2015 (9) TMI 428 - AT - Income Tax

Commission/royalty estimated at 2% on accrued basis on the sub contracted work - revision u/s 263 by CIT(A) as AO without properly examining the material on record has estimated the profit at 2% on work given on sub contract basis as claimed by the assessee and has not examined the assessee s claim of exemption under section 54F for an amount of ₹ 11.00 lakhs against the capital gain arising out of sale of agricultural land - Held that - As far as the first issue relating to CIT s directions on estimation of profit from work contract business, as agreed by both the parties, it is of mere academic interest as in the consequential order passed by the Assessing Officer in pursuance to the directions of the CIT under section 263 the Assessing Officer has not made any variation to such income determined by him in the original assessment order. On a perusal of section 54B, it is evident that if the capital gain arising from sale of agricultural land is invested in purchase of agricultural land, then the assessee is eligible for exemption. Similarly section 54F provides that if the capital gain arising from transfer of long term capital asset, not being a residential house is utilized for purchase of a residential house, within a period of two years, then assessee will be eligible for exemption under section 54F. On a reading of the aforesaid provisions, we do not find any restriction/conditions imposed therein that if an assessee claims exemption under section 54B is not eligible to claim under section 54F. Respectfully following the order in ACIT vs. Sri Satyanarayana 2013 (11) TMI 1550 - ITAT HYDERABAD we hold that the assessee will be eligible for exemption under section 54F for the amount of ₹ 11.00 lakhs invested in purchase of an apartment. Accordingly we set aside the impugned order of the learned CIT on this issue and restore the order of the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
1. Estimation of profit on subcontracted work.
2. Claim of exemption under section 54F.

Estimation of profit on subcontracted work:
The appeal was against an order passed by the CIT under section 263 of the Act for the assessment year 2009-10. The Assessing Officer had estimated profit at 2% on work subcontracted to third parties without offering any commission/royalty, resulting in an increased income. The CIT found this estimation erroneous and prejudicial to revenue. The CIT also noted the failure to examine the claim of exemption under section 54F. The assessee argued that there was no error in the assessment order, but the CIT disagreed. Consequently, the assessment order was set aside for a de novo assessment, directing the Assessing Officer to re-examine the profit estimation and denying the exemption under section 54F.

Claim of exemption under section 54F:
The CIT observed that since the sale proceeds of agricultural land were invested in acquiring a non-agricultural asset, the assessee was deemed ineligible for exemption under section 54F. The Assessing Officer had allowed the claim initially, but the CIT disagreed in the section 263 order. The assessee contended that there was no restriction preventing the claim of exemption under section 54F, even if exemption under section 54B was availed. The ITAT analyzed the statutory provisions of section 54B and 54F, finding no explicit restriction on claiming both exemptions. Citing a previous case, the ITAT concluded that the assessee was entitled to exemption under both sections. Consequently, the ITAT held that the assessee was eligible for exemption under section 54F for the amount invested in purchasing an apartment, overturning the CIT's decision and restoring the Assessing Officer's order.

In conclusion, the ITAT partially allowed the appeal, emphasizing the eligibility of the assessee for exemption under section 54F and setting aside the CIT's decision on this issue. The judgment highlighted the absence of restrictions in the statutory provisions, affirming the right of the assessee to claim exemptions under both section 54B and 54F.