2015 (1) TMI 820 - HC - Income Tax

Disallowance of expenditure - deduction could have been claimed and allowed under section 37 of the Act and not under section 35DDA - ld that - Merely invoking wrong provisions should not disentitle the Assessee from claiming the deduction if the same can be otherwise claimed and granted and with recourse to another provision in the Income Tax Act 1961. - Decided in favour of assessee. Bifurcation of land and building - Exemption under section 54EC - Held that - Gain in respect of land portion has to be computed as long terms capital gain and the Assessee has invested this gain in NABARD bonds. Therefore it would be entitled to deduction under Section 54EC of the Act. It would be so entitled in respect of short term capital gain under under section 50 in respect of building portion if the same was held for more than three years. There was nothing in section 50 to suggest that fiction created is not restricted in its application to sections 48 & 49 but to other provisions as well. Section itself makes it clear that the deeming fiction created in sub-sections 1 & 2 is restricted only to the mode of computation of capital gains contained in sections 48 & 49. Section 50 does not convert a long term capital asset into short term capital asset. - Decided in favour of assessee.

Summary

Issues:
1. Whether the questions raised are substantial questions of law?
2. Whether the Assessee is entitled to capital gain on the sale of property?
3. Whether certain deductions claimed by the Assessee are permissible under the Income Tax Act, 1961?
4. Whether the bifurcation of land and building for the purpose of capital gain computation is valid?
5. Whether the Tribunal's order raises any substantial question of law?

Analysis:

1. The appellant argued that four questions raised were substantial questions of law, emphasizing that the amount involved should not hinder the court from considering them. The Tribunal's approach of not approving or modifying the Assessing Officer and Commissioner's views raised these questions.

2. The Assessee claimed capital gain on the property sale, with the appellant contending that the bifurcation into land and building for depreciation purposes was not permissible. The Tribunal's decision on this matter was challenged.

3. The Assessee claimed deductions under various sections of the Income Tax Act, which the appellant argued were not eligible. The Tribunal allowed some deductions and disallowed others, leading to a debate on the correctness of these decisions.

4. The validity of bifurcating land and building for capital gain computation was a key issue. The Tribunal referred to relevant judgments to support its decision, emphasizing the need to compute capital gains in line with legal provisions.

5. The Tribunal's order on various questions, including deductions claimed and capital gain computation, was analyzed. The court found the Tribunal's approach consistent with legal principles and previous judgments, concluding that no substantial question of law arose. The appeal was dismissed for lack of merit.