Bhupinder Singh Julka Vs ACIT (ITAT Delhi)
ITAT Delhi held that held that benefit of indexed cost of acquisition should be available to assessee based on payments made. Accordingly, AO directed to re-compute gain.
Facts- The assessee is a non-resident Indian. The case was selected for scrutiny and notice u/s. 143(2) of the Act, was issued and duly served upon the assessee. In response thereto, the assessee company filed the requisite details to the Assessing Officer.
Thereafter, AO after considering the submission of the assessee passed a draft Assessment Order u/s. 144C of the Act on 28.09.2021 thereby, he proposed to make an addition of INR 3,37,202/- in respect of the Short Term Capital Gain and a sum of INR 24,86,030/- treating the compensation received as income from the other sources. The assessee filed his objection before the DRP who vide order dated 11.05.2022, disposed off the objection and directed AO to verify regarding transfer of the property.
In pursuance of directions of DRP, AO proceeded to frame the final assessment order. During the course of Assessment proceeding, AO noticed that the assessee had disclosed in his return of income a sum of INR 4,56,070/-under head income from House Property and INR 81,317/- under head income from other sources. In his computation of income, the assessee had declared long term capital loss of INR 81,42,760/-. Therefore, the AO show caused the assessee to explain and furnish the requisite details to substantiate the basis of sale consideration of INR 1,09,00,000/- how it was arrived at. The explanation as offered by the assessee was not found acceptable by the Assessing Authority, on the basis that the assessee in its computation of income declared total sale consideration of his unit No. 03-012A in Digital Greens at Gurgaon as on 19.02.2018 at INR 1,33,86,030/-. The said property was booked in year 2007 and its payment was made on various dates starting from 2007-08 to the Assessment Year. Its final payment of INR 3,88,746/- was made on 23.02.2018 thus, the effective date of purchase of the property was taken as on 23.02.2018. Thus, the Assessing Officer made addition of INR 3,37,202/- on account of Short Term Capital Gain.
Further, AO show caused the assessee as to why the compensation of INR 24,86,030/- received from M/s MGF Limited, shout not be treated as interest / income from other source. In response thereto, the assessee filed its reply. However, that reply was not found acceptable by the AO. He made addition of INR 24,86,030/-. He thus, assessee the income of the assessee at INR 33,60,600/- against the returned income at INR 5,37,371/-.
Aggrieved against the order, the assessee appealed before the tribunal.
Conclusion- Bombay High Court in the case of PCIT vs Vembhu Vidyanathan it was held that benefit of indexed cost of acquisition should be available to assessee based on payments made.
In the instant case, admittedly, the allotment letter was issued back in the year 2007 and substantial payment had been made before the year 2018 when final payment was made. Therefore, looking to the facts of the present case and above-mentioned judicial precedents relied by the assessee, we find merit into the contention that the AO erred in treating the surplus to be short term capital gain without giving benefit of indexation. We therefore, direct the AO to re-compute gain, if any after giving benefit of indexation as provided under law and decide the issue in the light of judgement of Hon’ble Bombay High Court in the case of PCIT vs Vembhu Vidyanathan.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Assessee is directed against the order of Assistant Commissioner of Income Tax passed under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (“the Act”) dated 26/06/2022 for Assessment Year 201819. The assessee has raised following grounds of appeal:-
“ 1. That the learned Assistant Commissioner of Income Tax, Circle-INT-Tax-2(1), Delhi (“AO”) has erred both in law and on facts in determining total income of the appellant at Rs. 33,60,600/-as against declared income of Rs. 5,37,371/- in an order of assessment dated 26.6.2022 under Section 143(3)/ 144C(13) of the Act.
2. That the learned AO/ DRP has further erred both in law and on fact in making an addition of Rs. 3,37,202/- representing alleged short term capital gain as against claim of long term capital loss of Rs. 81,42,760/- on sale of capital asset by the appellant in the instant year.
2.1 That the learned AO/DRP has failed to appreciated that appellant had acquired the capital asset in the shape of right in an office space in 2007 and therefore sale of such capital asset in financial year 2017-18 constituted long term capital asset and as such any loss arising on sale had to be computed as long term capital loss after indexation and not short term capital loss.
2.2. That the finding that “the assessee could have transferred the said property as absolute owner only after having such a title in first place, could have matured only after completion of due payments” is factually incorrect, legally erroneous and wholly untenable.
(Tax Effect Rs. 69,463/-)
3. That the learned AO/DRP has also erred both in law and on fact in making an addition of Rs. 24,86,030/- representing capital receipt accrued to the appellant in the shape of compensation from Emaar MGF Ltd. and, erroneously held as income for the instant year.
(Tax Effect Rs. 7,55,264/-)
4. That the learned AO/DRP has included amount of Rs. 24,86,030/- twice both in capital gain calculation and also as income from other sources. Inspite of Hon’ble DRP direction to record reason on the alleged treatment of impugned amount, no justification has been given in assessment order dated 26.06.2022 u/s 143(3) read with section 144C of the Act.
5. That the learned AO / DRP has grossly erred in law and on facts in not allowing deduction of Rs. 10,000/- under Section 80TTA of the Act in computation sheet.
(Tax Effect Rs. 2,060/-)
6. That the learned Assessing Officer has further erred both in law and on facts in levying interest of Rs. 9,486/- u/s 234B of the Act which is not leviable on the facts and circumstances of the case of the appellant.
Prayer: It is therefore, prayed that the addition made along with interest levied may kindly be deleted and appeal of the appellant be allowed. It be further held enhanced compensation is capital receipt and is not taxable.”
2. The facts of the present appeal are that the assessee is a non-resident Indian filed his original return of income on 26.07.2018 declaring gross total income of INR 5,37,371/-. The case was selected for scrutiny and notice U/s 143(2) of the Act, was issued and duly served upon the assessee. In response thereto, the assessee company filed the requisite details to the Assessing Officer.
2.1 Thereafter, the Assessing Officer after considering the submission of the assessee passed a draft Assessment Order U/s 144C of the Act on 28.09.2021 thereby, he proposed to make an addition of INR 3,37,202/- in respect of the Short Term Capital Gain and a sum of INR 24,86,030/- treating the compensation received as income from the other sources. The assessee filed his objection before the Ld. DRP who vide order dated 11.05.2022, disposed off the objection and directed the Assessing Officer to verify regarding transfer of the property when the title of such property was transferred further in respect of the other objection, the Assessing Officer was directed to verify the claim of the assessee.
2.2 In pursuance of directions of Ld. DRP, the Assessing Officer proceeded to frame the final assessment order. During the course of Assessment proceeding, the Assessing Officer noticed that the assessee had disclosed in his return of income a sum of INR 4,56,070/-under head income from House Property and INR 81,317/- under head income from other sources. In his computation of income, the assessee had declared long term capital loss of INR 81,42,760/-. Therefore, the AO show caused the assessee to explain and furnish the requisite details to substantiate the basis of sale consideration of INR 1,09,00,000/- how it was arrived at. The explanation as offered by the assessee was not found acceptable by the Assessing Authority, on the basis that the assessee in its computation of income declared total sale consideration of his unit No. 03-012A in Digital Greens at Gurgaon as on 19.02.2018 at INR 1,33,86,030/-. The said property was booked in year 2007 and its payment was made on various dates starting from 2007-08 to the Assessment Year 2017-18. Its final payment of INR 3,88,746/- was made on 23.02.2018 thus, the effective date of purchase of the property was taken as on 23.02.2018. Thus, the Assessing Officer made addition of INR 3,37,202/- on account of Short Term Capital Gain. Further, the Assessing Officer show caused the assessee as to why the compensation of INR 24,86,030/- received from M/s MGF Limited, should not be treated as interest / income from other source. In response thereto, the assessee filed its reply. However, that reply was not found acceptable by the AO. He made addition of INR 24,86,030/-. He thus, assessee the income of the assessee at INR 33,60,600/- against the returned income at INR 5,37,371/-.
3. Aggrieved against the order, the assessee preferred an appeal before the Tribunal.
4. Apropos to grounds of appeal, the Ld. Counsel for the Assessee reiterated the submissions as made in the written submissions. For the sake of clarity, the submissions of the assessee are reproduced as under:
1. “ That the appellant is a non-resident.
1.1 That on 26.07.2018, the appellant e-filed his income tax return returning gross total income at Rs. 5,27,370/- as per details below:
