2020 (2) TMI 151 - AT - Income Tax

Addition u/s 2(24)(iv) - assessee had received the benefit from a company in which the assessee was a promoter Director - HELD THAT - As relying on SRI DANDA BRAHMANANDAM AND SRI BATTINI NAGESWARA RAO 2019 (10) TMI 833 - ITAT VISAKHAPATNAM there is no case for invoking the provisions of section 2(24)(iv) of the Act and there is no case for taxing the income under the head income from other sources, accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. Deduction u/s 54F - Investment in acquiring the residential house - HELD THAT - The assessee relied on the CBDT Circular No.667 dated 18.10.1993, wherein, the CBDT clarified that the land is an integral part of the residential house, whether purchased or built. Since the assessee had participated in the VUDA auction for purchase of plot, the intention behind participating in auction is to procure the land and to construct the house. The VUDA neither returned money nor allotted the vacant site, hence, the assessee looked for alternate investment and acquired the new residential house by 31.03.017 for a sum of ₹ 5.79 crores within the permissible period of three years from the end of the relevant assessment year and the balance amount was admitted for tax in the A.Y.2017-18. Since the investment was made for acquiring the plots and construction of house, we hold that the assessee is entitled for deduction u/s 54F. Further, in the instant case, the amount paid to VUDA for acquiring the plots was not returned to the assessee till such time of acquiring the new house. The said amount was remained with the VUDA. The Department also did not place any evidence to show that the assessee had received the money back from the VUDA and utilized for personal purpose. Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against revenue

Summary

Issues Involved:
1. Addition under Section 2(24)(iv) of the Income Tax Act, 1961.
2. Deduction under Section 54F of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition under Section 2(24)(iv) of the Income Tax Act, 1961:

The Assessing Officer (AO) added ?3,96,18,099/- to the income of the assessee under Section 2(24)(iv) of the Income Tax Act, 1961, on the grounds that the assessee received a benefit from M/s Tirumala Milk Products Private Ltd. (M/s TMPPL), where the assessee was a promoter Director. The AO observed that M/s TMPPL paid ?28,81,31,631/- as a success fee to M/s Barclays Bank PLC for evaluating the value of shares and searching for a potential buyer. The AO held that this payment should have been borne by the shareholders and not the company, and thus, proportionately taxed the benefit received by the assessee.

The CIT(A) deleted the addition, stating that the payment was made by the company per its agreement with Barclays Bank, not by the shareholders. The CIT(A) emphasized that the success fee was related to an Engagement Letter (EL) entered into before the Share Purchase Agreement (SPA) and thus was not the shareholders' responsibility. The Tribunal upheld the CIT(A)'s decision, citing a similar case (Sri Danda Bharhmanandam and Sri Battini Nageswara Rao) where it was held that the shareholders had no obligation to pay the success fee, and thus, no benefit was accrued to the assessee under Section 2(24)(iv).

2. Deduction under Section 54F of the Income Tax Act, 1961:

The AO disallowed the deduction claimed by the assessee under Section 54F, amounting to ?14.34 crores, for acquiring a residential house. The AO found that the payment was made for plots acquired by the assessee's son through an auction held by VUDA, and not directly by the assessee. The AO argued that the deduction under Section 54F is only permissible when the investment is made in the assessee's name.

The CIT(A) deleted the addition, noting that the assessee constructed the house within three years from the end of the relevant assessment year and claimed the deduction for ?5.79 crores, offering the remaining amount to capital gains in the A.Y. 2017-18. The CIT(A) directed the AO to verify the return for A.Y. 2017-18 and delete the addition.

The Tribunal upheld the CIT(A)'s decision, stating that the payment to VUDA was intended for acquiring the plot for constructing a residential house, and the assessee subsequently completed the construction within the permissible period. The Tribunal found no evidence that the assessee received the money back from VUDA for personal use and dismissed the revenue's appeal on this issue.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on both issues. The addition under Section 2(24)(iv) was deleted as no benefit was accrued to the assessee, and the deduction under Section 54F was allowed as the investment was made for constructing a residential house within the stipulated time.