2012 (7) TMI 59 - AT - Income Tax

Rejection of claim u/s 54F - no possession of the residential premises by the assessee and no sale deed was executed till the due date of filing the return of income - Held that - No merit in the argument of DR as the assessee has made all efforts to acquire new asset stipulated u/s 54F and made the payments towards purchase of the property by entering into an agreement with the developer - if the AO had any doubt regarding the completion of the construction within the time stipulated, he could have very well inspected the premises and have called for the information like sanction plan of the building, construction details, power connection details, etc. The assessing officers without carrying out all these enquiries, straightaway rejected the claim of the assessee - set aside this issue to the file of AO to verify the completion of the construction - in favour of assessee. Tax on interest received of advances made - the assessee has paid Rs. 2 crores to a party and in return was allotted 52 acres 34 guntas of land at the rate of Rs. 4 lakh per acre - Held that - Considering a clause in MOU that the seller agreed to buy back the said agricultural land within four months from the date of registration with the further grace period of two months and if there is delay beyond the period of six months in buying back the interest at 2% would be paid - as the party did not exercised their option to purchase the property and in view of this, the assessee is at liberty to sell the property to whomsoever it wants, being so, in the present case, it cannot be said that the income from this transaction has been accrued to the assessee - is no scope for addition on notional basis without really accruing the income to the assessee - in favour of assessee. Sustaining an amount on account of the interest receivable - The assessee had advanced Rs. 3 crores to party at the rate of 2% per month - assessee contented that he has been following cash system of accounting - Held that - Set aside this issue to the file of AO to see whether the assessee is following cash system of accounting to this head of income and whether this impugned income was offered to tax in the next assessment year.

Summary

Issues Involved:
1. Rejection of claim under section 54F of the Income-tax Act.
2. Taxation of interest paid to M/s. Amogh Realtors.
3. Taxation of interest receivable from Golden Gate Properties Pvt. Limited.

Issue 1: Rejection of claim under section 54F of the Income-tax Act:
The assessee claimed a deduction under section 54F of the Income-tax Act, which was denied by the assessing officer due to the non-possession of residential premises and non-execution of a sale deed by the due date of filing the return of income. The CIT (A) upheld this decision. The assessee contended that the consideration from the sale of the property was invested in the construction of a new property. The ITAT held that the completion of construction needed verification and set aside the issue to the assessing officer for fresh consideration.

Issue 2: Taxation of interest paid to M/s. Amogh Realtors:
The assessee paid Rs. 2 crores to M/s. Amogh Realtors for land purchase with a buyback agreement. The assessing officer calculated the profit on the investment and added it to the income. The CIT (A) directed the taxation of interest at 2% per month on the advanced amount. However, the ITAT noted that the buyback had not occurred, and the assessee was free to sell the property after the specified period. Therefore, the income did not accrue to the assessee, and no taxation was warranted on a notional basis.

Issue 3: Taxation of interest receivable from Golden Gate Properties Pvt. Limited:
The assessee advanced Rs. 3 crores to Golden Gate Properties Pvt. Limited at 2% per month. The assessing officer taxed the interest receivable, including Rs. 21 lakhs for the subsequent year. The ITAT directed the assessing officer to verify if the assessee followed a cash system of accounting and offered the income for the subsequent year. If so, the Rs. 21 lakhs should not be taxed for the current assessment year to avoid double taxation.

In conclusion, the ITAT allowed the appeal in part, setting aside the issues for fresh consideration by the assessing officer.