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2016 (9) TMI 1201 - AT - Income TaxDisallowance of Exemption under section 54F - Held that - Since the assessee in the case on hand has utilized the amount of capital gains in investing in the purchase of a residential property (flat) within the extended period as stipulated under section 139(4) of the Act for A.Y. 2008-09, the assessee is entitled for exemption under section 54F of the Act. Disallowance under section 14A - Held that - We have heard the rival contentions of both the parties and perused and carefully considered the material on record. From the working of the disallowance under section 14A r.w. Rule 8D(2)(iii) made by the AO at para 4 of the order of assessment, it appears to us that there is some merit in the averments of the learned A.R. However, we restore the matter for verification of the correctness of the assessee s claim, that the AO s computation of the disallowance under Rule 8D(2)(iii) at ₹ 2,56,495/- is incorrect and that correct working of the said disallowance by the assessee is ₹ 1,28,247/- as given at para 5.1 (supra). The AO is directed to verify the veracity of the assessee s claim and workout the correct disallowance under section 14A r.w. Rule 8D(2)(iii) after affording the assessee adequate opportunity of being heard.
Issues:
1. Disallowance of Exemption under section 54F of the Act 2. Disallowance under section 14A of the Act 3. Initiation of penalty proceedings Issue 1 - Disallowance of Exemption under section 54F of the Act: The appeal was against the order of the CIT(A)-34, Mumbai for A.Y. 2008-09. The assessee sold shares and claimed exemption under section 54F of the Act. The AO recomputed the LTCG and denied the exemption as the full consideration was not utilized before the due date for filing the return. The CIT(A) upheld this decision. The assessee argued that the extended period for filing the return should be considered for claiming exemption. Judicial pronouncements were cited to support the claim. The Tribunal noted that the assessee invested in a residential property within the extended period for filing the return under section 139(4) of the Act. Citing relevant High Court decisions, the Tribunal held that the assessee was entitled to exemption under section 54F. Therefore, the appeal was allowed on this ground. Issue 2 - Disallowance under section 14A of the Act: The assessee challenged the disallowance made under section 14A of the Act. The disallowance was based on Rule 8D(2)(iii). The assessee claimed a mistake in the computation by the AO, leading to an incorrect disallowance amount. The Tribunal found merit in the assessee's claim and directed the AO to verify and correct the disallowance amount. The matter was restored for verification of the correctness of the claim and to recalculate the disallowance accurately. Issue 3 - Initiation of penalty proceedings: The assessee requested dropping penalty proceedings under section 271(1)(c) of the Act. However, since no penalty had been levied in the impugned order, the Tribunal dismissed this ground as premature. The plea to drop penalty proceedings was not entertained due to the absence of any penalty imposition in the current order. In conclusion, the Tribunal partly allowed the assessee's appeal for A.Y. 2008-09, granting relief on the disallowance of exemption under section 54F of the Act and directing a re-verification of the disallowance under section 14A. The premature plea regarding penalty proceedings was dismissed.
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