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2015 (11) TMI 1062 - AT - Income TaxDisallowance of exemption u/s 54F - CIT(A) allowed part claim - Held that - Claim of deduction u/s 54F cannot be denied for the sole reason that the assessee did not have sufficient balance in his bank account as on the date of issue of cheque for purchase of a plot of land for the reason that the cheque was honoured as and when it was presented; this is a beneficial provision and has to be liberally construed; factually it cannot be stated that the assessee has not invested the said amount in the purchase of a plot, before the filing of the return of income on 30.9.2008. The Tribunals and Courts have in a number of decisions held that, there is no requirement in law, that the same funds, which were obtained on the sale of a asset, should be utilized for the purchase of a plot. The moment a cheque has been issued by a person, in pursuance of a contract of purchase, in our view, it is utilization of funds, as there is a legal commitment by the assessee. When the transaction materialized it relates back to the date of agreement and the date of encashment is of no relevance. See Sanjeev Lal vs. CIT 2014 (7) TMI 99 - SUPREME COURT - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - Held that - The provision made for the electricity charges is apparently for the period 14.3.2008 to 31.3.2008. This being the case, the provision for this period of ₹ 76,584 is allowable as deduction therefore the disallowance made is deleted and the ground of appeal is allowed - Decided in favour of assessee.
Issues Involved:
1. Disallowance of Rs. 98,13,725/- by restricting the claim of exemption u/s 54F of the Income Tax Act, 1961. 2. Non-deduction of TDS on an amount of Rs. 3,66,093/- paid for loading expenses and repair of JCB. 3. Addition of Rs. 76,584/- made by the A.O. on account of provision made for electricity for want of evidence. Issue-Wise Detailed Analysis: 1. Disallowance of Rs. 98,13,725/- by restricting the claim of exemption u/s 54F of the Income Tax Act, 1961: The assessee, an individual with income from various sources, filed a return for AY 2008-09 declaring a total income of Rs. 8,51,320/-. The primary issue was the disallowance of Rs. 98,13,725/- by restricting the claim of exemption u/s 54F from Rs. 2,87,20,000/- to Rs. 1,87,86,275/-. The assessee sold 2 lakh shares of M/s Alps Ltd. and claimed a long-term capital gain of Rs. 2,86,00,000/- eligible for deduction u/s 54F. The A.O. did not accept the investment in a residential plot of Rs. 86,20,000/- due to several reasons, including the timing of the cheque issuance and encashment, and the lack of registration of the plot in the assessee's name. On appeal, the First Appellate Authority granted relief. The Revenue contended that the assessee did not have sufficient funds in the bank account when the cheque was issued, and the cheque was encashed later. The Tribunal held that the claim of deduction u/s 54F could not be denied merely because the assessee did not have sufficient balance in the bank account on the date of issuing the cheque. The cheque was honored when presented, and the provision is beneficial and should be liberally construed. The Tribunal relied on case laws, including the Hon'ble Supreme Court's judgment in Sanjeev Lal vs. CIT and another, which emphasized that the issuance of a cheque constitutes a legal commitment, and the date of encashment is irrelevant. 2. Non-deduction of TDS on an amount of Rs. 3,66,093/- paid for loading expenses and repair of JCB: The A.O. disallowed Rs. 2,06,733/- out of loading expenses and Rs. 1,59,360/- for repair of JCB by invoking S.40A(ia) due to non-deduction of TDS. The First Appellate Authority observed that the A.O. could not provide any material evidence to show that these payments were due to a contractual obligation, thus not attracting the provisions of section 194C. Consequently, the question of disallowance u/s 40(a)(ia) did not arise, and the disallowance was deleted. 3. Addition of Rs. 76,584/- made by the A.O. on account of provision made for electricity for want of evidence: The A.O. added Rs. 76,584/- for provision made for electricity, citing a lack of evidence. The First Appellate Authority noted that the provision was for the period 14.3.2008 to 31.3.2008 and was allowable as a deduction. Thus, the disallowance was deleted. Conclusion: The Tribunal upheld the findings of the First Appellate Authority on all grounds. The claim of deduction u/s 54F was allowed, considering the beneficial nature of the provision and the legal commitment made by issuing the cheque. The disallowances related to non-deduction of TDS and provision for electricity were also deleted due to lack of evidence and proper justification by the A.O. Consequently, the appeal of the Revenue was dismissed.
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