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2015 (5) TMI 71 - AT - Income TaxRevision of assessment order - CIT finding that the relevant assessment order to be both erroneous and prejudicial to the interests of the Revenue - Denial of exemption u/s 54F - Addition on account of additional sale consideration - Rejection of expenditure related to cost of acquisition of shares - Held that - Ground No.2 is against the order of the CIT in assuming jurisdiction u/s 263. We find that the AO has passed cryptic, non speaking order and hence we are of the opinion that the jurisdiction assumed u/s 263 by the CIT is justified. Our opinion is based on the decision of Apex Court in Toyota Motor Corpn. 2008 (8) TMI 56 - SUPREME COURT . Exemption u/s 54F - The ld Counsel for the assessee has pointed to the page No.72 of the Paper Book wherein the lease agreement has been produced. Since the assessee has treated one property as commercial property and the other property is the only residential house in the possession of the assessee, the assessee is entitled to exemption u/s 54F. Further the incomes of the properties owned by the minor daughters were clubbed in the hands of the assessee, but the investment for purchase of the said properties has come from the independent sources of the daughters and hence it cannot be presumed that assessee is the owner of the properties. Hence in our opinion the assessee having only one residential house is eligible for claiming exemption u/s 54F. We are of the opinion that the CIT erred in determining the short term capital gain on the entire property while computing deduction under the head capital gain . The long term capital gain has to be calculated on the undivided interest in land i.e. on the land component. Hence we set aside this issue to the file of the AO to rework the capital gain computation. The assessee may be given an opportunity to represent her case, since the assessee has elaborately submitted before us. Denial u/s 54F on ground of that possession of new asset is beyond three years - Respectfully following the decision 2013 (11) TMI 415 - ITAT HYDERABAD of the Coordinate Bench of the ITAT, Hyderabad Bench, we set aside the issue to the file of the AO, with a direction to follow this decision of the ITAT in the instant case before us. Addition on account of additional sale consideration - Assessee reiterated its submission that the amount of ₹ 20.00 lakhs received as deposit from the developer and the same had been refunded back, copy of the confirmation letter in this regard from Lumbini Constructions Ltd was enclosed. Hence no amount can be added on this count. We have perused the evidence for return of the amount of deposit and are satisfied with the assessee's claim that no amount can be added on this count. This ground of appeal is allowed. Addition on account of additional sale consideration in short term capital gains - In our opinion, the ld CIT erred in directing to bring to tax an amount of ₹ 18,50,000/- as additional sale consideration without appreciating the fact that this amount was not sale consideration, but was towards society corpus fund, water and electricity connection charges, cost of solar water heating system, which was in turn to be defrayed to respective agencies. Hence, the same cannot be considered as sale consideration. The ld CIT (A) seems to have ignored the statement of sale consideration received, which was filed before him. The assessee did include amount received towards electricity and water charges (Rs.1,10,000 per flat) from 8 flat owners, amount of ₹ 1,62,500 received towards solar system from 8 flat owners and ₹ 1,50,000 towards corpus fund from three flat owners which in turn, were defrayed to respective agencies. Those flat owners who have not paid their contribution to the assessee have directly paid their respective shares to the concerned agencies. Hence these amounts should not form part of sale consideration of the flats sold. Hence this ground of appeal preferred by the assessee is allowed. Rejection of expenditure related to cost of acquisition of shares - We find no infirmity with the order of the CIT (A). We are of the opinion that the deduction is permissible only when (i) Expenditure is incurred wholly and exclusively in connection with such transfer and (ii) Expenditure is towards the cost of acquisition of the asset and the cost of any improvement thereto. The assessee has not proved that it comes under any one of the permissible deduction as stated above and hence is eligible. Also no evidence has been produced with regard to the advice rendered. Hence the deduction is unavailable to the assessee. Disallowane of deduction u/s 54F on the ground that assessee's deposit in Bank a/c made in October 2006 is beyond the due date for filing of ROI - Since the AO has allowed the exemption u/s 54F of the Act as claimed by the assessee after examining the pass book produced by the assessee and verifying the details also, the assessee had made substantial investment within 3 years from the sale of original asset. We also find that the date of filing the return was extended and the amount was deposited. The assessee has produced the notification for extension by the CBDT at page 34 of the paper book. Hence, we are of the opinion that the assessee is eligible for deduction u/s 54F. - Decided partly in favour of appellants.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Disallowance of deduction under Section 54F. 3. Classification of capital gains as short-term or long-term. 4. Additional sale consideration and refundable deposits. 5. Cost of acquisition and expenditure for investment advice. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: Ground No.2: The assessee argued that the Assessing Officer (AO) had passed the assessment order after detailed scrutiny, and hence, the Commissioner of Income Tax (CIT) erred in holding the assessment as erroneous and prejudicial to the interest of revenue. The Tribunal found that the AO's order was cryptic and non-speaking, justifying the CIT's assumption of jurisdiction under Section 263, supported by the Apex Court's decision in CIT vs. Toyota Motor Corp. 2. Disallowance of Deduction under Section 54F: Ground No.3: The CIT disallowed the deduction under Section 54F, stating that the assessee owned more than one residential house on the date of the transfer. The assessee contended that the property at Pancom Chambers was a commercial property and not a residential house. The Tribunal agreed with the assessee, noting that the property was let out for commercial purposes and thus should not disqualify the assessee from claiming deduction under Section 54F. Ground No.5: The CIT found that the possession of the new asset was beyond three years, thus denying the deduction under Section 54F. The Tribunal referenced ITAT Hyderabad's decision, stating that the provision should be construed liberally and remitted the issue back to the AO for fresh determination. 3. Classification of Capital Gains: Ground No.4: The AO treated the capital gains on the sale of flats as short-term, while the assessee claimed it as long-term capital gains. The Tribunal noted that the long-term capital gain should be calculated on the undivided interest in land and set aside the issue to the AO for reworking the capital gain computation. Ground No.6: This ground became redundant as it was an alternate ground to Ground No.5. 4. Additional Sale Consideration and Refundable Deposits: Ground No.8: The CIT directed to treat Rs. 10 lakhs as additional sale consideration, noting the absence of evidence for refunding the deposit. The Tribunal found that the assessee had refunded the deposit and allowed this ground of appeal. Ground No.9: The CIT directed to bring to tax Rs. 18.5 lakhs as additional sale consideration. The Tribunal disagreed, noting that the amount was towards society corpus fund, water and electricity connection charges, and solar water heating system, which were defrayed to respective agencies, and allowed this ground of appeal. 5. Cost of Acquisition and Expenditure for Investment Advice: Ground No.10: The CIT disallowed Rs. 5 lakhs claimed as cost of acquisition of shares, stating it was not incurred wholly and exclusively in connection with the transfer. The Tribunal upheld the CIT's decision, noting the lack of evidence for the nature of advice rendered. Separate Judgment for Smt. V. Shailaja: Ground No.4: The CIT disallowed the deduction under Section 54F, stating the deposit in the bank account was beyond the due date for filing the return. The Tribunal found that the due date was extended by the CBDT and the assessee had made substantial investments within three years from the sale of the original asset. Hence, the assessee was eligible for deduction under Section 54F. Conclusion: Both appeals were partly allowed for statistical purposes, with directions to the AO for reworking certain issues and fresh assessments as per the Tribunal's observations. The order was pronounced in open court on 30.1.2015.
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