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2017 (2) TMI 592 - ITAT AHMEDABAD

2017 (2) TMI 592 - ITAT AHMEDABAD - TMI - Disallowance in respect of cost of improvement while arriving at Long Term Capital Gain - Held that:- The entire claim of the assessee is based on the various clauses in the sale deed and the copy of the ledger account of Rama Realty. As mentioned elsewhere, the sale deed was already executed without the assessee carrying out any work as mentioned in the sale deed. The assessee may have paid ₹ 45.90 lacs to the contractor in the subsequent year but .....

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essee has offered this amount as its income in subsequent year if the disallowance is sustained during the year under consideration, it would amount to double taxation of the same amount. Therefore, in our understanding of the fact, this disallowance cannot be sustained. We, accordingly, modify the findings of the ld. CIT(A) and direct the A.O. to confirm the addition of ₹ 45.90 lacs and delete the addition of ₹ 99.10 lacs. - Decided in partly in favour of assessee - ITA. Nos. 969 .....

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this common order for the sake of convenience. ITA No. 969/Ahd/2014 Assessee s appeal for A.Y. 2010-11 3. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of ₹ 1.45 crore in respect of cost of improvement while arriving at Long Term Capital Gain. 4. The assessee filed its return of income electronically on 08.10.2010 declaring total income at ₹ 49,60,542/-. The return was selected for scrutiny assessment and accordingl .....

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itted the ledger account of Rama Realty to whom contract for improvement of asset was given. On perusal of the copy of the ledger account, the A.O. found that the assessee has credited amount of ₹ 1.45 crores with the narration being the amount paid to party up to 31.03.2010 . The A.O. noticed that the payments amounting to ₹ 50 lacs were made in total to Rama Realty and the closing balance was shown at ₹ 1.45 crores. 6. The A.O. was of the opinion that the amount of ₹ 1. .....

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Ltd. and for completing those work, the assessee had to incur expenditure towards the said property. The assessee strongly contended that if the expenditure was not incurred, it would not have been possible to sell the portion of the estate. 8. After considering the submissions of the assessee, the A.O. was of the firm belief that the only expenses which are deductible for computing capital gains chargeable to tax are:- (i) Expenditure incurred wholly and exclusively in connection with such tran .....

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. Assessee carried the matter before the ld. CIT(A) and reiterated its claim but without any success. 11. Before us, the ld. counsel for the assessee vehemently stated that both the lower authorities have grossly erred in not appreciating the facts in true perspective. The ld. counsel brought to our notice that out of the balance of ₹ 1.45 crores, the assessee has paid ₹ 45.90 lacs to Rama Realty as on 31.03.2012. The ld. counsel further stated that the amount of ₹ 99.10 lacs h .....

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f improvement is available even if such cost is shown as payable. The ld. counsel further stated that since out of outstanding 1.45 crores, ₹ 99.10 lacs has been offered as income in subsequent assessment year, addition of the same would amount to double taxation. 13. Per contra, the ld. D.R. strongly supported the findings of the ld. CIT(A). 14. Having heard the rival contentions, we have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that .....

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he year under consideration, the same cannot be allowed as cost of improvement. 16. It is true that u/s. 48 clause (i) what has mentioned is expenditure incurred and incurred means paid or payable but there is no such reference so far as cost of improvement is concerned. Be that as it may, it is equally true that the onus is upon the assessee to demonstrate that he has actually incurred some expenditure, whether paid or payable, by bringing cogent material evidence on record. Except for the copy .....

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condition precedent . Although, the A.O. has allowed ₹ 50 lacs paid during the year under consideration as cost of improvement but we cannot comment on that because that is not an issue before us. All that we have to see is whether the claim of cost of improvement is supported by any documentary evidences. No Valuation Report has been furnished nor any certificate from any engineer/valuer/contractor has been furnished to show that the cost was actually incurred by the assessee. 17. The ent .....

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d towards cost of improvement. We, accordingly, confirm the disallowance to the extent of ₹ 45.90 lacs. 18. So far as the balance of ₹ 99.10 lacs is concerned, a perusal of the paper book shows that the assessee has offered the same as remission/cessation of liability in A.Y. 2013-14 and has paid the taxes accordingly. Since, the assessee has offered this amount as its income in subsequent year if the disallowance is sustained during the year under consideration, it would amount to d .....

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mption u/s. 54EC of the act. 21. While scrutinizing the return of income, the A.O. noticed that the assessee has claimed deduction u/s. 54EC in its return of income for investment in infrastructure bonds worth of ₹ 1 crore. Copies of bonds certificate issued by REC and NHAI allotted on 31.03.2010 were examined. The A.O. was of the opinion that since the long term asset was transferred on 28.01.2010, the six months period expired on 27.07.2010 and the assessee has claimed 54EC exemption by .....

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andatory condition has been fulfilled by the assessee and the same has also been accepted by the A.O. 24. The assessee further contended that the investments in each financial year did not exceed the upper limit of ₹ 50 lacs, therefore, the A.O. erred in not allowing the claim of deduction. 25. After considering the facts and the submissions, the ld. CIT(A) observed as under:- 7.2 The above submission of the appellant with regard to disallowance of its claim of deduction u/s 54EC of the Ac .....

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t is eligible to claim deduction u/s 54EC up to ₹ 1 Crore. The AO has mentioned in the assessment order that the appellant had claimed deduction u/ s 54 EC in its return of income of ₹ 1 crore for investment in infrastructure bonds worth of ₹ 1 crore. As per the AO the appellant had submitted copies of the bond certificate issued by the REC and NHAI allotted on 31/3/2010 and 30/6/2010 respectively. As per the AO the appellant had transferred the long term capital Assets on 28th .....

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