2015 (5) TMI 422 - AT - Income Tax

Disallowance of exemption u/s 54F - assessee had purchased land on which construction was done subsequently - Held that - The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit. As relying on Commissioner of Income-tax Versus Sambandam Udaykumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT the disallowance made by the AO was rightly deleted by the ld CIT (A) as In the instant case, it is seen that the assessee had purchased land on which construction was done subsequently. CBDT Circular No. 667 dated 18.10.1993 states that the cost of land is an integral part of the cost of residential house and therefore if the amount of capital gain for the purposes of section 54F is appropriated towards purchase of plot and also towards construction of the residential house thereon then the aggregate cost should be considered for determining the quantum of deduction U/S 54F provided that the acquisition of plot and also the construction thereon are completed within the period specified in the section. The assessee purchased the land on 28.12.2007 and construction was undertaken on this land which was completed within a period of 3 years as required under the provisions of section 54F of the Act. - Decided in favour of assessee. Addition on account of share transaction - no details were filed during the assessment proceedings in respect of purchase and sale of shares and therefore the above amount was added back to the appellant's income as per AO - CIT(A) deleted the addition - Held that - the purchase and sale of shares has been made through the bank account of the assessee, securities transactions tax has been paid on the transactions, all the payments have been made and received through cheque and the transactions have been confirmed by the brokers by way of the ledger accounts, the disallowance made by the AO was not justified, and therefore it was rightly deleted by the ld CIT (A). - Decided against revenue. Addition on payment made through credit card - business purpose - Held that - We concur with the observation of the ld CIT (A) that in the absence of any findings or evidence on record to show that the expenditure was incurred by the assessee was for non business purposes and also in view of the fact that the payments have been made through cheques by the companies in which the assessee is a director and also in view of the fact that the above expenditure has been accepted by the department in the assessments of these companies in which the assessee is a director, the disallowance made by the AO is not based on facts and it cannot be said that the credit card expenses were not incurred on behalf of the companies for business purpose in which the assessee was a director. However the ld CIT(A) have considered the fact that some personal expenditure could also have been incurred by the assessee, so the disallowance made by the AO was rightly restricted to 5% of credit card expenses of ₹ 17,47,917/-. The remaining disallowance was rightly deleted by the ld CIT (A). - Decided against revenue.

Summary

Issues Involved:

1. Deletion of addition on account of exemption u/s 54F.
2. Deletion of addition on account of share transactions.
3. Deletion of addition on account of payment made through credit card.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Exemption u/s 54F:

The Revenue contested the deletion of an addition of Rs. 2,68,21,050/- by the CIT(A), which was claimed by the assessee as an exemption under section 54F of the Income Tax Act. The AO had disallowed the exemption on the grounds that the assessee purchased agricultural land and did not construct a residential house within the stipulated period. The AO noted that the sale deed described the property as agricultural land and there was no evidence of residential construction. However, during the appellate proceedings, the assessee provided evidence including a site plan approved by MCD, a notification declaring the area as residential, and photographs of the constructed house. The CIT(A) accepted these evidences and noted that the AO's remand report confirmed the residential use and construction of the house. The Tribunal upheld CIT(A)'s decision, emphasizing that the assessee had invested the capital gains in purchasing land and constructing a residential house within the prescribed period. The Tribunal also referenced the Karnataka High Court's judgment in CIT Vs. Sambandam Udaykumar, which supports the view that the intention of section 54F is to encourage investment in residential property.

2. Deletion of Addition on Account of Share Transactions:

The AO had added Rs. 95,38,589/- to the assessee's income, claiming that no details were provided during the assessment regarding share transactions. During the appellate proceedings, the assessee submitted detailed evidence of share transactions through brokers, which were verified by the AO in the remand report. The evidence included ledger accounts, bank statements, and confirmation from brokers, showing that all transactions were through the bank account and securities transaction tax was paid. The CIT(A) found the addition unjustified and deleted it. The Tribunal upheld this decision, noting that the AO had not provided any contrary evidence and the transactions were duly explained and documented.

3. Deletion of Addition on Account of Payment Made Through Credit Card:

The AO added Rs. 16,50,521/- to the assessee's income, citing a lack of details for credit card payments. During the appellate proceedings, the assessee provided evidence that these expenses were incurred on behalf of the companies where he was a director, and these expenses were claimed and accepted in the companies' assessments. The CIT(A) accepted this explanation but restricted the disallowance to 5% of the total credit card expenses, considering the possibility of some personal expenses. The Tribunal upheld the CIT(A)'s decision, agreeing that the expenses were primarily business-related and had been accepted in the companies' assessments.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal found no infirmity in the CIT(A)'s well-reasoned order and confirmed the deletions of the additions made by the AO. The judgment emphasized the importance of proper documentation and the fulfillment of statutory requirements for claiming exemptions and deductions under the Income Tax Act.