietor of Shri Maruti Udyog, which is in the business of manufacturing of plastic water tanks. Assessee is also stated to be Proprietor of Sai Venkateshwara Minerals and Partner in Sai Venkateswara Polymers, Ranjangaon besides being engaged in the trading in F & O Shares. Assessee filed its return of income for A.Y. on 2012-13 on 30.09.2012 declaring total income of Rs.6,19,630/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.27.03.2015 and the total income was determined at Rs.6,19,630/- after assessing the long term capital gains and short term capital loss. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.19.10.2016 (in appeal No.ABD/CIT(A)-2/187/2015 16) granted substantial relief to the assessee. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised following grounds :
1. The assessment was completed under section 143(3) by making disallowance of a sum of Rs.1,07,42,039/- that was claimed as cost of improvement comprising of interest expenses. The Commissioner of Income Tax (Appeals) erred in allowing the sum of Rs.1,07,42,039/-.
2. On the facts and circumstances of the case, the order of Commissioner of Income Tax (Appeals), Aurangabad may be vacated and the order of the AO may be restored.”
3. On the other hand, assessee has raised the following effective ground.
“The lower authorities have erred in not allowing set off of long term capital loss on sale of shares of listed companies Rs.62,45,117/- against long term capital gains on sale of shares of unlisted companies and hence it is prayed that same intra head set off may please be allowed.”
4. We first take up Revenue’s appeal in ITA No.2986/PUN/2016 for A.Y. 2012-13.
4.1. During the curse of assessment proceedings, AO noticed that assessee has sold a house property situated at Juhu, Mumbai for Rs.11 crores, in which assessee’s share was 50% and assessee had received Rs.5,50,00,000/- being his share of sale proceeds. AO noticed that in the computation of income, assessee had shown short term capital loss of Rs.2,98,62,599/- with respect to the sale of the aforesaid property. While computing the long term capital loss, assessee had considered cost of improvement amounting to Rs.1,07,42,039/- being the interest paid to Punjab National Bank for the acquisition of the property. AO was of view that interest paid on borrowed funds which were utilized for acquisition of an asset cannot be considered as cost of improvement as according to him on account of specific provisions of Sec 24(b) of the Act which allows the assessee to get the benefit of deduction of interest paid on borrowed funds utilized for the acquisition of assets. He, accordingly rejected the claim of cost of improvement of Rs.1,07,42,039/- and re-worked the long term capital loss. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who decided the issue in favour of the assessee by relying on the various decisions of High Courts noted in paras 7 to 11 by observing as under :
“12. Respectfully, following the ratio of decisions in the above mentioned case, I hold that the assessee is entitled to capitalize the interest paid on borrowed funds and treat it as cost of asset especially when there is no doubt on the fact that the impugned amount has not been claimed as a deduction or an expense and has been capitalized in the books of accounts. Ground No.1 is allowed.”