2021 (9) TMI 811 - AT - Income Tax

LTCG - Deduction u/s 54F - Purchase of farmhouse - further allegation that, assessee owned more than one residential property at the time of making claim of deduction - CIT-A deleted the addition - HELD THAT - AO himself says that he could not prove whether the assessee has more than one property. Furthermore, with respect to the objection of the learned assessing officer, that assessee has purchased a farmhouse and therefore it is not a residential house property is also devoid of any merit. Farmhouse can be residential house also. It is not the case of the revenue that assessee has purchased excessive land and has constructed a small house thereon and thereby claiming the deduction on the total value of land and small property constructed thereon. If that had been the case perhaps, the assessee would have been eligible for proportionate deduction to the extent of residential house property as well as lender pertinent thereto. There is no finding by the learned assessing officer that assessee has purchased excessive land which would be used as a farmland and has for namesake constructed a residential house property. Merely because a property is called a farmhouse, it does not become a non-residential house property unless otherwise proved. In view of this, we do not find any reason to upset the order of the ld CIT(A). Accordingly, ground No. 1 is dismissed. Addition of Credit card expenditure - assessee has submitted that he has three credit cards, which are exclusively used for the purpose of the business of assessee s employer where the assessee is CEO - CIT-A deleted addition - HELD THAT - When the expenditure is incurred merely because this expenditure has been incurred through his credit card there is no reason to make an addition in the hands of the assessee. The assessee also stated that he continues to make such expenditure on behalf of the firm through his credit card in subsequent years also and no such additions have been made in the subsequent year. This fact remains uncontroverted. In view of this, we do not find any infirmity in the order of the ld CIT(A) in deleting the addition. - Decided against revenue.

Summary

Issues:
1. Deduction u/s 54F of the Income Tax Act, 1961 - Ownership of multiple residential properties and lack of legal documents.
2. Disallowance of credit card expenses under entertainment, sales promotion, and traveling expenses.
3. Expenditure incurred to earn dividend income.

Analysis:

1. Deduction u/s 54F:
The appeal concerned the allowance of a deduction of ?2,36,96,898 u/s 54F of the Income Tax Act. The Assessing Officer (AO) denied the deduction as the assessee allegedly owned multiple residential properties and lacked legal documents to establish ownership. The AO also questioned the purchase of a farmhouse and the eligibility for deduction. However, the CIT(A) allowed the deduction after considering the explanations and documents provided by the assessee. The tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to prove the ownership of multiple properties and that the farmhouse could qualify as a residential property. The tribunal found no merit in the revenue's appeal and dismissed it.

2. Credit Card Expenses Disallowance:
Another issue was the disallowance of credit card expenses totaling ?32,61,606 by the AO, which the assessee claimed were for business purposes and reimbursed by the employer. The CIT(A) overturned this disallowance, noting that the expenses were accounted for in the employer's books and the AO failed to provide evidence of personal benefit derived by the assessee. The tribunal concurred with the CIT(A)'s reasoning, highlighting the lack of basis for the AO's addition and the consistent nature of such expenses in subsequent years. As a result, the tribunal dismissed the revenue's appeal regarding the disallowance of credit card expenses.

3. Expenditure for Dividend Income:
The judgment did not delve into the details of the expenditure incurred to earn dividend income, as it was not a central point of contention in the appeal. Consequently, there was no specific analysis or decision provided regarding this issue in the judgment.

In conclusion, the ITAT Delhi upheld the CIT(A)'s decisions regarding the deduction u/s 54F and the disallowance of credit card expenses, dismissing the revenue's appeal. The judgment highlighted the importance of substantiating claims with evidence and the need for assessing officers to provide a valid basis for disallowances.