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2015 (6) TMI 138 - HC - Income TaxEntitlement to the exemption under Section 54EC - Held that - The present Tax Appeal is ADMITTED to consider the following substantial question of law - Whether the ITAT is justified in law as well as on facts in coming to the conclusion that the assessee is entitled to the exemption under Section 54EC of ₹ 1 Crore instead of ₹ 5 lakhs ignoring the amendment in Section 54EC by Finance Act (2) of 2014, which is clarificatory in nature? Deduction from long term capital gain and short term capital gain - Held that - while considering the aforesaid issue the learned Tribunal has relied upon the decision of the Division Bench of this Court in the case of CIT Vs. Himalaya Machinery (P) Ltd reported in 2012 (12) TMI 607 - GUJARAT HIGH COURT and CIT Vs. Polestar Industries reported in (2013 (11) TMI 910 - GUJARAT HIGH COURT). The learned Counsel appearing on behalf of the revenue is not in a position to show any contrary decision to the aforesaid decisions - Decided against revenue. Disallowance of expenditure - ITAT allowed the claim - Held that - The learned CIT(A) has given independent and elaborate reasons while restricting the disallowance of expenditure of ₹ 10,90,223/- and granted the relief to the assessee to the extent of ₹ 6,09,870/- on each item. We see no reason to interfere with the finding recorded by the learned CIT(A) confirmed by the learned Tribunal restricting the disallowance of expenditure to ₹ 10,90,223/- It is required to be noted that the Assessing Officer disallowed the expenditure of ₹ 17,00,093/- against which the learned CIT(A) has restricted the disallowance of expenditure to ₹ 10,90,223/-. - Decided against revenue.
Issues:
1. Interpretation of Section 54EC exemption amount. 2. Allowance of deductions from capital gains. 3. Allowance of expenses debited in P & L account. Analysis: Issue 1: The first issue revolves around the interpretation of Section 54EC exemption amount. The Tribunal had allowed the assessee an exemption of Rs. 1 crore under Section 54EC instead of Rs. 5 lakhs, disregarding the clarificatory amendment in Section 54EC by Finance Act (2) of 2014. The High Court admitted the Tax Appeal to consider whether the Tribunal's decision was justified in law and on facts, especially in light of the pending appeal related to a similar matter. The Court acknowledged the relevance of the pending appeal and admitted the case for further consideration. Issue 2: The second issue concerns the allowance of deductions from capital gains. The Tribunal directed the Assessing Officer to permit a deduction of Rs. 81,48,754 from long term capital gain and Rs. 18,51,246 from short term capital gain, taxing the remaining capital gains accordingly. The Tribunal's decision was supported by previous rulings of the Division Bench of the High Court. The Court noted that the revenue failed to provide any contrary decisions and dismissed the Tax Appeal concerning this issue based on the binding precedents. Issue 3: The final issue involves the allowance of expenses amounting to Rs. 6,09,870 debited in the Profit and Loss (P & L) account. The Tribunal had upheld the relief granted by the CIT(A) regarding the expenses, albeit without detailed analysis. The High Court recognized the Tribunal's lack of elaboration on the matter but chose not to remand the case. Instead, the Court independently reviewed the records considered by the CIT(A) and found no reason to interfere with the relief granted. The Court upheld the decision to restrict the disallowance of expenditure to Rs. 10,90,223, ultimately dismissing the Tax Appeal concerning this issue. In conclusion, the High Court admitted the appeal for consideration on the interpretation of Section 54EC exemption amount, dismissed the appeal regarding deductions from capital gains based on established precedents, and upheld the decision on the allowance of expenses debited in the P & L account.
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