Maintenance & Electricity Charges not in the form of Deposits excluded from Cost of Property for computing LTCG: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Cuttack Bench has held that the revenue expenditures incurred by the assessee such as maintenance and electricity charges which are not in the form of any deposit shall be excluded from the cost of property for the purpose of computation of Long Term Capital Gain (LTCG).

The appeal was filed by the assessee Abani Pattanayak against the order of the Commissioner of Income Tax (Appeals) (CIT(A)), Kolkata arising out of the order passed by the Assistant Commissioner of Income Tax (ACIT), International Taxation, Bhubaneswar.

The assessee submitted that the CIT(A) has erred in confirming the non-inclusion of amounts incurred with respect to Bangalore Water Supply and Sewerage Board (BWSSB) deposit, Karnataka Power Transmission Corporation Limited (KPTCL) charges, sinking fund and maintenance charges paid to the builder towards the cost of property for the purpose of computation of LTCG.

The assessee contended that the all these payments incurred shall be included in the cost of building for the purpose of computation of its LTCG since it was paid to the builder at the time of acquisition of the flat, which has been sold.

The Revenue, represented by Kishore Ch. Mohanty submitted that the amount paid to the builder under the head maintenance charges is a revenue expenditure since the same is paid towards the annual maintenance of the property and hence the submission of the assessee shall not be accepted.

It was the further submitted by the revenue that the breakup of BWSSB deposits and KPTCL charges has not been given by the assessee. The KPTCL charges are nothing but the electricity charges and hence the same cannot be allowed as cost of the flat, the revenue contended.

The bench observed that the maintenance charges are the payments made to the builder on a routine basis for a period of one year as per the agreement of the assessee with the builder. Hence, it is a revenue expenditure and the same should not be included in the cost of property for the purpose of computation of LTCG.

The bench viewed that sinking fund is paid towards the value of the property and the same is includible in the cost of property.

The tribunal was in consensus with the statement made by revenue that the break-up of BWSSB deposits and the investment in KPTCL charges has not been given by the assessee. The Assessing Officer was instructed to verify the break-up of the amount towards these deposits.

The single bench of Shri. George Mathan (Judicial Member) held that BWSSB deposits is liable to be considered as part of the cost of the building. If KPTCL charges is in the form of deposit, the same is also to be considered as part of the building. But, if it is found that KPTCL charges is towards the electricity charges in respect of the flat, the same is not to be considered as part of the cost of building, the bench clarified.

In the result, appeal of the assessee is partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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