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TMI Blog2020 (1) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... e the finding of the learned CIT (A) and direct the AO to delete the disallowance made by the AO. As such the exemption claimed by the assessee under section 54F of the Act is accepted. Hence the ground of appeal of the assessee is allowed. Addition u/s 57 - Assessee has earned interest income from the FDRs and deposits with the firms during the year and the assessee has claimed interest expenses against such interest income - addition u/s 14A - AO rejected the contention of the assessee by observing that the assessee did not furnish any documentary evidence to justify that interest bearing funds were used in interest bearing deposit and advance - HELD THAT:- Assessee failed to justify whether the interest expenses were incurred against the interest income. Accordingly, the AO made the disallowance of such interest expenses in the absence of sufficient documentary evidence and further observed that the assessee has earned dividend income which is exempted from tax but no disallowance was made by the assessee under the provisions of section 14A read with rule 8D of Income Tax Rules. As such the AO was of the view that the borrowed fund has been utilized in making the investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the appellant s case, the Ld.CIT(A) has erred in not appreciating the fact that claim u/s.54F made in Return of Income is in accordance with law and further erred in directing A.O. to tax long term capital gain of ₹ 28,93,333/- in A.Y. 2013-14 i.e. the year in which according to CIT(A) appellant has failed to comply with provisions of section 54F of the Act. He ought to have appreciated that LTCG of ₹ 28,93,333/- cannot be taxed either in assessment year in which impugned property is sold or in A.Y. 2013-14. 3. On facts and in law and in the circumstances of the appellant s case, the CIT(A) has erred in sustaining disallowance of expenses of ₹ 2,59,394/- claimed u/s 57 of the Act as the these expenses have a direct nexus with interest income of ₹ 5,79,963/- offered u/s.56 of the Act as Income from other sources . 4. The appellant craves leave to add to, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 2. The interconnected issue raised by the assessee in ground nos. 1 and 2 is that the Ld. CIT(A) erred in denying the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the year of exemption. Accordingly the AO disallowed the exemption claimed by the assessee u/s 54F of the Act of ₹ 28,93,333/- only. Aggrieved assessee, preferred an appeal before Ld. CIT(A). 3.7. The assessee before the Ld. CIT(A) submitted that the assessee has applied for the approval for the commencement of construction with the Municipal Corporation on 03-08-2011. However the municipal corporation granted approval to him on 12-12-2012. Therefore it was not possible to construct the residential house within the remaining period of time. 3.8. However, the Ld. CIT(A) admitted the partial submission of the assessee by observing that the intention of the assessee for the purchase of plot for the purpose of construction of residential house is not in doubt as evident from the documents filed by him. 3.9. However, the construction was completed after the expiry of 3 years specified in section 54F of the Act. Accordingly the Ld. CIT(A) directed the AO that the addition should be made in the year in which the period of 3 years were completed after verifying the return submitted by the assessee for that ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. It will be open to the AO to verify the entire issue de novo and satisfy himself that the conditions of section 54F of the Act have been duly complied with. However, in the same vain, we clarify that mere delay in completion of construction activity of the residential house will not act as a fetter for eligibility of deduction under section 54F of the Act. The issue is thus set aside and remitted back to the file of the AO in terms of directions noted above. 12. In the result, appeal of the assessee is allowed for statistical purposes. 6.2 Similarly, we also draw support and guidance from the judgment of Hon ble Karnataka High Court in the case of CIT Vs. Smt. B.S. Shantha Kumari reported in 233 taxmann 347 wherein it was held as under: The intention of the legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are 'purchased' or 'constructed'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the deposit /advance and borrowings. Therefore it is a allowable expense. 7.3. However, the AO rejected the contention of the assessee by observing that the assessee did not furnish any documentary evidence to justify that interest bearing funds were used in interest bearing deposit and advance. 7.4. The AO further noticed that the Assessee declared exempt income by way of dividend received from West Cost Pharmaceuticals. Therefore is clear that the interest bearing fund might be utilized for investment in this company. Therefore the interest expense is also not allowable u/s 14A of the Act. Thus the AO disallowed the interest expenses claimed by the assessee. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and reiterated the submission as made before the AO. 7.5 However, the Ld. CIT-A rejected the contention of the assessee by observing that the assessee failed to establish nexus between the interest expenses and interest income. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 8. The learned AR before us submitted as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities below under section 14A read with rule 8D of income tax rule against the dividend income which is exempted under section 10(34) of the Act. Thus, in our considered view no disallowance of such interest can be made for the interest expenses under the provisions of section 14A read with rule 8D. 11. Now, coming to the issue whether the impugned interest expense has been incurred by the assessee against the impugned interest income as discussed above. Indeed the onus lies on the assessee to furnish the sufficient documentary evidence in support of his contention. But he failed to do so before the authorities below. 11.1. However, the learned AR before us has pleaded to restore the matter to the file of the AO for fresh adjudication as per the provisions of law and assured to file the requisite documents. The request made by the learned AR for the assessee was not objected by the learned DR for the revenue. Though in our considered view, the assessee has failed to furnish the necessary documentary evidence, but in the interest of justice and fair play we are inclined to give one more opportunity before the AO to raise his points of cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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