TMI Blog2020 (7) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... act that there is no material available on record from where it could be gathered that the valuation adopted by the stamp valuation authority at ₹ 5,53,35,670/- had been substituted by the aforesaid ready reckoner rate of ₹ 4,53,00,690/-. In sum and substance, there is nothing discernible from the records which would reveal that the valuation adopted by the stamp valuation authority had been revised at ₹ 4,53,00,690/-. In the backdrop of the aforesaid facts, we find that the Pr. CIT had directed the A.O to verify as to whether the excess payment of stamp duty was refunded to the assessee or not. No infirmity in the aforesaid direction of the Pr. CIT, except for the fact that as the stamp duty qua the transfer of the property under consideration was paid by the purchaser party viz. M/s SVG Investments Pvt. Ltd., therefore, the question of refund of any part of the excess stamp duty paid to the assessee would not arise. Accordingly, we to the said extent modify the directions of the Pr. CIT., and direct the A.O to verify as to whether or not the valuation adopted by the stamp valuation authority had been revised at ₹ 4,53,00,690/-. In case, the valuation ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee while computing its income in the previous years under the head Income from House Property had claimed deduction u/s 24(b) of the interest paid on loan raised from Janalaxmi Co-op Bank Ltd , which funds are stated to have been utilized in construction of the property in question. In our considered view, there is substance in the view taken by the CIT(A) that now when the interest expenditure was allowed as a deduction to the assessee while computing its income under the head Income from house property , the same could not have thereafter been allowed as a deduction by allowing it to be capitalized as a part of the cost of acquisition while computing its income under the head capital gains at the time of sale of the property. In fact, a view to the contrary would lead to allowing of a deduction to the assessee twice. Our aforesaid view is fortified by the judgment in the case of CIT Vs. Maithreyi PaiI [ 1983 (11) TMI 43 - KARNATAKA HIGH COURT]. Now when the assessee in the case before us had claimed deduction of the interest paid to Janalaxmi Co-op Bank Ltd while computing its income for the previous years under the head Income from House Property , theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SH SOOD, JM The present appeals filed by the assessee are directed against the respective orders passed by the Pr. Commissioner of Income-tax-2, Mumbai [Pr. CIT] under Sec. 263 of the Income-tax Act, 1961 [for short Act ], dated 26.03.2019 AND the order passed by the CIT(Appeals)-6, Mumbai, dated 08.11.2017, both of which arises from the assessment framed by the A.O u/s 143(3) of the Act, dated 28.12.2016. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, the same are being taken up and disposed off together by way a common order. We shall first advert to the appeal filed by the asssessee against the order passed by the Pr. CIT u/s 263 of the Act, wherein the impugned order has been assailed on the following grounds of appeal before us : 1. On the facts and the circumstances of the case and in law, the Learned Commissioner of Income-tax -2, Mumbai (hereinafter said the CIT ) erred in passing order under section 263 of the Income-tax Act, 1961 {Act}, dated 26th March, 2019 (hereinafter referred to as the impugned order ) despite the fact that the CIT was appraised of the fact that an appeal against the order un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of the assessment proceedings it was observed by the A.O that the assessee had sold its Office premises (I.T Building) located at Pune for a consideration of ₹ 4,55,00,000/-, against which it had worked out the Long Term Capital Gain (for short LTCG ) at ₹ 62,75,410/-. On a perusal of the working of the LTCG, it was observed by the A.O that the assessee had claimed deduction for cost of acquisition/improvement, as under: Particulars Financial Year Cost (Rs.) Indexed Cost (Rs.) Cost of Acquisition 2004-05 ₹ 95,27,993/- ₹ 1,86,39,136/- Interest paid 2008-09 ₹ 20,06,379/- ₹ 32,37,096/- ..........do........ 2009-10 ₹ 18,31,764/- ₹ 27,21,561/- ..........do........ 2010-11 ₹ 19,49,290/- ₹ 25,74,379/- ..........do........ 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee made submissions vide letters dated 26.12.2016 and 28.12.2016, wherein the assessee has claimed that as per clause No. 8 of the ready reckoner published by the collector of stamps dated 31.12.2012, large shops/offices are entitled to deduction of 20% from ready reckoner value, if the size of office is above 929 Sq. Meters. The assessee also produced deed of correction dated 26.12.2016 in which both the parties mentioned that value of the property as per ready reckoner rate is ₹ 4,53,00,690/-. The claim of the assessee has been accepted by the A.O vide the assessment order dated 28.12.2016, wherein sale consideration was taken at ₹ 4,55,00,000/- instead of ₹ 5,53,35,670/- for the purpose of computation of capital gain without applying provisions of section 50C of the Act. Further, it is also observed that the assessee had claimed substantial sums of ₹ 3.8 crores as indexed cost of acquisition and cost of improvement in this case. It is brought to the notice that the same comprised of cost of construction as shown by the assessee on old balance sheets and interest on loan, stated to be utilized for construction of the property. Hence, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a direction to the A.O to examine the same and after due verification re-compute the income of the assessee. 5. Aggrieved, the assessee has assailed the order passed by the Pr. CIT u/s 263 of the Act before us. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. We shall advert to the observations recorded by the Pr. CIT in his order passed u/s 263 as under: (A). AS REGARDS APPLICABILITY OF SEC. 50C: (i). As is discernible from the records, the assessee had sold the property in question for a sale consideration of ₹ 4,55,00,000/-, which was less than the value assessed by the stamp valuation authority at ₹ 5,53,36,670/-. On being confronted with the said fact in the course of the assessment proceedings, it was submitted by the assessee vide his letters dated 26.12.2016 and 28.12.2016, that as per Clause No. 8 of the ready reckoner published by the collector of stamps, dated 31.12.2012, large shops/offices were entitled to deduction of 20% from ready reckoner value if the size of office was above 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stamp duty in respect of such transfer, the value so adopted [or assessed or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. Admittedly, in the present case the stamp duty qua the transfer of the property in question was paid on a valuation of ₹ 5,53,35,670/- adopted by the stamp valuation authority. Although both the parties i.e the assessee and the purchaser had executed a deed of correction wherein they had mentioned that the value of the property as per ready reckoner rate was ₹ 4,53,00,690/-, but then, we cannot remain oblivious of the fact that there is no material available on record from where it could be gathered that the valuation adopted by the stamp valuation authority at ₹ 5,53,35,670/- had been substituted by the aforesaid ready reckoner rate of ₹ 4,53,00,690/-. In sum and substance, there is nothing discernible from the records which would reveal that the valuation adopted by the stamp valuation authority had been revised at ₹ 4,53,00,690/-. In the backdrop of the aforesaid facts, we find that the Pr. CIT had directed the A.O t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Maintenance 2013-14 ₹ 33,99,949/- ₹ 33,99,949/- Total ₹ 3,82,24,590/- As such, the aforesaid Indexed cost of acquisition/cost of improvement aggregating to ₹ 3,82,24,590/- comprised of three items viz (i). Indexed cost of acquisition of the property (depreciated value) : ₹ 1,86,39,136/-; (ii). Indexed interest paid on loan raised from Janalaxmi Co-op Bank Ltd., which was stated to have been utilized for construction of property : ₹ 1,29,48,409/- [i.e ₹ 32,37,096 (+) ₹ 27,21,561/- (+) ₹ 25,74,379/- (+) ₹ 38,31,890/- (+) ₹ 38,20,579/-]; (iii). Indexed cost of repairs and maintenance of the property: ₹ 33,99,949/-. On a perusal of the records, we find that the A.O had not accepted the claim of interest expenses and the repairs and maintenance expenses as a part of the indexed cost of acquisition/improvement of the property in question, and had thus scaled down the same to an amount of ₹ 2,71,72,172/-. But then, we find that though the A.O had inter alia rejected the assesse s claim of interest expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. As the ld. A.R during the course of hearing of the appeal had failed to support his aforesaid claim, which we find is devoid and bereft of any merit, therefore, the same is rejected. 7. We shall now deal with the judgment of the Hon ble High Court of Bombay in CIT Vs. Gera Development P. Ltd. (2016) 387 ITR 691 (Bom) relied upon by the assessee. In the said case, the Hon ble High Court had observed that if the A.O had considered an issue by raising questions during the assessment proceedings, then the mere fact that it does not fall for discussion in the assessment order would not ipso facto lead to the conclusion that the Assessing Officer did not apply his mind. It was observed by the Hon ble High Court that if the Assessing Officer was satisfied with the response of the assessee on an issue and drops the likely addition, it cannot be said that there was non - application of mind to the issue arising before the Assessing Officer. In our considered view, the aforesaid judgment of the Hon ble High Court would not assist the case of the assessee before us, as the same is found to be distinguishable on facts. On both the issues i.e (i). applicability of sec. 50C to the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , vide his order passed u/s 143(3), dated 28.12.2016 at ₹ 1,62,42,690/- under the normal provisions and the book profit u/s 115JB was determined at ₹ 4,17,36,719/-. 11. In the course of the assessment proceedings, it was observed by the A.O that the assessee had sold its Office premises (I.T Building) located at Pune for a consideration of ₹ 4,55,00,000/-, against which it had worked out the Long Term Capital Gain (for short LTCG ) at ₹ 62,75,410/-. On a perusal of the working of the LTCG, it was observed by the A.O that the assessee had claimed deduction for Cost of acquisition/improvement, as under: Particulars Financial Year Cost (Rs.) Indexed Cost (Rs.) Cost of Acquisition 2004-05 ₹ 95,27,993/- ₹ 1,86,39,136/- Interest paid 2008-09 ₹ 20,06,379/- ₹ 32,37,096/- ..........do........ 2009-10 ₹ 18,31,764/- ₹ 27,21,561/- ......... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovement of ₹ 3,82,24, 590/- to an amount of ₹ 2,71,72,172/-. Accordingly, the LTCG on the sale of the aforesaid property was reworked out by the A.O at an amount of ₹ 1,73,27,828/-. 12. Aggrieved, the assessee assailed the assessment framed by the A.O vide his order passed u/s 143(3), dated 28.12.2016 in appeal before the CIT(A). It was the claim of the assesee that the A.O was in error in excluding the interest paid by the assessee on the loan funds which were utilized towards construction of the property in question, from its cost of acquisition. Also, the exclusion of the repair and maintenance expenses incurred on the aforesaid property was challenged before the appellate authority. Admitting, that the interest expenses were though claimed as a deduction u/s 24(b) while computing the income under the head Income from house property in the previous years, it was the claim of the assessee that despite the said fact the interest expenditure was eligible to form part of the cost of acquisition/improvement of the property in question. In support of his aforesaid claim heavy reliance was placed by the assessee on the order of the ITAT, Chennai bench in ACIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as a deduction in computing capital gains. The Hon ble High Court also held that No taxpayer under the scheme of the Act could be allowed deduction of the same amount twice over . Relying on such decisions of Hon ble Karnataka High Court, the Hon ble ITAT, Bangalore in the case of Captain B.L Lingaraju vs. ACIT held that the tax payer was not eligible to claim interest paid on housing loan as part of the cost of acquisition in computing capital gains as the said interest was allowed as a deduction from house property. The facts of the case were that the tax payer has claimed a deduction on interest paid on housing loan while computing income from house property which was claimed to be self-occupied. The Tribunal also observed that even if the property had not been let out or used for the business purposes, claim of deduction of interest could be from income from house property or from business income respectively. Under these facts, the Hon ble Tribunal relying on the rationale of the decision of Hon ble High Court in the case of CIT vs. Maithreyi Pai (supra) held that the tax payer was not eligible to claim interest paid on housing loan as part of cost of acquisition in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cost of improvement by the A.O is found to be justifiable and contention of the assessee, is accordingly rejected. 14. We have deliberated at length on the observations of the CIT(A) and given a thoughtful consideration to the issue before us. Admittedly, the assessee while computing its income in the previous years under the head Income from House Property had claimed deduction u/s 24(b) of the interest paid on loan raised from Janalaxmi Co-op Bank Ltd , which funds are stated to have been utilized in construction of the property in question. In our considered view, there is substance in the view taken by the CIT(A) that now when the interest expenditure was allowed as a deduction to the assessee while computing its income under the head Income from house property , the same could not have thereafter been allowed as a deduction by allowing it to be capitalized as a part of the cost of acquisition while computing its income under the head capital gains at the time of sale of the property. In fact, a view to the contrary would lead to allowing of a deduction to the assessee twice. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Karnataka in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies of the aforesaid invoices/bills were furnished with the lower authorities. On a perusal of Sec. 55(2) of the Act, we find, that if an assessee had incurred an expenditure of a capital nature in making any addition or alterations to a capital asset after it had became his property, then the same would form part of the cost of improvement of such property. At the same time, there is a rider provided in the aforesaid statutory provision, which therein envisages that any such expenditure which is deductible in computing the income chargeable under the other heads of income is not to be included within the meaning of cost of improvement . In our considered view, in all fairness, the aforesaid issue requires to be restored to the A.O with a direction to verify afresh the maintainability of the aforesaid claim of deduction so raised by the assessee. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assesee who shall remain at a liberty to substantiate his aforesaid claim on the basis of fresh documentary evidence. Ground of appeal No. 3 is allowed for statistical purposes in terms of our aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the rule so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether or not the passing of this order, beyond a period of ninety days in the case before us was necessitated by any extraordinary circumstances. 19. We find that the aforesaid issue after exhaustive deliberations had been answered by a coordinate bench of the Tribunal viz. ITAT, Mumbai F Bench in DCIT, Central Circle-3(2), Mumbai Vs. JSW Limited Ors. [ITA No. 6264/Mum/18; dated 14/05/2020, wherein it was observed as under: Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. The epidemic situation being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disrup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made time bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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