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2016 (8) TMI 470 - ITAT JAIPUR

2016 (8) TMI 470 - ITAT JAIPUR - TMI - Deduction of traveling expenditure from Capital gains - whether travelling expenditure is an allowable deduction u/s 48(i) of the Act while computing capital gains in connection with transfer of property - assessee is a non-resident Indian and residing in Japan - Held that:- The appellant is living in Japan and has filed her return of income in the status of an NRI disclosing the capital gains on sale of the property. She has travelled to India from Japan o .....

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operty, she was present in India to execute various documents such as execution of MOU, conveyance deed sale deed etc. The necessity of her presence in India and execution of the various documents related to sale of the property have not been disputed by the lower authorities. It is thus seen that the appellant has proved the direct linkage/nexus between her travel to India and the corresponding travel expenditure with the transfer of the property, capital gains arising out of which has been dul .....

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om the order dated 21.08.2012 passed by the learned CIT (A)-I, Jaipur for the A.Y. 2009-10. The assessee has raised the following ground of appeal:- That the ld. Assessing Officer has erred in law as well as in facts by disallowing travelling expenditure incurred by the assessee, who is a nonresident and residing in Japan and ld. CIT (Appeals) have further erred in confirming the same without giving any relief to the appellant. 2. The brief facts of the case are that the assessee is a non-reside .....

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f said property, claimed an expenditure of ₹ 8,50,000/- towards travelling in connection with the said transaction, under section 48(i) of the IT Act. The AO asked the assessee to furnish justification regarding claim of travelling expenses against capital gain. In compliance, the assessee submitted her reply which was considered by the AO but he could not found it acceptable. The AO observed that in various judicial decisions it has been held that travel expenditure is not allowable expen .....

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s not clear firstly whether the assessee is actually an NRI because a copy of her passport has not been filed. Secondly, considering the fact that her brother and her sister were co-owners of the said property and resident therein it is unlikely that the entire burden of meeting the prospective buyers etc. was on her shoulders. The ld.CIT (A) further observed that on perusal of the details of travel, it is not clear why the assessee was required to travel from Delhi to Bombay and Delhi to Jaipur .....

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sfer of the capital asset the following amounts, namely:- i) Expenditure incurred wholly and exclusively in connection with such transfer, ii) The cost of acquisition of the asset and the cost of any improvement thereto . The ld. A/R submitted that the section does not say that which particular expenses are allowable or not allowable. However, it stipulates that any amount which is expenditure in nature and have incurred wholly and exclusively in connection with such transfer can be deducted fro .....

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conducted by the assessee was to complete the transaction. Hence it is obviously wholly and exclusively in connection with the transfer only and the same is allowable as per section 48(i) of IT Act. The ld. A/R has further submitted that the AO has failed to take into account the entire break-up of the travelling and the nexus with the events of the transactions, which were very well filed before him with full details and supporting. It is evident from the fact that while discussing the said rep .....

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her residential status as Non-Resident India, which has neither doubted by the AO nor the ld. CIT (A) herself. Therefore, to that extent observations of ld. CIT (A) is contradictory. 4.2 The ld. A/R further submitted that the property under consideration is co-owned and one of the co-owners is Appellant. A co-owner is having his/her economic interest in the property to the extent of his/her share. In this materialistic world, it is unreasonable to expect that the revenue will be shared equally, .....

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cial understanding of a particular person among the different co-owner, belief in each other between the co-owner, understanding of the issue, convincing skill of a particular person among different co-owner, etc. Under the facts and circumstances, Ld. CIT (A) has erred in believing that the burden of meetings with the prospective buyers was not on the shoulders of the Assessee. Thus, the belief of the CIT(A) is solely based on her own surmises. In this regard, the ld. A/R placed reliance on the .....

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are not getting completed in single slot of hours or days, it requires lot of deliberations, consultations, efforts to complete stipulations, gathering of documents, dealing with different government departments to fulfill the conditions of the prospective buyers, etc. in the instant case, Appellant is permanently living at Japan. As far as travelling to Jaipur is concerned, some time she has to come to consult her Advisors based at Jaipur and sometime once she came to India for that work and st .....

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hey have at one hand disallowed the entire travelling expenditure, which includes for meeting, executing MOU, Conveyance Deed, Sale Deed, etc. on the other hand, they have not denied the requirements of the presence of the Appellant to sign different documents executed on different dates and for such purpose, necessity to come from Japan to India. Under the facts even if for sake of arguments the doubts of the CIT(A) considered correct, the entire expenditure cannot be disallowed. 4.5 LR AR furt .....

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itself at prima-facie establishes that to complete the transaction under consideration, her travelling from Japan to India was necessary and was in connection with said transaction only. The dates of the travelling from Japan to India and the date of execution of different documents clearly establish the nexus between travelling undertaken and execution of different documents. Under the facts and circumstances of the case, the ld. A/R requested that the disallowance made by AO and confirmed by .....

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able deduction u/s 48(i) of the Act while computing capital gains in connection with transfer of property. What can be deducted under section 48 is expenditure incurred wholly and exclusively in connection with the transfer contemplated under Section 45 of the Act. The provisions nowhere specifiy what kind of expenditure or the specified nature of the expenditure which shall be allowed as a permissible deduction while computing the capital gains. All it provides is that the expenditure so incurr .....

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R 306). In that case, the assessee executed a release deed in favour of the firm in which her husband was a partner and received certain amount in consideration. During the course of assessment proceedings, she gave a breakup of the consideration amount and claimed deduction in respect of lawyer's fee, traveling expenses and damages for mental worry and suffering on account of wrongful withholding and detention of the property. The ITO held that the break up given of the amount of considerat .....

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esented lawyer's fees, etc., apart from her own assertion to that effect. In the circumstances referred to by the ITO in his order, such a plea could not be accepted. The Tribunal was, therefore, correct in proceeding on the basis that there was no evidence in support of the assessee's contention. Even assuming that what the assessee represented was correct, the deduction was not permissible in terms of section 48(i). What can be deducted under section 48(i) is expenses incurred wholly a .....

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d with the transfer. Similarly, regarding the travelling expenses, it was not specific that it was in connection with the transfer. Therefore, the nature of expenses as represented by the assessee would not bring them within the ambit of section 48(i), so as to be a permissible deduction. 4.9 The order of the Hon ble High Court of Mysore therefore has to be seen in the context of facts which were presented before it. In this case, given that there was no evidence produced for payment of lawyer s .....

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. 4.10 The principle that emerges is that there is no restriction on the nature of expenditure that can be claimed as a permissible deduction under section 48(i) of the Act. At the same time, the expenditure so incurred, should have been incurred wholly and exclusively in connection with the transfer. In other words, the expenditure should be intimately connected with the transfer and the appellant has to establish the necessary nexus between the incurring of the expenditure and the transfer of .....

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