2019 (1) TMI 1458 - AT - Income Tax

Denial of exemption claimed u/s.54EC - investments in Electrification Corporation Bonds made on 28.02.2014 and 30.06.2014 were beyond the period allowed u/s.54EC - whether JDA was correctly taken as date of transfer by the lower authorities - Held that - Handing over of the possession could happen only after the CMDA approval for the plan was received. Planning permit was given by the CMDA, only on 31.12.2013. Hence, possession could have been given by the assessee to the developer only after 31.12.2013. Even if, we presume the letter dated 03.02.2014 placed by the assessee at paper book page 42 and claimed as evidence for handing over of possession, as a document constructed by the assessee and the developer to help the assessee s cause, still we are inclined to hold that the investments made by the assessee in the bonds were within six months outer limit mentioned in Section 54EC of the Act. Even if possession was given by the assessee on the very next day after getting the CMDA approval, viz, on 01.01.2014, the investments made on 28.02.2014 and 30.06.2014 were within six months period. By virtue of Section 2(47) (v) of the Act transfer is complete when the possession of immovable property is given in part performance falling within Section 53A of the Transfer of Property Act, 1882. Coming to the question whether assessee could claim such exemption over investment done over two successive financial year, this stands answered by Hon ble Jurisdictional High Court in the case of Coromandel Industries Ltd 2014 (12) TMI 852 - MADRAS HIGH COURT as upheld the view of this Tribunal that investments, even though they are made in two difference financial years, if they fall within six months period from the date of transfer, would be eligible for deduction under Section 54EC - Decided in favour of assessee Disallowance of additional cost of construction while computing the deduction claimed under Section 54 - Held that - AO sought restriction of the additional claim of ₹ 12,21,086/- based on certain submissions given by M/s.Sumanth& Co. It appears that he did not verify whether the claim of the assessee was genuine. Ld. AO also did not verify whether there was any duplication of original claim of ₹ 3,18,75,000/- under Section 54 made in the return and the additional claim of ₹ 3,06,40,581/- made before ld. CIT(A). Once ld. CIT(A) admitted fresh evidence in our opinion ld. AO was duty bound to verify such evidence in accordance with law. Careful examination is required since the claim of additional construction, when aggregated with what was originally claimed by the assessee in the return appears prime facie to be disproportionate to the cost and the area. Even the original claim, it seems, was allowed without consider this aspect. We are therefore of the opinion that question whether assessee was eligible for claiming any relief for additional cost of construction and if so, to what extent requires a fresh look by the ld. AO - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Denial of exemption under Section 54EC of the Income Tax Act, 1961.
2. Disallowance of additional cost of construction claimed under Section 54 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Section 54EC of the Income Tax Act, 1961:
The assessee entered into a Joint Development Agreement (JDA) on 15.04.2013, receiving ?5 Crores upfront and a total consideration of ?16 Crores. The assessee claimed a deduction of ?1 Crore under Section 54EC for investments in Electrification Corporation Bonds made on 28.02.2014 and 30.06.2014. The Assessing Officer (AO) denied this exemption, arguing that the investments were made beyond the six-month period from the date of transfer, which the AO considered to be the date of the JDA (15.04.2013). The assessee contended that the transfer date should be considered as 03.02.2014, the date of handing over possession after receiving CMDA approval on 31.12.2013. The Tribunal found that possession could only be given after CMDA approval, thus the transfer date was after 31.12.2013. Consequently, investments made on 28.02.2014 and 30.06.2014 were within the six-month period. The Tribunal also referenced the High Court's decision in CIT vs. Coromandel Industries Ltd., which supported the assessee's claim. Therefore, the Tribunal allowed the exemption under Section 54EC.

2. Disallowance of Additional Cost of Construction Claimed under Section 54 of the Income Tax Act, 1961:
The assessee claimed a deduction for additional construction costs amounting to ?3,06,40,581/- under Section 54, which was not included in the original return. The AO, in the remand report, restricted this claim to ?12,21,086/- based on the developer's submission that the unfinished work was valued at this amount. The Tribunal noted that the AO did not verify the genuineness of the additional claim or whether there was any duplication with the original claim of ?3,18,75,000/-. The Tribunal found that the AO should have verified the additional evidence and the proportionality of the claim to the cost and area. Therefore, the Tribunal remitted the matter back to the AO for fresh consideration, directing a thorough examination of the additional construction costs claimed by the assessee.

Conclusion:
The Tribunal allowed the appeal concerning the exemption under Section 54EC, recognizing the transfer date as post-31.12.2013 and validating the investments made within six months. For the additional construction cost claim under Section 54, the Tribunal remanded the issue back to the AO for detailed verification and fresh adjudication. The appeal was thus allowed pro-tanto.