2019 (5) TMI 1003 - AT - Income Tax

Exemption u/s. 54 - treating the house as being Constructed by the assessee - assessee has entered into buyer seller purchase agreement on 10.02.2006, thereby purchasing the said house on 10.02.2006 only - HELD THAT - We note that it has been clarified by the CBDT in Circular No.672 dated 16.12.1993 in which it has been made clear that the earlier circular No. 471 dated 15.10.1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies and other institutions. The builder would fall in the category of other institutions as held by Mumbai Bench of Tribunal in the case Smt. Sunder Kaur Sujan Singh Gadh 2005 (4) TMI 518 - ITAT MUMBAI and therefore booking of the flat with the builder has to be treated as construction of flat by the assessee. It is it is clear that the facts of the present case that it was a case of construction of flat and not purchase of flat as held by the AO. Since, the case pertains to construction, benefit of section 54 of the Act are available to assessee. The booking of bare shell of a flat is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 therefore, the CIT(A), has rightly directed the AO to allow benefit to the assessee as claimed u/s.54 which does not require any interference on our part, hence, we uphold the action of the CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Disallowance of deduction u/s.54EC - scope of provisions of latest amendments made to section 54EC by the Finance Act 2014 - AO had restricted the deduction claimed u/s.54EC in part - HELD THAT - This is to be understood that the restriction of ₹ 50,00,000/- in a financial year was placed for evenly distributing the invest into the capital gains bonds on continued basis throughout the year. Therefore, the alternative was put into operation were in the capital gain bonds are available on tap throughout the year without stopping but the limit of investment has been capped to ₹ 50,00,000/- per assessee per financial year. This has resulted in even distribution of benefit to public at large. Had the intention of the legislation was cap the total investment to ₹ 50,00,000/-, the amendment in statute would have prescribed the limit on deduction allowed u/s 54EC and not on investment allowed under section 54EC. We find that the judgement of the Hon ble Madras High Court in COROMANDEL INDUSTRIES LIMITED 2014 (12) TMI 852 - MADRAS HIGH COURT is applicable on the facts of the present case. Therefore, following the decision of Hon'ble High Court, Ld. CIT(A) has rightly allowed the ground. Addition on account of rental income received from D.T. Cinemas - Income from business Profession OR house property - alleged that maintenance charged received and clubbed with rent - HELD THAT - Assessing Officer as presumed that the assessee is in receipt of certain amount towards the provisioning of certain services which have not been disclosed which is patently false and based on his own conjecture and surmises, and without fully appreciating records and explanations placed before him. Further, the Assessing Officer has not made any inquiry or undertaken any exercise to prove the evidences / confirmations placed before him to be incorrect or false. We find that no maintenance charges were received by the assessee as confirmed by the tenant. This fact also gets confirmed from perusal of the bank statement, TDS certificate and details reflected in Form 26AS. Since, no maintenance charges were received or receivable by the assessee, hence, CIT(A) has rightly directed the AO to delete the addition in dispute. - Appeals filed by the Revenue stand dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of exemption under sections 54 and 54EC of the Income Tax Act.
2. Deletion of addition on account of exemption under section 54EC of the Income Tax Act.
3. Deletion of addition on account of rental income received from M/s DT Cinemas.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Exemption under Sections 54 and 54EC:

The Revenue contested the deletion of an addition of ?4,10,45,578/- and ?50,00,000/- by the CIT(A) on account of exemption under sections 54 and 54EC. The Assessing Officer (AO) had disallowed the deduction under section 54, arguing that the date of the agreement (10.02.2006) should be treated as the date of acquisition, which falls beyond the one-year period prior to the date of transfer, as per section 54. The AO relied on the judgments in Gulshan Malik vs. CIT and CIT vs. RL Sood.

The Tribunal, however, upheld the CIT(A)'s decision, noting that the assessee had entered into an agreement for the construction of a bare shell house with M/s DLF, which should be treated as construction and not purchase. The construction was completed within three years of the sale of the original asset, fulfilling the conditions under section 54. The Tribunal referenced CBDT Circular No. 672 and various judicial precedents, including CIT v. Smt. Brinda Kumari and CIT v. J.R. Subramanya Bhat, which clarified that the commencement date of construction is immaterial as long as it is completed within the stipulated period.

2. Deletion of Addition on Account of Exemption under Section 54EC:

The Revenue also contested the deletion of an addition of ?50,00,000/- by the CIT(A) on account of exemption under section 54EC. The AO had restricted the deduction to ?50,00,000/- following the ITAT Jaipur Bench decision in ACIT Circle-2 vs. Sh. Raj Kumar Jain Sons HUF, arguing that the investment in REC bonds exceeded the limit.

The Tribunal upheld the CIT(A)'s decision, citing the judgment of the Hon'ble Madras High Court in CIT v. C. Jaichander, which clarified that the limit of ?50,00,000/- applies per financial year, and investments made in two different financial years are permissible. The Tribunal also referenced the Finance Act, 2014, which introduced a second proviso to section 54EC, effective from 1st April 2015, indicating that the amendment was prospective and not applicable to the assessment year in question.

3. Deletion of Addition on Account of Rental Income Received from M/s DT Cinemas:

The Revenue challenged the deletion of an addition of ?14,07,474/- made by the AO on account of rental income from M/s DT Cinemas. The AO had added maintenance charges to the rental income based on clause 8(v) of the lease deed, despite the assessee's explanation and confirmation from the tenant, M/s DLF Utilities Ltd., that no such charges were received.

The Tribunal upheld the CIT(A)'s decision, noting that the AO had made the addition based on assumptions without any factual basis. The Tribunal emphasized that the maintenance charges were paid directly to the Mall Management Company and not to the assessee, as confirmed by the tenant. The Tribunal concluded that no maintenance charges were received or receivable by the assessee, and thus, the addition was rightly deleted.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on all grounds. The Tribunal emphasized the importance of factual accuracy and adherence to legal provisions and judicial precedents in making additions and disallowances. The decision reinforced the principles of fair assessment and the correct interpretation of tax laws.