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2020 (1) TMI 407 - HC - Income TaxDeductions u/s 54 and 54EC - LTCG - whether acquisition of flat through allotment by DLF Universal Ltd. has to be treated as a construction of flat? - HELD THAT - The assessee was required to purchase a residential house property either one year before, or within two years after the date of transfer of original asset; or within a period of three years after the date he was required to construct a residential house. CBDT in its circulars No. 672 dated 16.12.1993 has made it 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 cooperative societies and other institutions. The tax authorities have relied upon the said circular and held that the builder would fall in the category of other institutions and, therefore, booking of the flat with the builder has to be treated as construction of flat by the assessee. In accordance with the said agreement, the assessee was to make payment in installments and the builder was to construct an unfinished bare shell flat for finishing by the buyers. The possession was granted on 30.03.2013. The lower tax authorities after examining the terms of the agreement, the occupation certificate, and the other letters-offer to finalize the details of interiors, have come to a conclusion that the assessee had booked a semi furnished flat with the builder, namely, DLF Universal Ltd. in the residential group housing complex named as Magnolias DLF Golf Links. Accordingly, the assessee had a window of three years period from 21.12.2011 till 21.12.2014 to construct a house property, calculated from the date of transfer of original asset. The appellant has claimed deduction on amount invested till the due date of filing of return under Section 139 (1) - No cogent ground to hold that the Respondents do not fulfill the conditions laid down under Section 54 (1) of the Act so as to deny the benefit of the said provision. The apprehension expressed by the learned senior standing counsel for the Revenue is not borne from the facts on record. The provision in question is a beneficial provision for assessees, who replace the original long term capital asset by a new one. It cannot be said in the facts of the present case that the deduction claimed for the construction were not relatable to the transaction of sale of the Jor Bagh property which resulted in income by way of capital gains. There is no ground urged by Revenue before CIT (A), or before the ITAT, that the expenditure was not connected with the sale transactions. Deduction u/s 54EC - As decided in COROMANDEL INDUSTRIES LIMITED 2014 (12) TMI 852 - MADRAS HIGH COURT the legislature has chosen to remove the ambiguity in the proviso to Section 54EC(1) of the Act by inserting a second proviso with effect from 1.4.2015.The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature probably appears to be that this amendment should be for the assessment year 2015-2016 to avoid unwanted litigations of the previous years. Even otherwise, we do not wish to read anything more into the first proviso to Section 54EC(1) of the Act, as it stood in relation to the assessees. In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to ₹ 50,00,000/- is incorporated in Section 54EC(1) of the Act itself. However, the ambiguity has been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years. - Decided against the Revenue Addition of suppression of maintenance charges under the head income from house property received from rented property - HELD THAT - ITAT has held that the presumption drawn by the AO for making the addition was patently false, based on conjectures and surmises, without appreciating the records and making an inquiry to discredit the evidences and confirmation placed on record by the assessee. DLF Universal Ltd. has confirmed that the payment of rent under the lease agreement to the assessee, and has also stated that no other amount is due on any account whatsoever. Maintenance of the property was being done by the tenant itself. In absence of any evidence of receipt of any amount on account of maintenance, that would contradict the books of account, the deletion made by CIT (A) has been upheld. This consistent factual finding arrived at by the CIT (A) and ITAT does not give rise to any question of law.
Issues Involved:
1. Condonation of delay in re-filing applications. 2. Deduction under Section 54 of the Income Tax Act, 1961. 3. Deduction under Section 54EC of the Income Tax Act, 1961. 4. Addition on account of suppression of maintenance charges under the head "income from house property." Issue-wise Detailed Analysis: 1. Condonation of Delay in Re-filing Applications: The court addressed the condonation of delay in re-filing applications for ITA 991/2019, ITA 992/2019, and ITA 996/2019. The delays of 39 days, 34 days, and 39 days respectively were condoned for reasons stated in the applications, and the applications were disposed of accordingly. 2. Deduction under Section 54 of the Income Tax Act, 1961: The appeals under Section 260A of the Income Tax Act, 1961, emanated from ITAT orders dismissing the Revenue's appeals and upholding the CIT (A) orders allowing deductions under Section 54 and 54EC, consequently deleting the additions made by the Assessing Officer (AO). The case involved the sale of a property at Jor Bagh, New Delhi, and the subsequent investment in a new house property at 'Magnolias DLF Golf Links.' The AO disallowed the deduction under Section 54 on the grounds that the date of acquisition (10.02.2006) was beyond the one-year period provided under Section 54 and prior to the date of transfer. The CIT (A) held that the booking of the flat with the builder constituted construction of a new residential house, not purchase, and since construction was completed within three years of the sale of the original asset, the assessee was entitled to relief under Section 54. The ITAT upheld this view, and the High Court found no cogent ground to deny the benefit of Section 54, emphasizing the beneficial nature of the provision for assessees replacing the original long-term capital asset with a new one. 3. Deduction under Section 54EC of the Income Tax Act, 1961: The AO made a disallowance of ?50,00,000/- under Section 54EC, which was contested. The CIT (A) and ITAT relied on the judgment of the High Court of Madras in CIT vs. Coromandal Industries Ltd., which clarified that the restriction on investment in bonds of ?50,00,000/- was effective from 01.04.2015 for AY 2015-16 and subsequent years. The High Court upheld this view, noting that the restriction did not apply to the assessment year in question and that the provision was intended to avoid litigation for previous years. 4. Addition on Account of Suppression of Maintenance Charges under the Head "Income from House Property": The AO made an addition of ?14,07,474/- on account of suppression of maintenance charges received from rented property. The CIT (A) found that no maintenance charges were received by the appellant, as confirmed by the tenant and verifiable from the statement of account, TDS certificates, and Form 26AS. The ITAT upheld this finding, and the High Court noted that the presumption drawn by the AO was based on conjectures and surmises without proper inquiry, thus upholding the deletion of the addition. Conclusion: The High Court dismissed the appeals, finding no substantial question of law requiring consideration. The court upheld the factual findings of the lower tax authorities and ITAT, emphasizing the beneficial nature of the provisions under Sections 54 and 54EC for assessees replacing long-term capital assets. The court also found no merit in the Revenue's arguments regarding the suppression of maintenance charges.
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