2017 (2) TMI 728 - AT - Income Tax

Addition of the investment claimed on the renovation of the house property - Held that - When the AO got satisfied regarding renovation of the house carried out by the assessee during the year under assessment to the tune of ₹ 13,00,000/- on the basis of bills and vouchers produced by the assessee, contention of the assessee that the amount of ₹ 1,88,820/- was spent by way of labour charges given to the daily wagers who have worked for a period of three months is sustainable. One cannot be expected to procure the vouchers for making payments to the daily wagers who even keeps on changing as per availability in the labour market. So, we find no illegality or perversity in the findings returned by the CIT (A). This ground is determined against the revenue. Entitlement to exemption u/s 54F - property purchased in the joint name - Held that - Perusal of the findings returned by ld. CIT (A) goes to prove that he has thrashed the matter threadbare by perusing the bank account maintained with State Bank of India vide which the entire reinvestment in purchasing the house has been made by the assessee, though the house was purchased in the joint name of the assessee as well as her daughter-in-law, Smt. Purabi Devi. So, when the source of funds invested in the house have come from assessee herself which she has got by selling her property for a sale consideration of ₹ 5,81,19,521/-, she cannot be denied the benefit of section 54 merely because of the fact that the property was also purchased in the joint name of her daughter-in-law. Moreover, the entire sale consideration received by the assessee form the sale of property was received through bank and Smt. Purabi Devi has undisputedly not invested any amount towards making payment of sale proceeds of the new property. Ratio in both cases CIT vs. Ravinder Kumar Arora (2011 (9) TMI 343 - DELHI HIGH COURT ); and (ii) CIT vs. Kamal Wahal (2013 (1) TMI 401 - DELHI HIGH COURT) says that, when new residential property has been purchased by the assessee in joint names of assessee and his close relative by investing the entire amount of long term capital gain, the assessee is entitled for full exemption u/s 54F of the Act. - Decided against the revenue. Addition claimed u/s 54-EC on purchase of National Highway Authority of India (NHAI) Bonds - Held that - Bare perusal of section 54-EC goes to prove that there is no mention that the long term investment in specified assets should be in the name of assessee only rather the core issue to be seen is as to what was the source of fund. No doubt, the bonds were purchased by way of cheques issued form joint account of the account holders but further perusal of the bank account goes to prove that the assessee has received ₹ 75,00,000/- as the sale consideration out of which the amount of purchase of long term specific assets were invested. So, following the ratio of the judgments in the cases of CIT vs. Ravinder Kumar Arora and CIT vs. Kamal Wahal (supra), we are of the considered view that the assessee has rightly claimed deduction of the entire amount of ₹ 50,00,000/- invested by her. - Decided against the revenue.

Summary

Issues:
1. Allowance of renovation charges without bills/vouchers
2. Allowance of deduction u/s 54 for property purchased in joint names
3. Allowance of deduction u/s 54EC for joint investment in NHAI Bonds

Issue 1 - Renovation Charges:
The Deputy Commissioner of Income-tax challenged the order allowing renovation charges in a new house without producing bills/vouchers. The Assessing Officer disallowed &8377; 1,88,820/- due to incomplete documentation. However, the CIT (A) upheld the renovation expenses based on bills & vouchers totaling &8377; 13,00,000/-. The Tribunal found the contention valid that expenses paid to daily wagers, who change frequently, may not always have complete documentation. Therefore, the Tribunal ruled in favor of the assessee, rejecting the Revenue's appeal.

Issue 2 - Deduction u/s 54 - Property in Joint Names:
The AO disallowed a deduction of &8377; 1,87,33,472/- under section 54, arguing that the property was purchased jointly. However, the CIT (A) allowed the deduction, emphasizing that the source of funds, not the ownership, is crucial for claiming benefits under section 54. The Tribunal agreed with the CIT (A), stating that the entire reinvestment came from the assessee, despite the property being in joint names. Citing relevant case law, the Tribunal upheld the decision, dismissing the Revenue's appeal.

Issue 3 - Deduction u/s 54EC - Joint Investment in NHAI Bonds:
The AO disallowed a deduction of &8377; 50,00,000/- under section 54EC for NHAI Bonds purchased jointly. However, the CIT (A) allowed the deduction, focusing on the source of funds used for the investment. The Tribunal concurred, noting that the assessee invested her own funds from the property sale, justifying the full deduction. Relying on precedent cases, the Tribunal upheld the CIT (A)'s decision, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on all three issues. The Tribunal's detailed analysis considered the source of funds, ownership structure, and relevant legal precedents to support the assessee's claims for deductions and allowances under the Income-tax Act, 1961.