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2014 (8) TMI 1116 - AT - Income TaxEntitlement to deduction u/s 54 - second residential unit purchased by assessee - Held that - We find that this issue no more res integra in view of various decisions referred by the ITAT in the case of Meher R. Surti (2015 (4) TMI 52 - ITAT MUMBAI ). Further, we find that amendment has been brought in section 54 to limit the exemption u/s 54 to one residential unit, which is applicable from A.Y. 2015-16. therefore, for the year under consideration the assessee was entitled for exemption u/s 54 in respect of more than one flat. In the result, assessee s appeal is allowed. Disallowance of consultancy charges - consultancy income received - Held that - The assessee had earned consultancy income of 60,11,330/- from the business of real estate. In order to finalise the deal, the assessee met with many persons like professionals and other persons, who had the knowledge about such place and influence over the local residents. Ld. Counsel in course of hearing clarified that in Himachal Pradesh, sale and purchase of land cannot take place without the intervention of Himachal people and therefore the assessee had to take consultancy and advisory services in the matter of land acquisition from Mr. Surinder Pal and Mr. Sachin Shridhar. The necessary confirmations along with income-tax particulars were filed before the assessing officer in respect of Mr. Sachin Shridhar for payment of ₹ 9,65,000/-. Necessary confirmation along with affidavit, bank statement and acknowledgement of the ITR from Mr. Sachin Shridhar was also filed. Similarly, in respect of Mr. Surinder Pal, all evidences were filed. Therefore, there was no basis for making any disallowance. As regards the commission expenses, a sum of ₹ 14,41,070/- was paid to M/s Starlit Infrastructure Ltd. for the services rendered by them during FY 2007-08. Copy of the confirmation along with bills, affidavit and income-tax return for AY 2008-09 was also filed. The services of M/s Starlit Infrastructure Ltd. were taken for purchase and consolidation of land. Payment of commission was made directly on assessee s instructions by M/s SKIL Himachal Infrastructure & Tourism Ltd. to M/s Starlit Infrastructure Ltd. The said party had charged service tax and had also paid necessary income-tax on the aid income. Confirmations from M/s SKIL Himachal Infrastructure & Tourism Ltd. was also filed. The other payments were to architect which could not be disputed in case of real estate deal, as the same was paid for preparation of detailed architectural and utility drawings. Copies of the bills were also filed. As regards the payment to Mr. Sant Kumar Sharma of ₹ 55,742/-, the copy of confirmations could not be provided as he died on 9-6-2010. However, assessee filed copy of his return of income for A.Y. 2008-09. In regard to payment to Shri Ravinder Kumar Sharma of ₹ 55,642/-, assessee filed copy of confirmation, bill & income tax return. Considering the overwhelming evidence on record, we do not find any reason to doubt the genuineness of assessee s claim as also the purpose for which the services were taken by the assessee for the consultancy income received from M/s SKIL Himachal Infrastructure & Tourism Ltd. - Decided in favour of assessee.
Issues Involved:
1. Entitlement to deduction under Section 54 for multiple residential units. 2. Deletion of additions made by AO on account of disallowance of cost of improvement. 3. Deletion of additions made by AO on account of disallowance of consultancy charges. 4. Deletion of additions made by AO on account of disallowance of commission expenses. 5. Admission of additional evidence under Rule 46A. Issue-wise Detailed Analysis: 1. Entitlement to Deduction under Section 54 for Multiple Residential Units: The primary issue in the assessee's appeal was whether the assessee is entitled to deduction under Section 54 in respect of the second residential unit purchased. The assessee had sold a residential property and invested the capital gains in two new residential units. The AO disallowed the claim, stating that exemption under Section 54 is available only for one residential house. The CIT(A) allowed the exemption for one house, directing the AO to allow the exemption for the house with a higher cost. The ITAT, referencing various High Court decisions, concluded that for the year under consideration, the assessee was entitled to exemption under Section 54 for more than one flat, as the amendment limiting the exemption to one unit was applicable from A.Y. 2015-16. Therefore, the assessee's appeal was allowed. 2. Deletion of Additions on Account of Disallowance of Cost of Improvement: The revenue's appeal contested the deletion of the addition made by the AO regarding the disallowance of cost of improvement. The AO had disallowed the assessee's claim due to the lack of original vouchers and purchase deed. The CIT(A), however, accepted the cost of improvement based on the documentary evidence such as the valuation report, loan documents from LIC Housing Finance Ltd., and occupancy certificate from HUDA. The ITAT upheld the CIT(A)'s decision, finding no reason to interfere given the substantial evidence provided. Thus, this ground of the revenue's appeal was dismissed. 3. Deletion of Additions on Account of Disallowance of Consultancy Charges: The AO had disallowed consultancy charges paid by the assessee due to the lack of supporting agreements and evidence linking the payments to business income. The CIT(A) deleted the disallowance, noting that the assessee provided confirmations, affidavits, and bank statements from the parties who received the payments. The ITAT upheld the CIT(A)'s decision, citing the genuineness of the transactions supported by substantial evidence. Thus, this ground of the revenue's appeal was dismissed. 4. Deletion of Additions on Account of Disallowance of Commission Expenses: The AO disallowed commission expenses, questioning the linkage between the payments and the assessee's business activities. The CIT(A) deleted the disallowance, supported by documentary evidence including confirmations, affidavits, and income-tax returns from the recipients, as well as confirmations from M/s SKIL Himachal Infrastructure & Tourism Ltd. The ITAT upheld the CIT(A)'s decision, finding the evidence provided by the assessee credible. Thus, this ground of the revenue's appeal was dismissed. 5. Admission of Additional Evidence under Rule 46A: The revenue contested the admission of additional evidence by the CIT(A) under Rule 46A, arguing that sufficient opportunity was provided to the assessee during the assessment proceedings. The CIT(A) admitted the additional evidence, noting that the assessee was not afforded sufficient opportunity to present the necessary documents. The ITAT found no reason to interfere with the CIT(A)'s decision to admit the additional evidence, thus allowing the evidence to be considered in adjudicating the grounds. Conclusion: The assessee's appeal was allowed, granting the exemption under Section 54 for multiple residential units. The revenue's appeal was dismissed, upholding the CIT(A)'s decisions on the deletion of disallowances for cost of improvement, consultancy charges, and commission expenses, and the admission of additional evidence under Rule 46A.
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