TMI Blog2019 (11) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... this point and concur with the conclusion that resultant gains were rightly brought to tax as short-term capital gains u/s 50. Ground No.1 stand dismissed. Claim of direct expenditure - HELD THAT:- The property tax as well as Best deposit, as rightly held by first appellate authority, could not be held to be part of cost of acquisition of the property. The same could also not be termed as cost of improvement or expenditure incurred wholly and exclusively in connection with transfer of property. Therefore, the same has rightly been disallowed. So far as the other expenditure is concerned, we find that the assessee failed to adduce sufficient documentary evidences to substantiate the same. Keeping in view the principal of natural justice, we deem it fit to provide another opportunity to the assessee to substantiate his claim with documentary evidences before Ld. AO. Therefore, for the said limited purpose, the matter stand restored back to the file of Ld. AO with a direction to the assessee to substantiate that expenditure in the nature of Legal expenses, brokerage, Repairs Renovation qualified for deduction from sale of property. Ground No. 2 stand partly allowed for st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the learned CIT (Appeals) -4 while passing the Appellate Order did not allow the expenses incurred for renovation, clearance of liability against the property tax and legal expenses preparing the documents for sale. 3. Third Ground of appeal relates to the Disallowance of Administrative Expenses incurred against the income On the facts and in the circumstances of the case and in law, the learned CIT (A) - 4 while passing the Appellate Order did not consider the genuine operating expenses to be allowed against the income. The Appellant Company, therefore, prays the order of the learned assessing officer / CIT (Appeals) be amended to allow deductions / reliefs claimed above. The Appellant Company also craves leave to add to, alter and / or amend any of the foregoing grounds, if and when necessary. We have heard and considered the rival submissions and perused relevant material on record including documents placed in the paper-book. 2.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at ₹ 75.98 Lacs, being difference in sale value of ₹ 170 Lacs and Written Down Value of the premises for ₹ 94.01 Lacs as on 01/04/2013. 2.3 The assessee, in the alternative, contended that the expenses disallowed in working of STCG may be allowed as business loss which was also rejected in view of the fact that the assessee did not carry out any business activity during the year but earned only the rental income which was not the main business activity of the assessee. Finally, the income was determined at ₹ 90.53 Lacs which, inter-alia, comprised-off of Income from house property for ₹ 15.69 Lacs and Short-term capital gains for ₹ 75.98 Lacs. The business loss of ₹ 1.13 Lacs was allowed to be set-off against the same. 3. The Ld. CIT(A), upon further appeal, confirmed the stand of Ld. AO by observing as under: - 7.2 The appellant in its submission has referred and reproduced the provision of Section 50 and 50A and has accordingly contended that provision of Section 50 are applicable only in case depreciation was availed in respect of these assets under the Act. The assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty . No details whatsoever, have been given by the assesses in respect of the period prior to the Assessment Year 2013-14 as what status the property had etc. It is also seen from notes forming part of financial statement that the said asset has been reflected in the schedule of fixed asset as building under lease and 5% depreciation has been claimed and reflected therein for the year under 31st March 2013. Nothing has been mentioned for the period ending 31st March 2012 and the period ending 31st March 2011 in respect of the said property. Under these facts and circumstances the contention of the assessee that the provision of Section 50 cannot be applied in their case, is not found to be acceptable. Accordingly, the application of Section 50 by the AO and working out of the short term capital gain after reducing the WDV as on 01.04.2013 is found to be justifiableand is accordingly upheld.This ground of appeal is accordingly dismissed. 8. Ground No. 3 : This ground relates to disallowance of expenses incurred on the property and cost of improvement thereof. 8.1. The assessee has incurred direct expenses of ₹ 33,41,029 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly observed that at para 6.4 that assessee has not submitted conclusive evidence in support of such claim of expenditure. The assessee further claimed legal expenses of ₹ 5,04,750/- and brokerage of ₹ 3,40,000/- without any evidences. The aforesaid factual observations have been just mentioned here for the sake of clarity, however, they do not merit any consideration as the action of the AO in respect of the gains earned from the property sold have been held to be taxableu/s.50 of the Act. This ground of appeal is accordingly dismissed. 9. Ground No. 4. : The assessee by this ground contends that it is carrying out business activity of preparing the property to be suitable for disposal by making suitable modification etc. 9.1 The Assessing Officer in the assessment order has mentioned that assesseehas claimed Employee Benefit Expenses of ₹ 34,34,852/-, administrative expenses of ₹ 2,64,676/- and direct expenses relating to the sale of property at ₹ 33,41,029/-. All these expenses have been debited against the sale proceeds of ₹ 1.7 crore of a property sold by the assesses during the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the tune of ₹ 34,34,852/-. The contention of the assessee that the directors remuneration have been offered to tax in the hands of the directors does not lend any support to the cause of the assessee, as for deduction of such expenses in the hands of the assessee, the same should be wholly and exclusively incurred for the purpose of business carried out by the assessee and not for any other reason. There is no specific premise given u/s.37 of the Act, that when the payment is made to the directors, may not be even for the purposes of business and are not incurred wholly and exclusively for the purposes of business, still the same has to be allowed. The AO has allowed an amount of ₹ 1,13,680/- out of the other expenses claimed at ₹ 5,11,261/- for keeping the status afloat of the business entity of the appellant. Accordingly, no interference is considered, called for in the action of the AO, and therefore, the ground raised is accordingly dismissed. Aggrieved, the assessee is under appeal before us. 4. Upon due consideration, we find that the fact that the immovable property,which was sold by the assessee during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the same has rightly been disallowed. So far as the other expenditure is concerned, we find that the assessee failed to adduce sufficient documentary evidences to substantiate the same. Keeping in view the principal of natural justice, we deem it fit to provide another opportunity to the assessee to substantiate his claim with documentary evidences before Ld. AO. Therefore, for the said limited purpose, the matter stand restored back to the file of Ld. AO with a direction to the assessee to substantiate that expenditure in the nature of Legal expenses, brokerage, Repairs Renovation qualified for deduction from sale of property. Ground No. 2 stand partly allowed for statistical purposes. 6. The last ground pertains to allowance of indirect expenditure of ₹ 36,99,728/- which consist of employee s benefit expenses of ₹ 34.34 Lacs and administrative overheads of ₹ 2.64 Lacs, as business expenditure u/s 37(1). As rightly held by lower authorities, these expenditures could not be allowed from sale of property under the head capital gains since these costs could not be termed either as cost of acquisition / improvement or e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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