Nityanand Bansal, New Delhi v. ACIT, New Delhi

ITA 2323/DEL/2010 | 2006-2007
Pronouncement Date: 27-08-2010 | Result: Dismissed

Appeal Details

RSA Number 232320114 RSA 2010
Assessee PAN AAGPB2354L
Bench Delhi
Appeal Number ITA 2323/DEL/2010
Duration Of Justice 3 month(s) 10 day(s)
Appellant Nityanand Bansal, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 27-08-2010
Date Of Final Hearing 17-08-2010
Next Hearing Date 17-08-2010
Assessment Year 2006-2007
Appeal Filed On 17-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 2322(DEL)/2010 ASSESSMENT YEAR: 2006-07 MRS. KIRAN BANSAL ASS ISTANT COMMISSIONER OF 199 SUKHDEV VIHAR VS. INCOME- TAX CIRCLE 22(1) NEW DELHI-110025. NEW D ELHI. PAN-AAGPB2354L ITA NO. 2526(DEL)/2010 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME SMT. KIR AN BANSAL TAX CIRCLE 22(1) NEW DELHI. VS. 199 SU KHDEV VIHAR NEW DELHI. ITA NO. 2323(DEL)/2010 ASSESSMENT YEAR: 2006-07 SHRI NITYANAND BANSAL ASSIST ANT COMMISSIONER OF 199 SUKHDEV VIHAR VS. INCOME- TAX CIRCLE 22(1) NEW DELHI-110025. NEW D ELHI. PAN-AAIPB2177R ITA NO. 2525(DEL)/2010 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME SH. NITY ANAND BANSAL TAX CIRCLE 22(1) NEW DELHI. VS. 199 SU KHDEV VIHAR NEW DELHI. (APPELLANT) (RESPONDENT ASSESSEE BY : SH RI PRAKASH NARAIN ADVOCATE DEPARTMENT BY: SHRI H.K. LAL SR. DR CONTD. PAGE 2 ITA NOS. 2322 2323 2525&2526(DEL)/2010 2 ORDER PER K.G. BANSAL : AM THESE CROSS APPEALS IN THE CASE OF HUSBAND AN D WIFE DUO WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNS EL FOR THE ASSESSEE AND THE LD. DR. THEREFORE WE THINK IT FIT TO PAS S A CONSOLIDATED ORDER. MRS.. KIRAN BANSAL ITA NO. 2322(DEL)/2010-APPEAL OF THE ASSESSEE 2. THE ASSESSEE HAS TAKEN UP TWO GROUNDS IN TH E APPEAL TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN (I) CONFIRMING THE ADDITION OF RS. 3.70 LAKH AS DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT 1 961; AND (II) DISALLOWING THE AMOUNT OF RS. 86 804/- AS COST OF IMPROVEMEN T WHILE COMPUTING CAPITAL GAINS ON SALE OF PROPERTY SITUATED AT GUR GAON HARYANA. 3. THE FACTS IN REGARD TO GROUND NO. 1 AS S TATED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE RECEIVED LOAN/AD VANCE FROM B.G. CREATIONS PVT. LTD. ON 11.3.2006 AND THE OUTSTANDING BAL ANCE ON 31.3.2006 WAS ITA NOS. 2322 2323 2525&2526(DEL)/2010 3 RS. 3.70 LAKH. SUCH AN AMOUNT IS COVERED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IF THE FOLLOWING CONDITIONS ARE SATISFIED:- (I) THE PAYMENT IS MADE BY A COMPANY IN WHICH PUBL IC ARE NOT SUBSTANTIALLY INTERESTED (II) PAYMENT IS MADE BY WAY OF LOAN OR ADVANCE (III) PAYMENT IS MADE TO A SHAREHOLDER HOLDING NOT LESS THAN 10% OF VOTING RIGHTS AND (IV) THE AMOUNT IS PAID OUT OF THE ACCUMULATED PRO FITS. 3.1 HE WAS OF THE VIEW THAT ALL THESE CONDITIO NS ARE SATISFIED IN THIS CASE. THEREFORE THE AMOUNT HAS BEEN INCLUDED I N THE TOTAL INCOME. 4. AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED A N APPEAL BEFORE THE CIT(APPEALS)-XXIII WHO DISPOSED IT OFF ON 12.3 .2010 IN APPEAL NO. 332/08-09. IT WAS SUBMITTED BEFORE HIM THAT THE ASSESSEE HAD SUFFICIENT LIQUID FINANCIAL RESOURCES AND HE HAS BEEN A TAX-PAYER IN INDIA AND THE USA. THE IMPUGNED AMOUNT WAS GIVEN TO HIM BY THE COMPANY AS IMPREST AMOUNT FOR THE EXPENDITURE TO BE INCUR RED ON ITS BEHALF. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) MENTIONED THAT THE LENDER IS ADMITTEDLY A COMPANY IN WHIC H PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. THE ASSESSEE IS ADMIT TEDLY A SUBSTANTIAL ITA NOS. 2322 2323 2525&2526(DEL)/2010 4 SHAREHOLDER IN THE COMPANY HAVING REQUISITE VOTIN G POWER AS MENTIONED IN SECTION 2(22)(E). THE COMPANY HAS PAID A SUM OF RS. 3.70 LAKH TO THE ASSESSEE IN THIS YEAR AND THE AMOUNT HAS BEEN RETUR NED TO THE COMPANY AFTER LAPSE OF ABOUT 9 MONTHS ON 4.12.2006. IT IS AL SO AN ADMITTED FACT THAT THE COMPANY HAD ACCUMULATED PROFITS FAR EXCEEDING THIS AMOUNT. A CONFIRMATION HAS ALSO BEEN FILED FROM THE COMPA NY SIGNED BY SHRI NITYANAND BANSAL HUSBAND OF THE ASSESSEE AS DI RECTOR OF B.G. CREATIONS PVT. LTD. ON THE FACTS HE DID NOT AGREE WITH THE SUBMISSION THAT THE AMOUNT WAS IN THE NATURE OF IMPREST AMOUNT. IT WAS MENTIONED THAT THE AMOUNT WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE ON 14.3.2006. AFTER ANALYZING THE CREDITS AND DEBI TS IN THE ACCOUNT ON OR ABOUT THAT DATE HE CAME TO THE CONCLUSION TH AT THE ASSESSEE WAS IN NEED OF MONEY AS TWO SUMS OF RS. 2.00 CRORE AND RS. 50.00 LAKH WERE PAID FROM THE BANK ACCOUNT ON 23.2.2006 AND 11.3.2006 RESPECTIVELY. THEREFORE IT HAS BEEN HELD THAT THE AMOUNT IS IN THE NATURE OF LOAN OR ADVANCE WHICH IS CAUGHT WITHIN THE MISCHIEF OF SECTION 2(22)(E). 5. BEFORE US THE LD. COUNSEL FURNISHED THE BRIEF BACKGROUND FACTS THAT B.G. CREATIONS PVT. LTD. CONTROLLED BY THE ASSESS EE AND HER HUSBAND IS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS. TH E COMPANY ADVANCED A ITA NOS. 2322 2323 2525&2526(DEL)/2010 5 SUM OF RS. 3.70 LAKH TO THE ASSESSEE FOR INCURRI NG EXPENDITURE ON BEHALF OF THE COMPANY. THIS AMOUNT WAS LATER RETURNED TO THE COMPANY. THE AMOUNT PAID IS IN THE NATURE OF IMPREST AMOUNT AND NOT IN THE NATURE OF A LOAN OR AN ADVANCE. IN THIS CONNECTION HE R EFERRED TO PAGE NO. 2 OF THE PAPER BOOK CONTAINING THE SCHEDULE REGARDING SEC URITY DEPOSITS AND OTHER ADVANCES WHICH SHOWS INTER-ALIA A SUM OF RS. 3 .70 LAKH ADVANCED TO THE ASSESSEE. ON THE BASIS OF THE HEADING OF THE SCHE DULE IT IS ARGUED THAT IT WAS IN THE NATURE OF SECURITY DEPOSITS AND OTHER ADVANCES AND NOT A LOAN OR AN ADVANCE. FURTHER A REFERENCE WAS MADE TO PAGE NO. 3 OF THE PAPER BOOK BEING CONFIRMATION FROM B.G. CREATIONS PVT. LTD. WHICH HAS BEEN DEALT WITH BY THE LD. CIT(APPEALS). IT IS MENTIO NED THAT A SUM OF RS. 3.70 LAKH WAS PAID TO MRS. KIRAN BANSAL DIRECTOR OF T HE COMPANY IN MARCH 2006 FOR THE PURPOSE OF MEETING OUT THE EXPENSE S OF THE COMPANY. IT WAS NOT IN THE NATURE OF ANY LOAN OR ADVANCE. WHEN NO EXPENDITURE WAS INCURRED BY HER THE SAME AMOUNT WAS REFUNDED TO THE COMPANY IN DECEMBER 2006. ON THE BASIS OF THIS CONFIRMATION IT HAS BEEN ARGUED THAT THE AMOUNT IS NOT A LOAN OR AN ADVANCE. REFERE NCE HAS ALSO BEEN MADE TO PAGE NO. 5 OF THE PAPER BOOK BEING COPY OF THE BA NK ACCOUNT OF THE ASSESSEE WITH ICICI BANK SHOWING CREDIT OF RS. 3. 70 LAKH ON 14.3.2006. PRIOR TO THAT THE ACCOUNT OF THE ASSESSEE WAS IN DEBIT BALANCE AMOUNTING ITA NOS. 2322 2323 2525&2526(DEL)/2010 6 TO RS. 3 44 33 788/- ARISING PRIMARILY ON ACCOUN T OF TWO PAYMENTS OF RS. 2.00 CRORE AND RS. 50.00 LAKH ON 23.2.2006 AND 1 1.3.2006 RESPECTIVELY. ON DEPOSIT OF THE AMOUNT THE DEBIT BALANCE HAS BEEN REDUCED TO RS. 3 40 63 788/-. 5.1 THE LD. COUNSEL RELIED ON THE DECISION IN TH E CASE OF CIT VS. P.V. JOHN (1990) 181 ITR 1 (KER.) AND CIT VS. RAJ KUM AR (2009) 181 TAXMAN 155 (DEL) TO ARGUE THAT SINCE THE AMOUNT WAS NO T IN THE NATURE OF A LOAN OR AN ADVANCE IT WAS NOT INCLUDIBLE IN THE TOTA L INCOME OF THE ASSESSEE. 5.2 IN REPLY THE LD. DR RELIED ON PARAGRAPH NO. 30 OF THE IMPUGNED ORDER TO ARGUE THAT THE AMOUNT WAS A LOAN LIABL E TO BE INCLUDED IN THE TOTAL INCOME U/S 2(22)(E) OF THE ACT. FOR THE SAKE OF READY REFERENCE THIS PARAGRAPH IS REPRODUCED BELOW:- 30. THE ASSESSEE HAS RELIED UPON THE DECISIO N OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. C REATIVE DYEING AND PRINTING P. LTD. 318 ITR 476 (DELHI). I HAVE GONE THROUGH THE SAID DECISION RENDERED ON 22.9 .2009. THE SAID DECISION IS DISTINGUISHABLE ON FACTS AS I N THAT CASE THE COMPANY HAD TAKEN A DECISION TO MODERNIZE AND EXPAND THE PLANT AND MACHINERY FOR WHICH ADVANCES WERE GIV EN TO THE SHAREHOLDER FOR COMMERCIAL REASONS. ANOTHER DECI SION RELIED UPON BY THE ASSESSEE IS THAT OF CIT VS. RAJ KUMAR (2009) 181 TAXMAN 155 (DELHI). I HAVE MADE GAINFUL REFER ENCE TO THIS ITA NOS. 2322 2323 2525&2526(DEL)/2010 7 DECISION IN THIS ORDER INASMUCH AS THE CONDITIO NS IN WHICH SECTION 2(22)(E) IS TO BE INVOKED. HOWEVER IN T HAT CASE ALSO THE FACTS ARE DIFFERENT INASMUCH AS THE ADVA NCES TO THE DIRECTOR WAS OF THE NATURE OF ADVANCES RECEIVED FROM CUSTOMERS AND WAS IN THE ORDINARY COURSE OF BUSIN ESS. SO THIS CASE IS ALSO DISTINGUISHABLE ON FACTS. ANOTH ER CASE RELIED UPON BY THE ASSESSEE IS THE KOLKATA HIGH COURT DECISION IN NANDLAL KANODIA VS. CIT (1980) 122 ITR 405. IN THAT CASE THE HONBLE HIGH COURT HAD CONCLUDED THAT AMOUNT ADVANCED BY COMPANY IN WHICH THE ASSESSEE WAS A SHAREHOLDER TO A THIRD PARTY WHICH THIRD PART Y ADVANCED LOAN TO THE ASSESSEE WAS DEEMED DIVIDEND UNDER SEC TION 2(22)(E) IN SO FAR AS IT WAS FOUND BY THE TRI BUNAL TO HAVE BEEN ADVANCED BY THE COMPANY TO THE THIRD PART Y FOR THE BENEFIT OF THE ASSESSEE. AS SUCH THIS CASE ALS O CANNOT COME TO THE RESCUE OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT B.G . CREATIONS PVT. LTD. PAID A SUM OF RS. 3.70 LAKH TO THE ASSESSEE ON 11.3.200 6. THE COMPANY IS A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. THE ASSESSEE IS HOLDING MORE THAN 20% VOTING POWER IN THE COMP ANY. THE COMPANY HAD ACCUMULATED PROFITS FAR EXCEEDING RS. 3.70 LA KH. IT SHOWED THE AFORESAID ADVANCE IN ITS ACCOUNTS UNDER THE HEAD SECURITY DEPOSITS AND OTHER ADVANCES. IT ALSO ISSUED A CERTIFICATE THAT THE PAYMENT IS NOT IN THE NATURE OF A LOAN OR AN ADVANCE BUT WAS MAD E FOR THE PURPOSE OF MEETING EXPENSES OF THE COMPANY. THE EXACT PURP OSE FOR WHICH THE EXPENSES HAD TO BE INCURRED HAS NOT BEEN MENTIONED . THE MONEY WAS ITA NOS. 2322 2323 2525&2526(DEL)/2010 8 REFUNDED IN DECEMBER 2006. THE MATERIAL QUEST ION IS-WHETHER THE AMOUNT IS IN THE NATURE OF A LOAN OR AN ADVANCE OR NOT? FROM THE EVIDENCE PLACED ON RECORD IT IS CLEAR THAT THE A MOUNT HAS BEEN CLASSIFIED AS SECURITY DEPOSITS AND OTHER ADVANCES BY THE COMPANY. NOTHING HAS BEEN SHOWN TO US TO PROVE THAT THE RECEIPT WAS IN THE NATURE OF SECURITY DEPOSIT. THEREFORE IT CAN ONLY BE SAID TO BE OTHER ADVANCES AS PER EVIDENCE ON RECORD. THE CERTIFICATE FROM THE C OMPANY DOES NOT MENTION THE PURPOSE OF THE EXPENDITURE FOR WHICH THE A DVANCE WAS MADE. THEREFORE THERE IS NO EVIDENCE ON RECORD TO S HOW THAT THE AMOUNT WAS ADVANCED FOR THE BUSINESS OF THE COMPANY. ON TH E OTHER HAND THE BANK ACCOUNT OF THE ASSESSEE RAN INTO HUGE DEBIT B ALANCE AND EVEN AFTER CREDIT OF THE AMOUNT IN THE BANK THE DEBIT BALAN CE STOOD AT RS. 3 40 63 788/-. THEREFORE IT CAN BE SAID THAT T HE MONEY WAS UTILIZED BY THE ASSESSEE FOR HER PURPOSES WHICH LEADS TO A CLEAR FACTUAL INFERENCE THAT THE AMOUNT WAS A LOAN. 6.1 IN THE CASE OF RAJ KUMAR(SUPRA) THE QUESTIO N BEFORE HONBLE DELHI HIGH COURT WAS-WHETHER THE TRADE ADVANCES GIVEN TO THE ASSESSEE BY CEI CAN BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT 1961? THE HONBLE COURT ANSWERED THE QUEST ION IN FAVOUR OF THE ITA NOS. 2322 2323 2525&2526(DEL)/2010 9 ASSESSEE AND AGAINST THE REVENUE. AS SEEN FROM THE QUESTION ITSELF IT WILL BE CLEAR THAT THE ADMITTED POSITION WAS THAT ADVANCE GIVEN BY CEI TO THE ASSESSEE WAS A TRADE ADVANCE. SUCH IS NOT THE CASE HERE. THEREFORE THE FACTS OF THAT CASE ARE DISTINGUISHABLE. I N THE CASE OF P.V. JOHN (SUPRA) ONE OF THE QUESTIONS BEFORE HONBLE CAL CUTTA HIGH COURT WAS- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE TRIBUNAL IS RIGHT IN LAW FACTS SUBSTANCE AND REALITY IN H OLDING THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN THIS CASE? THE HONBLE COURT MENTIONED THAT THERE IS NO CASE THAT THE PAYMENTS HAVE BEEN MADE TO DISCHARGE ANY LIABILITY OF THE ASSESSEE TO THE COMPANY. APART FROM THE ASSESSEE HIS WIFE AND FATHER ARE ALSO SHAREHO LDERS. THEREFORE THERE IS NO MATERIAL TO SHOW THAT THE PAYMENTS IN QUESTION W ERE MADE TO THE SONS OF THE ASSESSEE ON BEHALF OF OR FOR HIS BENEFIT. FROM THE RELATIONSHIP ALONE A CONCLUSION CANNOT BE DRAWN TO THE EFFECT THAT THE PAYMENTS ARE MADE ON BEHALF OF OR FOR THE BENEFIT OF THE ASSESSEE A SHAREHOLDER. THUS THE QUESTION HERE WAS IN A TOTALLY DIFFERENT CONTEXT WHEN THE PAYMENT WAS MADE NOT TO THE ASSESSEE A SHAREHOLDER BUT TO HIS SON. IN ABSENCE OF ANY EVIDENCE THAT THE PAYMENT WAS MADE ON BEHALF OF OR FOR THE BENEFIT OF THE ASSESSEE THE QUESTION WAS DECIDED IN HIS FAV OUR. THE FACTS OF THIS CASE ARE ALSO DISTINGUISHABLE. IN THIS CASE THE PAYM ENT HAS BEEN MADE TO THE ITA NOS. 2322 2323 2525&2526(DEL)/2010 10 ASSESSEE AND NOT TO HER SON OR ANY OTHER RELATI VE. ON THE OTHER HAND THE LD. CIT(A) RELIED ON THE DECISION OF HONBLE CA LCUTTA HIGH COURT IN THE CASE OF NAND LAL KANODIA VS. CIT (1980) 122 ITR 405. RELIANCE WAS PLACED ON DISCUSSION AT PAGE 415 WHERE IT IS MENT IONED THAT THE ONLY QUESTION WHICH REMAINS TO BE CONSIDERED IS THAT WHETHER THE SAID COMPANY MADE THE PAYMENTS OF THE SAID SUM OF RS. 75 000/- AND RS. 4 80 000/- TO INDIRA & COMPANY FOR THE BENEFIT OF THE ASSESSEE . IN SO FAR AS RS. 75 000/- IS CONCERNED IT IS FOUND BY THE TRIBUNAL THOUGH NOT VERY CLEARLY THAT THIS AMOUNT WAS RECEIVED BY INDIRA & COMP ANY FROM THE SAID COMPANY AND THE SAME AMOUNT WAS GIVEN TO THE AS SESSEE BY INDIRA & COMPANY. THE TRIBUNAL INFERRED FROM THE SAID FA CTS THAT THIS WAS A PAYMENT BY THE SAID COMPANY MEANT FOR THE BENE FIT OF THE ASSESSEE. THIS CONCLUSION INVOLVES FINDINGS OF FACT NAMELY THE FACTUM OF PAYMENT BY THE COMPANY THE MOTIVE AND THE INTENTION OF TH E COMPANY MAKING SUCH PAYMENT NAMELY A BENEFIT ACCRUING TO THE ASSESSEE. THESE ARE ESSENTIALLY FINDINGS OF FACT AND HAVE NOT BEEN CHA LLENGED BY THE ASSESSEE BY AN APPROPRIATE QUESTION. IT IS FURTHER MENTIONED THAT THE CONCLUSION OF FACT THAT A BENEFIT ACCRUED TO THE ASSESSEE IN RESPECT OF RS. 75 000/- PAID BY THE COMPANY TO INDIRA & COMPANY HAD BECOME FINA L AND THEREFORE THIS PAYMENT COMES WITHIN THE MISCHIEF OF SECTI ON 2(22)(E) OF THE ACT. ITA NOS. 2322 2323 2525&2526(DEL)/2010 11 THE CASE OF THE LD. DR IS THAT WHEN A LOAN IS GIVEN INDIRECTLY TO THE ASSESSEE AND IT AMOUNTS TO DIVIDEND U/S 2(22) (E) THERE IS NO REASON TO HOLD THAT DIRECT PAYMENT TO THE ASSESSEE IN THIS CASE IS NOT COVERED UNDER THE AFORESAID PROVISION. WE HAVE GIVEN CONSIDER ATION TO THIS ISSUE ALSO. WE HAVE ALREADY RECORDED A FINDING THAT THE MONEY PAID TO THE ASSESSEE WAS A LOAN WHICH WAS UTILIZED BY HER BY DEPOS ITING THE CHEQUE IN HER ACCOUNT THEREBY REDUCING HER DEBIT BALANCE WIT H THE BANK. THE CERTIFICATE OF THE COMPANY IS NOT BELIEVABLE IN THIS REGARD AS NO PARTICULAR PURPOSE HAS BEEN MENTIONED. ALL OTHER INGREDIENTS OF SECTION 2(22)(E) STAND SATISFIED. THEREFORE WE ARE OF THE VIEW THAT THE AMOUNT IS COVERED WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. 6.2 IN THE RESULT THE GROUND IS DISMISSED. 7. GROUND NO. 2 IS THAT THE LD. CIT(A) ERRED ON F ACTS AND IN LAW IN DISALLOWING THE AMOUNT OF RS. 86 804/- AS COST OF IMPROVEMENT WHILE CALCULATING CAPITAL GAINS IN RESPECT OF THE PROPE RTY SITUATED AT DLF PHASE- II GURGAON HARYANA. ITA NOS. 2322 2323 2525&2526(DEL)/2010 12 7.1 THE FACTS IN THIS REGARD MENTIONED IN THE ASSESSMENT ORDER ARE THAT PAYMENTS WERE MADE FOR GENERAL MAINTENANCE AND U P-KEEP OF THE FACILITIES IN THE PROPERTY WHICH WERE INCURRED SUBSEQUENT TO TAKING OVER THE POSSESSION. IT WAS HELD THAT THE EXPENDITUR E DOES NOT BRING ABOUT ANY IMPROVEMENT IN THE ASSET. THEREFORE THIS AMOUNT WAS NOT TAKEN INTO ACCOUNT FOR COMPUTING CAPITAL GAINS. BEFORE THE LD. CIT(APPEALS) IT WAS SUBMITTED THAT AN EXPENDITURE OF RS. 39 760/- WA S INCURRED TOWARDS CHARGES FOR NOT CONSTRUCTING THE HOUSE PROPERTY W ITHIN THE STIPULATED PERIOD. THE BALANCE EXPENDITURE WAS FOR GENERA L MAINTENANCE AND WATCH AND WARD. THE LD. CIT(APPEALS) MENTIONED T HAT THERE IS NO EVIDENCE REGARDING EXPENDITURE FOR NOT CONSTRUC TING THE HOUSE WITHIN STIPULATED PERIOD. IN REGARD TO EXPENDITURE ON GENERAL MAINTENANCE IT WAS MENTIONED THAT THIS IS NOT AN EXPENDITURE TOWARDS ANY ADDITION TO THE VALUE OF THE ASSET. THEREFORE THE WHOLE OF THE AMOUNT WAS EXCLUDED FOR THE PURPOSE OF COMPUTING THE CAPITAL GAINS. 7.2 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE R EFERRED TO PAGE 6 OF THE PAPER BOOK BEING THE LEDGER ACCOUNT MAINTAINED B Y THE ASSESSEE IN RESPECT OF THIS PROPERTY. THIS ACCOUNT SHOWS THREE ITEM S OF EXPENDITURE AMOUNTING TO RS. 5 000/- RS. 42 044/- AND RS. 39 7 60/- AS PAYMENTS TO DLF. ITA NOS. 2322 2323 2525&2526(DEL)/2010 13 THE SECOND AMOUNT IS STATED TO BE MAINTENANCE CHA RGES UP TO 31.3.2004 AND THE THIRD PAYMENT IS STATED TO BE FOR LATE CO NSTRUCTION FEES. IT WAS CONTENDED THAT THESE EXPENSES REPRESENT COST OF IMPROVEMENT TO THE PROPERTY AND THEREFORE DEDUCTIBLE FROM THE FUL L VALUE OF CONSIDERATION RECEIVED WITH SUITABLE INDEXATION. 7.3 IN REPLY THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) IN WHICH THE CLAIM WAS DENIED ON THE GROUNDS INTER-ALIA THAT NONE OF THE PAYMENTS WAS TOWARDS ADDITION TO OR ALTERATION OF THE AS SET. 7.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT THE ASSESSEE INCURRED THREE EXPENSES WHICH WERE DEBITED IN THE LEDGER ACCOU NT IN RESPECT OF THE PROPERTY. THE FIRST PAYMENT OF RS. 5 000/- WAS MADE TO DLF BUT THE PURPOSE OF THE PAYMENT IS NOT KNOWN. THE SECON D PAYMENT OF RS. 42 044/- WAS MADE ON 3.6.2004 FOR THE PURPOSE OF MAINTENANCE OF THE PROPERTY FOR THE PERIOD UP TO 31.3.2004. THE NAM E OF THE PAYEE IS NOT MENTIONED IN THE LEDGER ACCOUNT. THE THIRD PAY MENT OF RS. 39 760/- WAS ALSO MADE ON 3.6.2004 TO DLF AND THE OSTENSIBLE PURPOSE IS FEES FOR LATE CONSTRUCTION. IT HAS BEEN SUBMITTED BEFORE US T HAT THE CONSTRUCTION COULD ITA NOS. 2322 2323 2525&2526(DEL)/2010 14 NOT BE STARTED IN TIME LEADING TO THE AFORESAID P AYMENT OF RS. 39 760/-. THE LD. CIT(APPEALS) HAS MENTIONED THAT THERE IS NO EVIDENCE TO THE EFFECT THAT THIS PAYMENT OF RS. 39 760/- HAS BEEN PAID AS PENAL CHARGES FOR NOT STARTING THE CONSTRUCTION WITHIN THE STIPULATED PERIOD. NO SUCH EVIDENCE HAS BEEN FILED BEFORE US ALSO. SINCE THE INTENT AND PURPOSE OF PAYMENT IS NOT KNOWN IT CANNOT BE TERMED AS COST OF IMPROV EMENT AND THEREFORE IT IS HELD THAT THIS AMOUNT CANNOT BE CLAIMED AS DEDUCTION FOR THE COMPUTATION OF CAPITAL GAINS. SIMILARLY THE PU RPOSE FOR WHICH THE SUM OF RS. 5 000/- HAS BEEN PAID HAS NOT BEEN MENTIO NED IN THE LEDGER ACCOUNT. THE PURPOSE HAS NOT BEEN EXPLAINED TO US ALSO. TH EREFORE THIS EXPENDITURE CANNOT BE HELD TO BE FOR THE IMPROVEMENT OF TH E PROPERTY. 7.5 WE ARE NOW LEFT WITH THE ISSUE-WHETHER MAINTE NANCE CHARGES FOR KEEP-UP OF THE PROPERTY COULD BE TAKEN AS COST O F IMPROVEMENT TO THE PROPERTY? WE HAVE ALREADY MENTIONED THE FINDINGS OF THE LD. CIT(A) IN THIS MATTER THAT THE EXPENDITURE IS NOT FOR AN Y IMPROVEMENT OR ALTERATION OF THE PROPERTY. IN ORDER TO SUPPORT HIS CASE THE LD. COUNSEL RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABRAR ALVI (2001) 247 ITR 312. THE DISPUTE IN THAT CA SE WAS REGARDING THE COST OF ACQUISITION OF THE PROPERTY. THE ASSESS EE HAD PAID A SUM OF RS. ITA NOS. 2322 2323 2525&2526(DEL)/2010 15 8.00 LAKH TO HIS SON PRIOR TO THE SALE OF THE PROPERTY IN 1992 BECAUSE HE HAD INSTITUTED A SUIT IN THE CITY CIVIL CO URT SEEKING AN INJUNCTION RESTRAINING THE ASSESSEE FROM SELLING THE PROPE RTY. THE TRIBUNAL FOUND THAT THE AMOUNT WAS PAID TO REMOVE THE ENCUMB RANCE THEREFORE IT WAS DEDUCTIBLE IN COMPUTING THE CAPITAL GAINS. THE HONBLE COURT MENTIONED THAT IT SAW NO REASON TO INTERFERE WITH THIS FINDING OF FACT. THE FINDING WAS GIVEN BY THE TRIBUNAL ON THE QUESTION OF FAC T WHETHER THE EXPENDITURE MADE TO REMOVE THE ENCUMBRANCE WAS GENUINE AN D THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE BASED UPON TH E PAYMENT MADE MUCH EARLIER IN VIEW OF THE IMPENDING CIVIL SUIT. IN THE INSTANT CASE NO PAYMENT HAS BEEN MADE FOR REMOVING THE ENCUMBRANCE ON TH E PROPERTY AS THERE WAS NO ENCUMBRANCE. THE PAYMENT WAS ONLY FOR UP-KEEP OF THE PROPERTY WHICH IS IN THE NATURE OF DAY-TO-DAY CLEANING ETC. THEREFORE THE RATIO OF THIS CASE DOES NOT SUPPORT THE SUBMISSION OF THE LD. COUNSEL. ON THE OTHER HAND THE LD. CIT(A) RELIED ON THE OBSERVATIONS MADE IN THE DECISION OF FULL BENCH OF HONBLE MADRAS HIGH COUR T IN THE CASE OF SMT. S. VALLIAMMAI & ANOTHER VS. CIT (1981) 127 ITR 7 13. THE QUESTION BEFORE THE HONBLE HIGH COURT WAS-WHETHER IN CO MPUTING THE CAPITAL GAINS ON THE SALE OF PROPERTIES MADE BY THE A SSESSEE DURING THE PREVIOUS YEARS RELEVANT TO ASSESSMENT YEAR 1966-67 1967 -68 1969-70 AND 1970- ITA NOS. 2322 2323 2525&2526(DEL)/2010 16 71 PROPORTIONATE ESTATE DUTY PAID ON THE DEA TH OF SHRI RAMANATHAN CHETTIAR & SMT. UMAYAL ACHI IN RESPECT OF PROPE RTY SOLD SHOULD BE DEDUCTED? THE HONBLE COURT HELD THAT WHERE THE C APITAL ASSET IS A TANGIBLE ASSET AN ADDITION CAN BE ONLY IN THE FORM OF PHYSICAL ADDITION WHICH COULD BE CALLED IMPROVEMENT THERETO. HOWEV ER IN THE CASE OF AN INTANGIBLE ASSET THERE MAY NOT BE ANY PHYSICAL ADDITION. THEREFORE WHETHER PHYSICAL ADDITION IS NECESSARY OR NOT W ILL DEPEND UPON THE NATURE OF CAPITAL ASSET. THIS DECISION WAS CONFIRMED BY THE HONBLE SUPREME COURT AT (1997) 227 ITR 222. IN THE CASE AT HAND WE ARE DEALING WITH IMMOVABLE PROPERTY WHICH IS A PHYSICAL PR OPERTY. THEREFORE WITHOUT ANY ADDITION THERETO THE EXPENDITURE INCURRED ON ITS MAINTENANCE CANNOT BE TAKEN AS THE COST OF IM PROVEMENT. THEREFORE WE DO NOT THINK IT NECESSARY TO MAKE ANY INTERFEREN CE IN THE ORDER OF THE LD. CIT(A). ITA NO. 2526(DEL)/2010-APPEAL OF THE REVENUE 8. THE ONLY SUBSTANTIVE GROUND TAKEN BY THE RE VENUE IN THE APPEAL IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) ITA NOS. 2322 2323 2525&2526(DEL)/2010 17 ERRED IN HOLDING THAT THE DATE OF PURCHASE OF PR OPERTY IS THE DATE OF ACQUIRING THE ASSET AND NOT THE DATE ON WHICH REG ISTRATION WAS MADE. 8.1 THE FACTS MENTIONED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE PURCHASED A PROPERTY IN DECEMBER 1996 BUT THE A CTUAL POSSESSION OF THE PROPERTY AND THE REGISTRATION OF THE SALE DEED T OOK PLACE ON 3.9.2004. THE CASE OF THE ASSESSEE BEFORE THE AO WAS THAT THE SELLER TRANSFERRED ALL VALUABLE RIGHTS IN THE PLOT OF LAND TO THE AS SESSEE ON 28.12.1996. THEREFORE THIS IS THE DATE OF ACQUISITION OF T HE PROPERTY. THE AO WAS OF THE VIEW THAT THE DATES OF PAYMENT OF THE IN STALLMENT ARE NOT MATERIAL FOR THIS PURPOSE. WHAT IS MATERIAL IS THE DATE OF POSSESSION. IN THIS CONNECTION HE REFERRED TO THE PROVISION CONTAINE D IN SECTION 2(47)(V) OF THE ACT WHERE ANY TRANSACTION INVOLVING THE A LLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAIN ED IN PART-PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTIO N 53A OF THE TRANSFER OF PROPERTY ACT 1882 IS TAKEN TO BE TRANSFER. SI NCE THE DATE OF POSSESSION AND THE DATE OF REGISTRATION WERE THE SAME I. E. 3.9.2004 THEREFORE HE TOOK THE DATE OF ACQUISITION AS 3.9.2004 AND A CCORDINGLY WORKED OUT SHORT-TERM CAPITAL GAINS AS AGAINST THE CLAIM OF LONG-TERM CAPITAL GAINS. ITA NOS. 2322 2323 2525&2526(DEL)/2010 18 8.2 BEFORE THE LD. CIT(APPEALS) IT WAS SUBMITTED THAT PURCHASE AND SALE OF AN IMMOVABLE PROPERTY INVOLVE TWO STAGE S. THE FIRST STAGE IS PURCHASE OR TRANSFER AS DEFINED IN SECTION 2(47) OF THE ACT. THIS WAS COMPLETE IN 1999 WHEN THE AGREEMENT TO SELL WAS EXECUTED AND ALL RIGHTS INCLUDING POSSESSION WAS HANDED OVER TO THE ASSESS EE. THE LD. CIT(APPEALS) CONSIDERED THE FACTS OF THE CASE. IT HAS BEEN MENTIONED THAT ANSAL PROPERTIES & INDUSTRIES LTD. ISSUED A CONFIRMATION ON 28.12.1996 REGARDING TRANSFER OF PLOT OF LAND TO HER NAME WHICH EARLIER STOOD IN THE NAME OF SHRI SURINDER M. AHUJ A. ON THE SAME DATE THE SELLER ISSUED A REQUEST THAT THE NAME MAY BE CHANGED ACCORDINGLY. THE CREDIT OF RS. 5 43 300/- STANDING IN THE NA ME OF THE SELLER WAS ALSO TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE. THER EFORE THE CONSIDERATION WAS PAID TO ANSAL PROPERTIES & INDUSTRIES LTD. ON THA T DAY. THE POSSESSION ALSO PASSED TO THE ASSESSEE TO WHOM THE COMPANY PASSED VALID RECEIPTS. THUS IT HAS BEEN HELD THAT THE CONSIDERATION HAD BEEN PAID AND THE NAME OF THE ASSESSEE HAD BEEN TAKEN ON RECORD BY ISSUIN G VALID RECEIPTS. THUS THE ASSESSEE ACQUIRED THE PROPERTY ON 28.12. 1996. 8.3 BEFORE US THE LD. DR RELIED ON THE ORDER OF THE AO WHILE THE LD. COUNSEL RELIED ON THE ORDER OF THE LD. CIT(APPEAL S). THE LD. DR SUBMITTED ITA NOS. 2322 2323 2525&2526(DEL)/2010 19 THAT THE POSSESSION OF THE PROPERTY WAS NOT GIV EN TO THE ASSESSEE ON 28.12.1996 BUT IT WAS GIVEN ON THE DATE OF RE GISTRATION. ON THE OTHER HAND THE LD. COUNSEL SUBMITTED THAT CONSIDERATIO N HAD BEEN PASSED AND THE ASSESSEE HAD BEEN TAKEN AS OWNER ON RECORD ON 28.12.1996. 8.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT ANSAL PROPERTIES & INDUSTRIES LTD. HAD ALLOTTED A PLOT OF LAND TO SHRI SURINDER M. AHU JA. SHRI AHUJA TRANSFERRED THE RIGHTS IN THIS PLOT TO THE ASSESSEE ON 28.12 .1996 BY INFORMING THE COMPANY WHO TRANSFERRED THE CREDIT IN THE ACC OUNT OF SHRI AHUJA TO THE NAME OF THE ASSESSEE ON 28.12.1996. THE FACTS THEREAFTER ARE NOT CLEAR. IT IS NOT CLEAR WHETHER AT THAT TIME SHRI SURIND ER M. AHUJA WAS IN POSSESSION OF THE PLOT OF LAND AND ALSO HANDED O VER THE POSSESSION TO THE ASSESSEE WITH THE COMPANY AS CONFIRMING PARTY. A DMITTEDLY THE SALE WAS REGISTERED ON 3.9.2004. THE AO HAS MENTIONED THAT POSSESSION OF THE PROPERTY WAS ALSO GIVEN TO THE ASSESSEE ON 3.9.2 004. THE LD. CIT(APPEALS) MENTIONED THAT THERE IS SOME CONFUSI ON IN THE MIND OF THE AO BECAUSE THE ASSESSEE HAD ALSO SOLD ANOTHER PROPERTY. THE LD. CIT(APPEALS) HAS NOT GIVEN A CLEAR FINDING ABOUT THE DATE ON WHICH POSSESSION OF THE PROPERTY WAS GIVEN TO THE ASSES SEE AND THE EVIDENCE ON ITA NOS. 2322 2323 2525&2526(DEL)/2010 20 THE BASIS OF WHICH THIS CONCLUSION HAS BEEN ARRIVE D AT. HE IT APPEARS HAS INFERRED THE TRANSFER ON THE BASIS OF THE FACT THAT THE ASSESSEE WAS TAKEN ON RECORD BY THE COMPANY ON 28.12.1996 WHEN H ER NAME WAS REPLACED IN PLACE OF THE NAME OF SHRI AHUJA. THE CONSIDERAT ION HAD ALSO BEEN PAID BY THAT DATE. BUT UNDER THE DEEMING PROVISIO N OF SECTION 2(47)(V) THE DATE OF POSSESSION IS THE MATERIAL DATE FOR FIND ING OUT THE DATE OF TRANSFER AS THE TRANSFER TAKES PLACE WHEN THE POSSESSIO N IS TAKEN IN A CASE COVERED U/S 53A OF THE TRANSFER OF PROPERTY ACT. AS ALL THE FACTS ARE NOT AVAILABLE ON RECORD WE THINK IT FIT TO RESTORE THIS MATTER TO THE FILE OF THE CIT(A) TO ASCERTAIN THE DATE OF TAKING POSSESSI ON OF THE PLOT OF LAND BY THE ASSESSEE AND DECIDE THE MATTER OF THE DATE OF ACQUISITION ACCORDINGLY. NEED LESS TO SAY THAT BOTH THE PARTIES SHALL BE G RANTED AN OPPORTUNITY OF BEING HEARD. SHRI NITYANAND BANSAL ITA NO. 2323(DEL)/2010-APPEAL OF THE ASSESSEE . 9. THIS APPEAL INVOLVES ONLY ONE GROUND AS TO WH ETHER THE SUM OF RS. 7.00 LAKH PAID BY B.G. CREATIONS PVT. LTD. TO TH E ASSESSEE AMOUNTS TO DIVIDEND U/S 2(22)(E) OF THE ACT. THE ADMITTED POSITION OF BOTH THE PARTIES IS THAT THE FACTS ARE IDENTICAL WITH THE FAC TS OF THE CASE OF MRS. KIRAN ITA NOS. 2322 2323 2525&2526(DEL)/2010 21 BANSAL IN ITA NO. 2322(DEL)/2010. THEREFORE THE ORDER IN THAT CASE IS MADE APPLICABLE TO THIS CASE ALSO. ITA NO. 2525(DEL)/2010-APPEAL OF THE REVENUE 10. GROUND NO. 1 IS THAT THE LD. CIT(APPEALS) ERRED IN HOLDING THE DATE OF PURCHASE OF PROPERTY AS THE DATE OF ACQ UIRING THE ASSET INSTEAD OF DATE OF REGISTRATION FOR THE PURPOSE OF DETERMINI NG THE PERIOD OF HOLDING. THE CASE OF RIVAL PARTIES IS THAT THE FACTS OF THE CASE ARE IDENTICAL WITH THE FACTS OF THE CASE OF SMT. KIRAN BANSAL IN R EVENUES APPEAL BEARING ITA NO. 2526(DEL)/2010(SUPRA). THEREFORE THAT O RDER IS MADE APPLICABLE TO THIS CASE ALSO IN RESPECT OF THIS GROUND. 11. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRE D IN DIRECTING THE AO TO ALLOW SET-OFF OF BUSINESS LOSS EVEN THOUGH THE ASSESSEE IN HIS RETURN OF INCOME CLAIMED IT TO CARRY FORWARD IN VIOLAT ION OF SECTIONS 71 AND 72 OF THE ACT. 11.1 FROM THE ORDER OF THE LD. CIT(APPEALS) IT IS CLEAR THAT THE ASSESSEE HAD MADE THE CLAIM REGARDING SETTING-OFF BY WAY OF A LETTER AND NOT BY WAY OF A REVISED RETURN. THE AO REFUSED TO ENT ERTAIN THIS CLAIM IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA ITA NOS. 2322 2323 2525&2526(DEL)/2010 22 LTD. VS. CIT (2006) 284 ITR 323. HOWEVER THE L D. CIT(APPEALS) ALLOWED THE CLAIM BY FOLLOWING THE DECISION OF H ONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA INVESTMENTS LTD. (2 009) 19 DTR (DEL) 235. 11.2 BEFORE US THE LD. DR FAIRLY CONCEDED THAT IN SO FAR AS MERITS ARE CONCERNED THE ORDER OF THE LD. CIT(APPEALS) IS CORRECT IN LAW. HOWEVER HIS POWERS ARE CO-TERMINUS WITH THE POWERS OF T HE AO AND THEREFORE HE COULD NOT HAVE DONE WHAT AO COULD NOT DO. IN R EPLY THE CASE OF THE LD. COUNSEL IS THAT THE AFORESAID DECISION OF THE HONBLE SUPREME COURT DOES NOT PLACE ANY SUCH FETTERS ON THE POWERS OF THE TRIBUNAL. THEREFORE IT WAS SUBMITTED THAT THE CLAIM WHICH IS ADMITTED LY CORRECT IN LAW AND FOR WHICH ALL FACTS ARE ON RECORD MAY BE ALLOWE D BY THE TRIBUNAL. HAVING CONSIDERED THE ARGUMENTS OF BOTH THE PARTIES A ND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA ) LTD. (SUPRA) WE ALLOW THIS CLAIM OF THE ASSESSEE. THUS THIS GROUND IS DISMISSED. 12. GROUND NO. 3 IS THAT THE LD. CIT(APPEALS) ERRE D IN DIRECTING THE AO TO ALLOW THE CREDIT FOR TAXES PAID IN USA BY NOT APPRECIATING THE STAND OF THE AO THAT THE INCOME WAS TAXABLE IN INDIA AND WAS ENTITLED TO CREDIT FOR TAXES PAID IN ACCORDANCE WITH THE DTAA. ITA NOS. 2322 2323 2525&2526(DEL)/2010 23 12.1 IN REGARD TO THIS GROUND THE ADMITTED POS ITION IS THAT THE RATE OF TAX IN USA IS LOWER THAN THE RATE OF TAX IN IN DIA AND THEREFORE EVEN IF THE CORRECT PROCEDURE OF LAW AS MENTIONED IN TH E GROUND OF THE REVENUE IS FOLLOWED THEN THE LIABILITY OF THE ASSESS EE STAYS THE SAME. IN OTHER WORDS THE GROUND IS ONLY OF ACADEMIC IMPORTAN CE. THUS IT IS DISMISSED ON AFORESAID CONSIDERATION. 13. IN THE RESULT:- (I) ASSESSEES APPEAL IN ITA NO. 2322(DEL)/2010 IS DISMISSED; (II) REVENUES APPEAL IN ITA NO. 2526(DEL)/2010 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES; (III) ASSESSEES APPEAL IN ITA NO. 2323(DEL)/201 0 IS DISMISSED; (IV) REVENUES APPEAL IN ITA NO. 2525(DEL)/2010 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST 2010. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 27TH AUGUST 2010. SP SATIA ITA NOS. 2322 2323 2525&2526(DEL)/2010 24 COPY OF THE ORDER FORWARDED TO:- SMT. KIRAN BANSAL & SHRI NITYANAND BANSAL NEW DELH I. ACIT CIRCLE 22(1) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.