S.Krishnamoorthy, Salem vs Assessee

Sh.S. Krishnamoorthy, The Joint Commissioner of 86-A, Trichy Main Road, v. Income Tax, Seelanaickenpatty, Range - III, Salem - 636 201. Salem.

PAN : AERPK 9570 Q (अपीलाथ,/Appellant) (-.यथ,/Respondent)

अपीलाथ, क/ ओर से/Appellant by : Sh.T.S. Lakshmi Venkataraman, CA -.यथ, क/ ओर से/Respondent by : Sh. N. Madhavan, JCIT

सन ु वाई क/ तार ख/Date of Hearing : 12.05.2015 घोषणा क/ तार ख/Date of Pronouncement : 30.06.2015

आदे श /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the assessee is directed against the order of

the Commissioner of Income Tax (Appeals), Salem, dated

24.12.2014 and pertains to assessment year 2009-10. The only

issue arises for consideration is with regard to disallowance of

`15,00,000/- incurred by the assessee towards renovation

expenses.

2 I.T.A. No.332/Mds/15

2. Shri T.S. Lakshmi Venkataraman, the Ld. representative for

the assessee, submitted that the assessee constructed a house at

Survey Nos.88/10B and 88/11A2 at Seelanaickenpatty Village,

Salem District. The land and building to the extent of 1020 sq.meter

was acquired by the Government for expansion of National

Highway. A revised award was passed awarding 10% of the market

value of the property as additional compensation for the purpose of

demolition of the building. The award also refers to the existing

building may not be structurally stable after demolition of the part of

the building. Therefore, 10% additional compensation was awarded

for the purpose of damage done to the existing building. The Ld.

representative further submitted that the assessee has incurred a

sum of `15,00,000/- on repairing of the remaining portion of the

demolished building. According to the Ld. representative, this

expenditure was incurred because the land and building was

acquired by the Government. Therefore, according to the Ld.

representative, the expenditure has to be allowed since the same

was related to compulsory acquisition of land by the Government.

3. On the contrary, Shri N. Madhavan, the Ld. Departmental

Representative, submitted that the expenditure said to be incurred

by the assessee was for the purpose of renovation of the property/ 3 I.T.A. No.332/Mds/15

building, which were not acquired by the Government. Having got

confirmed the weakness and unfit of other portion of the building,

the Government has also paid additional compensation at 10% to

the extent of ` 9,65,370/-. Since the expenditure said to be incurred

by the assessee was not in connection with the portion which was

taken over by the Government, but it was incurred on the portion

retained by the assessee, it cannot be said that the expenditure

incurred for the purpose of transferring the property.

4. We have considered the rival submissions on either side and

perused the relevant material on record. Admittedly, a revised

award was passed by the Collector under Land Acquisition Act

awarding 10% additional compensation to the extent of ` 9,65,370/-

after taking into consideration the structural instability of the

remaining part of the building after the acquisition. This sum of

`9.65,370/- is not the price paid by the Government for the land and

building taken over under the Land Acquisition Act. In other words,

the additional compensation of `9,65,370/- was paid by the

Government in respect of the damage caused to the building

retained by the assessee. Therefore, this Tribunal is of the

considered opinion that the additional compensation at 10% cannot

be treated as part of the consideration/compensation awarded by 4 I.T.A. No.332/Mds/15

the Government towards cost of the land. This amount of

`9.65,370/- is only meant for the building retained by the assessee

after acquisition. Therefore, this amount of `9,65,370/- has to be

reduced from the total compensation received by the assessee for

acquisition of the land and building. Similarly, a sum of ` 4,17,426/-

was awarded towards expenditure for demolition. This is also not

the cost of the land and building acquired by the Government.

Therefore, this sum is also to be reduced from the compensation

while computing the capital gains.

5. Now coming to the expenditure said to be incurred by the

assessee, admittedly, the assessee incurred the expenditure for the

purpose of renovation or making good of the remaining part of the

building retained after the acquisition. Therefore, the expenditure of

`15,00,000/- incurred was not connected with land or building taken

over by the Government. Therefore, this cannot be treated as

expenditure incurred for transfer of the land. Therefore, this

Tribunal is of the considered opinion that the amount of

`15,00,000/- cannot be allowed. However, as already discussed,

the Assessing Officer is directed to reduce `9,65,370/- from the cost

of land and building taken over by the Government and thereafter

work out the capital gain accordingly.

5 I.T.A. No.332/Mds/15

6. With the above observation, the appeal of the assessee is

dismissed.

Order pronounced on 30th June, 2015 at Chennai.

sd/- sd/- (A.Mohan Alankamony) (N.R.S. Ganesan) (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) लेखा सद य/Accountant Member या यक सद य/Judicial Member

चे नई/Chennai, th 5दनांक/Dated, the 30 June, 2015.

Kri.

आदे श क/ - त6ल7प अ8े7षत/Copy to: 1. अपीलाथ,/Appellant 2. -.यथ,/Respondent 3. आयकर आयु9त (अपील)/CIT(A), Salem 4. आयकर आयु9त/CIT, Salem 5. 7वभागीय - त न ध/DR 6. गाड( फाईल/GF.