2015 (5) TMI 986 - AT - Income Tax

Disallowance of exemption under section 54EC - Held that - In the present case we noted that the assessee sold his house property on 15.01.2006 for a considerat ion of 23, 00, 000/- while as per the provisions of sect ion 50C the consideration as per the stamp valuation was 24, 65, 600/-. The indexed cost of acquisition of the property came to 13, 57, 921/-. The assessee computed the capital gain at 9, 42, 079/- but taking the stamp duty valuation under section 50C the Assessing Officer computed the capital gain at 11, 07, 079/-. The assessee could not make any investment in REC Bonds as the Bonds were not available. The Central Board of Direct Taxes vide Ci rcular No. 142/09/2006-TPL dated 30.06.2006 extended the date for making the investment upto 31.12.2006. Therefore if the date would have made the investment till that date he would have been eligible for the exemption. But we noted after 31.12.2006 till 21.07.2007 the REC Bonds were not available in the market for purchase therefore the assessee could not make the investment in Bonds. The Bonds were available for sale only from 22.01.2007 and the assessee purchased Bonds on 01.02.2007 i.e. within 11 days from the date when the Bonds were available for sale in the market. In our opinion the decision of the Hon ble Bombay High Court n the case of CIT Cent ral-III Mumbai vs.- Cello Plast (2012 (8) TMI 527 - BOMBAY HIGH COURT) is clearly applicable in the case of the assessee. The assessee had purchased the Bonds within reasonable period when the Bonds were available for investment. No cont rary decision was brought to our knowledge by the ld. D.R. even though he has vehemently relied on the order of the Assessing Officer. We therefore respectfully following the aforesaid decision of the Hon ble Bombay High Court set aside the order of the ld. CIT(Appeal s) and direct the Assessing Officer to allow exemption to the assessee under section 54EC - Decided in favour of assessee. Addition made on account of the accrued interest on fixed deposits - Held that - We find substance in the submissions made by the ld. A.R. that the interest income on FDR has been shown by the assessee regularly on the basis of the certificate received from the Banker as is included in the TDS. Similarly during the impugned year also the interest has been shown by the assessee in accordance with the calculation given by the Banker. Since the assessee is regularly following the same method of accounting we therefore do not find any legality in the method of accounting followed by the assessee. Accordingly we delete the interest.- Decided in favour of assessee. Addition as notional rent - Held that - The notional rent has merely been estimated by the Assessing Officer without giving any basis and on what basis the rent has been estimated @ 4, 000/- per month. The provision of section 23 lays down how the annual value of the property has to be estimated. None of the relevant provisions has been brought to our knowledge by the Revenue. We therefore delete the addition.- Decided in favour of assessee. Assessment for rental receipt from the property - annual value adoption - Held that - The assessee before us claims that the property was occasionally let out and part of the property is being occupied by the assessee as weekend destination which means that the property remains vacant for part of the year but the assessee has not given any calculation how he received the rent and during what year the property remains vacant so that the actual rent received or receivable could have been computed in accordance with the provisions of sec tion 23(1)(c) of the Act. In our opinion the onus is on the assessee. In case he want s to claim that the property was not let out during the whole of the year. Since the assessee has not given any detail s neither before the authorities below nor before us we therefore do not find any illegality or infi rmity in the annual value being taken by the Assessing Officer on the basis of the rent which the assessee received during the assessment year 2004-05. We therefore confirm the addition made by the Assessing Officer. - Decided against assessee.

Summary

Issues involved:
1. Re-assessment proceedings under section 147
2. Disallowance of exemption claimed under section 54EC
3. Addition of accrued interest income on fixed deposit
4. Addition of notional rent
5. Addition of income from rental property

Analysis:
1. The appeal was filed against the re-assessment proceedings under section 147, challenging the arbitrary and unlawful nature of the proceedings. Grounds 1 to 3 were dismissed as not pressed by the assessee during the hearing. The Tribunal dismissed these grounds as not pressed, leading to their rejection.

2. The issue of disallowance of exemption under section 54EC was raised due to the Assessing Officer's denial of exemption claimed by the assessee for investment in Rural Electrification Bonds. The Tribunal, relying on a Bombay High Court decision, allowed the exemption as the assessee purchased the bonds within a reasonable period when they became available, thereby setting aside the CIT(A)'s order.

3. The addition of accrued interest income on fixed deposits was contested by the assessee, arguing that the interest had been regularly shown based on bank certificates and TDS. The Tribunal found merit in the argument, concluding that the interest amount should be deleted as it was accounted for in accordance with the bank's calculations.

4. The addition of notional rent was challenged by the assessee, who argued that the Assessing Officer's estimation lacked a proper basis. The Tribunal agreed, noting that the rent estimation was arbitrary and lacked statutory backing, leading to the deletion of the addition.

5. The addition of income from rental property was disputed by the assessee, who claimed that the property was occasionally let out and utilized for personal purposes. The Tribunal upheld the Assessing Officer's decision, stating that the onus was on the assessee to provide details supporting the claim of property not being let out, ultimately confirming the addition made by the Assessing Officer.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, addressing each issue raised in the appeal and providing detailed reasoning for the decisions made on each ground.