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2016 (6) TMI 1075 - AT - Income TaxDisallowance of exemption claimed u/s. 54 - plot had been purchased on 21.05.2007, well before the date of sale of capital asset - assessee constructed a house on the plot, which was completed on 29.04.2009 - AO observed that assessee s claim would amount providing him with a window of four years for meeting the conditions of section 54, which was not the intention of the provision - Held that - The language of section 54 comprehends that the asset transferred should be a residential building, and the asset invested it should also be a residential building, and the investment should be made within the time specified therein. The time specified in this case, within one year before and two years after, is the period between 9.3.2007 and 9.3.2010. The investment which is eligible for deduction would therefore, be restricted to ₹ 17,50,674/- on account of plot, and ₹ 8,12,464/- on account of construction. After careful consideration of the letter and spirit of section 54, it was rightly held that the assessee is entitled to the exemption under section 54 of ₹ 25,63,138. Hence, the ld. CIT(A) gave the partial relief on this issue on the right footing. Therefore, we do not find any infirmity in the well reasoned order passed by the Ld. CIT(A) on the restriction of addition in dispute, hence, we uphold the finding of the ld. CIT(A) on this issue. - Decided against assessee Addition u/s. 40(a)(ia) - failure to deduct tax at source from professional fees paid - Held that - CIT(A) has deleted the addition made by the AO u/s. 40(a)(ia) of the Act on the ground that assesse has deducted tax in all cases where the fees for professional services exceeded ₹ 20,000/-. Therefore, we do not find any infirmity in the well reasoned order passed by the Ld. CIT(A) on the addition in dispute and hence, we uphold the finding of the ld. CIT(A) on this issue - Decided against revenue
Issues Involved:
1. Disallowance of exemption claimed under Section 54 of the Income Tax Act. 2. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act. Detailed Analysis: Issue 1: Disallowance of Exemption Claimed Under Section 54 Background: The assessee sold a house property and claimed exemption under Section 54 of the Income Tax Act for the purchase of a residential plot and investment in NHIA Bonds. The Assessing Officer (AO) disallowed the exemption claimed for the residential plot, arguing that the purchase was made well before the sale of the capital asset and that the exemption is only allowable for investments in a residential house. Assessee's Argument: The assessee argued that the construction of a house on the plot was completed within the stipulated period, and as per the provisions of Section 54, the capital gains are not taxable if invested in the construction of a new residential house within one year before or three years after the date of transfer. Assessing Officer's Findings: The AO held that the period of 'one year before' applies only to the purchase of a new property, while the period of 'three years after' applies to the construction of a new house. The AO rejected the deduction claimed under Section 54 for the residential plot and recomputed the long-term capital gains. CIT(A) Findings: The CIT(A) partially allowed the appeal, considering various judicial precedents, including the Delhi High Court judgments in CIT vs. Smt. Brinda Kumari and Balraj vs. CIT. The CIT(A) held that the investment eligible for deduction should be restricted to ?17,50,674 on account of the plot and ?8,12,464 on account of construction, allowing a total exemption of ?25,63,138 under Section 54. Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, agreeing that the CIT(A) had rightly restricted the addition and provided partial relief based on judicial precedents. The Tribunal found no infirmity in the CIT(A)'s well-reasoned order and dismissed the ground raised by both the Revenue and the Assessee. Issue 2: Deletion of Addition Made Under Section 40(a)(ia) Background: The AO observed that the assessee claimed a deduction for professional fees paid but failed to deduct tax at source on certain amounts. The AO added ?1,06,200 to the total income under Section 40(a)(ia) due to non-compliance with TDS provisions. Assessee's Argument: The assessee submitted a revised list of professional fees paid and explained that certain amounts included in professional fees were actually salaries, which were below the taxable limits. CIT(A) Findings: The CIT(A) verified the details and found that the assessee had deducted tax in all cases where the fees for professional services exceeded ?20,000. The CIT(A) held that there was no case for making the disallowance under Section 40(a)(ia) and deleted the addition of ?1,06,200. Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision, agreeing that the CIT(A) had rightly deleted the addition after verifying the payments and TDS returns. The Tribunal found no infirmity in the CIT(A)'s well-reasoned order and dismissed the ground raised by the Revenue. Conclusion: Both the appeals filed by the Assessee and the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions on both issues, finding no errors in the reasoning or conclusions reached. The Tribunal's order was pronounced in the open court on 03/06/2016.
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