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2021 (9) TMI 754 - AT - Income TaxNature of expenditure - Disallowance of certain expenditure being not considered as capital/cost of improvement - HELD THAT:- AO after having accepted initial instalment of lease rent as capital has erred in rejecting subsequent instalments not being in the nature of capital expenditure. The assessee has constructed building on lease hold land. The lease of the land was allowed to the assessee for 30 years, therefore, lease being in the nature of long term lease, the lease rentals are clearly in the nature of capital expenditure. As regards water proofing charges, the assessee has pointed that water proofing was done immediately after completion of construction, this fact is evident from invoices vide which water proofing charges were paid. OC was received by the assessee in the month of June 2007 and the water proofing charges were paid in the month of October & December 2007. The water proofing definitely adds value to the asset as it improves the life of the structure/building - subsequent water proof coating may be considered in the nature of repairs and maintenance, in so far as initial water proofing is concerned it is integral part of construction activity, hence, it is to be included towards the cost of asset. 3rd component that has been disallowed by the AO/CIT(A) is vacant land tax and property tax. The payment of said taxes to the municipal authorities are perennial and does not add value to the property, hence, are not capital in nature. Payment of taxes is statutory obligation to be discharged as and when due - no merit in the submissions of assessee to include vacant land tax and property tax in the cost of acquisition. Correct date of indexation for computing LTCG - Whether the benefit of indexation should be allowed to the assessee from the date of allotment of land or from the date the document was registered in the name of assessee? - HELD THAT:- Relevant date for providing the benefit of indexation is when the assessee had first acquired right in the property, execution of registered document is subsequent event to reinforce and protect legal sanctity of the ownership of property - benefit of indexation should be allowed to the assessee in the year, the assessee had acquired right in the property after payment of entire purchase consideration. In the instant case, since the assessee had paid the consideration amount in January 1997 in accordance with the terms and conditions of the tenders floated by MHADA, the benefit of indexation should be allowed to the assessee from 31.03.1997. The findings of the CIT(A) on this issue are set-aside and ground no.2 of the appeal is allowed.
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