Thayappa Balakrishna Vs ACIT (ITAT Bangalore)
As rightly pointed out by the first appellate authority, the claim of assessee to include a sum of Rs.64,97,173 (cost of unfinished building as on 31.03.2010 as per balance sheet) to cost of improvement cannot be accepted for two reasons. Firstly, the assessee had only sold vacant site and the same is evident from the sale deed dated 19.07.2010. Secondly, the assessee himself submitted a receipt on stamp paper showing a receipt of Rs.96,04,899 towards sale of building material and fixtures from demolished building. The assessee, therefore, cannot turn around now and say that the amount of Rs.96,04,899 is part of the sale consideration of land. Moreover, the assessee during the course of assessment proceedings, filed revised computation disclosing short term capital gains on receipts of demolished building.
The assessee’s reliance on the judgment of the Hon’ble Apex Court in the case of Giridhar G. Yadalam v. CIT (supra) is also misplaced. In the case considered by the Hon’ble Apex Court, the assessee had sought to exclude from `net taxable wealth’ a land as productive asset by stating that it was occupied by a building (though unfinished building). The Hon’ble Apex Court rejected the contention of the assessee by holding that the land should be occupied by a building, which has been constructed and not a unfinished building. It was held by the Hon’ble Apex Court that only in such a scenario, it can be termed as productive asset not coming within the term “urban land”. The dictum laid down by the Hon’ble Apex Court cannot be applied in the facts of the instant case. The definition of capital asset as per section 2(14) of the I.T.Act is wide enough to include property of any kind held by an assessee (including an unfinished building) and the sale proceeds of the same would be liable for capital gains as long term capital gains or short term capital gains, depending upon the period of holding. Therefore, the contention of the learned AR is rejected.
The assessee had also raised a contention that he had incurred labour cost of Rs.14,15,840 over and above the value shown for the building in the balance sheet as on 31.03.2010 at Rs.64,97,173. We are of the view the claim of assessee is to be rejected, since it is not supported by any bills or vouchers. It is the claim of the learned AR that the cash withdrawal has been utilized for incurring the labour cost to the tune of Rs.14,15,840. We fail to understand, how cash withdrawal can help the case of the assessee, in absence of any evidence to show that the assessee has actually incurred labour expenses to the tune of Rs.14,15,840. Therefore, we uphold the addition of short term capital gain of Rs.31,07,726 with respect to the sale of building material, which the A.O. has rightly brought to tax. It is ordered accordingly.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 10.10.2019. The relevant assessment year is 2011-2012.
2. The grounds raised read as follows:-
“1. The order of the learned Commissioner of Income-tax (Appeals) – 6 passed under section 250 of the Income Tax Act for A Y 2011- 12 in so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case.
2. The appellant denies itself liable to be assessed to total income of Rs.88,23,835/- as against returned income Rs.57,16,109/- on the facts and circumstances of the case.
3. The assessment order passed by the learned Commissioner of Income-tax is without jurisdiction and consequently the assessment order passed is bad in law on the facts and circumstances of the case.
4. The learned Commissioner of Income-tax (Appeals) was not justified in law in confirming the addition made by the learned Assessing Officer under the head short term capital gain a sum of Rs.31 ,07,726/ – on the facts and circumstances of the case.
5. The learned Commissioner of Income-tax (Appeals) erred in holding that the learned Assessing officer rightly brought to tax the difference between the amount received and the amount spent on building materials and fixtures as the appellant’s short term capital gain on the facts and circumstances of the case.
6. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the learned Assessing Officer was not justified in law in computing the capital gains under two different heads of capital gains as long term and short term on the premise that the appellant has himself offered an alternate computation in respect of capital gains as consent cannot confer jurisdiction and the learned Assessing Officer ought to have assessed the total sale receipts under the head long term capital gains only on the facts and circumstances of the case.
7. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the learned Assessing officer was not justified in law in considering the cost of improvement made to land by way of construction of building and the resulting sale proceeds under the head short term capital gains, rather the learned Assessing officer ought to have adopted both the receipts as the sale consideration of the said property as a composite unit in the hands of the appellant till date of sale as the said sale was made to the same purchaser on the facts and circumstances of the case.
8. The learned Commissioner of Income-tax (Appeals) was not justified in law not allowing the claim of the appellant a sum of Rs.14, 15,840/ – as deduction being labour wages paid to building under construction as part of the cost of improvement of capital assets on the facts and circumstances of the case.
9. The appellant denies himself liable to pay interest under section 234B and 234C of the Act on the facts and circumstances of the case.
10. The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing.
11. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
3. The brief facts of the case are as follows:
The assessee is an individual. For the assessment year 2011-2012, the return of income was filed on 28.03.2012 declaring total income of Rs.57,16,109. In the said return of income, the assessee had computed long term capital loss on sale of immovable property at No.5, 17th Cross, Sadashivanagar, Bangalore. The details of computation of long term capital loss in the return of income filed by the assessee are as under:-
