2016 (7) TMI 1084 - AT - Income Tax

Deduction u/s 54EC denied - Held that - It is noted that there is a confusion with regard to the dates, which have neither been properly explained by the assessee before lower authorities nor it has been addressed properly by the lower authorities. Even before us, Ld. Counsel was not able to explain as to how there could be two agreements. How could there be one agreement of two dates. There should be only one agreement. Even if separate agreement is made for the buyers, the date is supposed to be same. We find that none of the authorities have looked into the aspect of dates properly. As per AO, the date of six months should be reckoned from 06.10.2009 and therefore date of investment being 08.04.2010 shall fall beyond the period of six months, whereas the assessee says that the six months period should be reckoned from the date 10.10.2009 which is actual date of transfer of original asset and if it is so done then the investment made on 08.04.2010 shall fall within the stipulated period of six months. In view of all these facts, ascertaining correct date of transfer becomes crucial. In view of these circumstances, we send this issue back to the file of the AO who shall give adequate opportunity of hearing to the assessee to submit requisite details and documents as may be considered appropriate by the assessee which shall be objectively taken into account by the AO to decide this issue afresh. Further whether the assessee can be allowed the investment in respect of 50 lakhs in one financial year and the second investment in next financial year but within the stipulated period of six months as decided is in favour of the assessee in view of various judgments of the Tribunal. See Shri Aspi Ginwala v. ACIT (2012 (4) TMI 195 - ITAT AHMEDABAD ) and Mrs. Lilavati M. Sayani v. ITO (2015 (10) TMI 1068 - ITAT MUMBAI) - Decided in favour of assessee as directed. Benefit of deduction u/s 54F denied - Flat was under construction and was not acquired within prescribed period of two years - Held that - Assessee had duly made investment in the Flat which was under construction. The facts in this regard are not under dispute. The completion of construction was not in control of the assessee. Since the construction of flat could not be completed, therefore, corresponding income as stipulated in section 54F was offered in the return for A.Y. 2013-14. Our attention was drawn in this regard and copy of computation sheet filed along with return for A.Y. 2013-14 showing that a sum of ₹ 86 lakhs was shown as long term capital gain on which the tax at the rate of 20% has been paid by the assessee. We find that entire exercise has been done in the bonafide manner and there was no deliberate attempt of any tax evasion. The assessee has filed its return for the impugned year as well as for A.Y. 2013-14, in accordance with law. The lower authorities were not able to controvert or contradict the factum of making investment in the Flat at the time of filing of return for the impugned year in which deduction u/s 54F was claimed in accordance with law. Thus addition has been wrongly made by the lower authorities - Decided in favour of assessee

Summary

Issues:
1. Denial of deduction u/s 54EC for investment in two financial years within six months.
2. Denial of deduction u/s 54F for a residential house under construction not acquired within two years.

Analysis:

Issue 1: Denial of deduction u/s 54EC
The appeal was against the denial of deduction u/s 54EC for an investment made in two financial years within six months. The confusion arose regarding the date of transfer of the asset, with the AO claiming it to be 06.10.2009, while the assessee argued it was 10.10.2009. The Tribunal found discrepancies in the dates and remanded the issue to the AO for further examination. The Tribunal referred to various judgments supporting the assessee's claim of being allowed to invest in two financial years within the stipulated period of six months. The Tribunal relied on the clarity of the proviso to section 54EC and allowed the aggregate claim of the assessee for ?1 crore, subject to the AO's decision after verifying the dates.

Issue 2: Denial of deduction u/s 54F
The assessee's claim for deduction u/s 54F for ?86 lakhs was denied by the AO on the grounds that the residential house acquired was under construction and not completed within two years. During the hearing, it was revealed that the construction was not completed by the builder, leading to the transaction being canceled, and the corresponding income offered in the subsequent assessment year. The Tribunal noted that the assessee had made a bonafide investment in the under-construction flat, and the income was offered in the subsequent year as per the law. The Tribunal found no deliberate tax evasion and directed the deletion of the addition made by the lower authorities. Consequently, the Tribunal partly allowed the appeal filed by the assessee.

In conclusion, the Tribunal addressed the issues of denial of deductions u/s 54EC and u/s 54F, remanding one to the AO for further examination and allowing the other in favor of the assessee due to the bonafide nature of the investment and compliance with tax laws.