2001 (2) TMI 1020 - AT - Income Tax

Summary

Issues Involved:
1. Income to be assessed after disclosure under the Kar Vivad Samadhan Scheme (KVSS).
2. Entitlement to deduction u/s 54E of the Act.

Summary:

Issue 1: Income to be assessed after disclosure under the Kar Vivad Samadhan Scheme (KVSS)
The assessee, a builder, declared a total income of Rs. 2,43,87,406 for the assessment year 1991-92 under the KVSS. The Assessing Officer (AO) adopted this figure but estimated the profit at 15% for the assessment year 1992-93, arriving at a business income of Rs. 2,46,85,149. The CIT(A) confirmed this assessment. The Tribunal directed the AO to compute the business income after giving credit for what has been assessed in the past, including the amount declared under KVSS, thereby disposing of ground Nos. 1 to 4.

Issue 2: Entitlement to deduction u/s 54E of the Act
The assessee sold its business for Rs. 3.55 crores and invested Rs. 1.42 crores in IDBI Bonds by borrowing from Vaswani Trust. The AO denied the exemption u/s 54E, arguing that the investment should come directly from the sale consideration. The CIT(A) upheld this view. The Tribunal, however, accepted the assessee's contention that the section requires only that an amount equal to the net consideration be invested in specified assets, regardless of the source of funds. The Tribunal emphasized a purposive interpretation to avoid injustice and allowed the exemption, rejecting the strict interpretation that the investment must come directly from the sale proceeds.

Additional Grounds:
- Ground No. 8 in ITA No. 2685/Mum./96 was rejected as it did not arise from the orders of the Income-tax authorities.
- Ground Nos. 9 and 10 in ITA No. 2685/Mum./96 and other general grounds in ITA No. 2694/Mum./98 required no decision.
- Ground No. 4 in ITA No. 2694/Mum./98 regarding the levy of interest u/s 234B and 234C was consequential to the Tribunal's order.

Conclusion:
Both appeals were partly allowed.