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2023 (10) TMI 185 - AT - Income TaxDisallowance u/s 54EC being investment in NHAI bond - AO noted that assessee is entitled for deduction only when the investment has been made within 6 Months after the date of transfer and in this case the assessee has made investment which is before the date of transfer - assessee submitted before AO that the investment was made out of the advance money received, therefore the advance money is part of receipt - HELD THAT - On the identical facts, our view is fortified by the judgment of Subhash Vinayak Supnekar 2017 (1) TMI 58 - BOMBAY HIGH COURT wherein it was held that when amount received as advance under an agreement to sell a capital asset is invested in specified bonds, benefit of section 54EC is available to assessee. We note that the case law referred by AO in the case of Smt. Dakshaben R. Patel 2012 (6) TMI 711 - ITAT AHMEDABAD is distinguishable on facts and not applicable to the facts of assessee s case in view of the fact that in said case there was no advance money received and the applicability of CBDT Circular No.359 (F. No.207/8/82.IT) dated 10.05.1983 was not brought on record wherein it is claimed that as section 54E contemplated investment of the net consideration in specified assets for a minimum period and as the earnest money/advance as a part of the sale consideration, if executed in the specified assets before the date of sale deed, the amount so invested would qualify for deduction under section 54E. Although this circular is issued in relation to section 54E, however it should be equally applicable to section 54EC of the Act also. Therefore, based on these facts and circumstances of the case, we allow ground No. 1 raised by the assessee. Disallowance u/s 54F considering it as investment in more than one residential house - As contented assessee owns only one house at the Oberoi Palace Housing Society in this name at the time of the sale and other two properties are owned jointly with others and therefore it is not required to be considered for the purpose of condition of section 54F - HELD THAT - Hon ble Madras High Court in case of Dr. (Smt.) P. K. Vasanthi Rangarajan 2012 (7) TMI 563 - MADRAS HIGH COURT wherein it was held that where the assessee held the property jointly with her husband in equal proportion, it cannot be said that she is the owner of the house property at the time of the sale for availing the deduction u/s 54F of the Act. It is to be noted that w.e.f. 01.04.2001, there was the amendment in section 54F to the effect that assessee could be owner of one house at the time of the sale On the identical facts, in the case of Ashok G. Chauhan, 2019 (4) TMI 1024 - ITAT MUMBAI held that where AO rejected assessee's claim for deduction under section 54F of the Act, on ground that at time of sale of capital asset, assessee was owner of more than one residential house properties, in view of fact that one residential property was co-jointly owned in name of assessee and his wife and he could not be treated as 'absolute owner' of said property, deduction under section 54F could not be denied to him. We note that Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd, 1973 (1) TMI 1 - SUPREME COURT held that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. Therefore, respectfully following the judgment of the Hon'ble Madras High Court in case of Dr. (Smt.) P. K. Vasanthi Rangarajan (supra), we allow ground No. 2 raised by the assessee. Disallowance of expense against the taxable interest income from firm - Addition made as personal expenses are not allowable - AO noticed that the assessee was having only interest income from firm but had claimed expenses in nature which were depreciation, petrol, insurance etc. which are nowhere related to earning interest income and therefore assessing officer disallowed the expenses - HELD THAT - AO never doubted the genuineness of expenses nor the nature of business income against which it was claimed. The assessing officer simply made addition without pinpointing the personal taint especially when the assessee has debited withdrawal for personal purpose separately. Thus, we note that the main grievance of the ld Counsel is that assessee was not granted sufficient opportunity to explain the nature of these expenses. We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of assessing officer for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee, who in turn, is also directed to contest his stand forthwith. For statistical purposes, ground raised by the assessee is allowed.
Issues Involved:
1. Disallowance under Section 54EC of the Income Tax Act. 2. Disallowance under Section 54F of the Income Tax Act. 3. Disallowance of expenses against taxable interest income from a firm. Summary: Issue 1: Disallowance under Section 54EC The primary issue was the disallowance of Rs. 50,00,000/- under Section 54EC for the investment in NHAI bonds made prior to the sale date. The assessee argued that the investment was made from advance money received and cited CBDT Circular No. 359, which should allow such investments to qualify for deduction. The Tribunal noted that the investment was made within two financial years, complying with Section 54EC. The Tribunal referenced the Madras High Court's ruling in C. Jaichander's case, which supports the assessee's position that investments made within six months, even if spanning two financial years, qualify for the deduction. Consequently, the Tribunal allowed the assessee's claim under Section 54EC. Issue 2: Disallowance under Section 54F The second issue pertained to the disallowance of Rs. 48,96,993/- under Section 54F, where the assessee was considered to have invested in more than one residential house. The assessee contended that the additional properties were jointly owned and should not disqualify him from the deduction. The Tribunal referred to the Madras High Court's decision in Dr. (Smt.) P. K. Vasanthi Rangarajan's case, which held that joint ownership does not count as owning multiple properties for the purposes of Section 54F. The Tribunal, therefore, allowed the assessee's claim under Section 54F. Issue 3: Disallowance of Expenses The final issue was the disallowance of Rs. 11,69,488/- in expenses claimed against taxable interest income from a firm. The assessee argued that these expenses were related to his business and should be allowed. The Tribunal noted that the Assessing Officer had not provided sufficient opportunity for the assessee to explain the nature of these expenses and had not pinpointed any personal element in the expenses. The Tribunal restored the matter to the Assessing Officer for a fresh adjudication, ensuring that the assessee is granted sufficient opportunity to present his case. Conclusion: The Tribunal allowed the appeal for the issues under Sections 54EC and 54F, and remanded the issue of disallowed expenses back to the Assessing Officer for re-evaluation. The appeal was partly allowed for statistical purposes.
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