9911796707
TMI Blog2025 (2) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... hment of its right in lands, in favour of the societies. The ground taken by the assessee is parly allowed. Deduction u/s.54F - AO had disallowed the claim of the assessee for the reason that the purchase of the new asset was not completed within two years from the date of transfer to the original asset and neither the construction of the new asset was completed within 3 years from the date of transfer, which was upheld by the Ld. CIT(A) - HELD THAT:- Hon'ble Karnataka High Court in the case of Smt. B. S. Shanthakumari [2015 (8) TMI 274 - KARNATAKA HIGH COURT] held that once it was established that the assessee had invested entire net consideration in construction of residential house within the stipulated period, it would meet the requirement of Section 54F of the Act and the assessee would be entitled to get benefit of Section 54F Revenue was not correct in disallowing the claim for deduction u/s.54F of the Actonly on the ground that the construction of the house was not completed within the stipulated period of 3 years from the date of transfer of the original asset. Claim for deduction u/s.54F also included legal charges which was not eligible for deduction - We find that ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed email ID [email protected] which was of his nephew and the second email ID belonged to his consultant. He has stated that no physical copy of the order of the Ld. CIT(A) was received and that the order was sent online only. Due to inadvertent mistake of nephew and the consultant who didn't inform about receipt of the order of the Ld. CIT(A) in their email account, there was a delay in filing of this appeal. It is found that the email ID mentioned in the Form No.35 was [email protected], which is stated to be belonging to the nephew. Considering the explanation to the assessee, the delay in filing the appeal is condoned. 3. The brief facts of the case are that the assessee had filed its return of income for A.Y. 2018-19 on 31.10.2018 declaring total income of Rs. 1,92,89,740/-. The case was selected for limited scrutiny to examine the deduction from income from other sources and capital gains deduction claimed. The assessment was completed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') on 17.03.2021, wherein the following additions were made: (i) Addition on account of long term capital gain - Rs. 12,26,32,248/- (ii) Disallowance of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shri S. N. Soparkar, Ld. Sr. Advocate appearing for the assessee explained that assessee was holding rights in a land admeasuring 2374 sq. mtr. in New Chhatra Chhaya Co-op Housing Society Limited (NCCCHSL) and also in other land admeasuring 1948 Sq.mtr. in New Chhaya Co-op Housing Society Limited (NCCHSL). The members of both the societies, including the assessee, had relinquished their rights in the respective plots of lands in favour of the societies in accordance with the resolution passed in this respect. Both the societies had, in turn, sold the entire land to M/s. Cloud 9 Infraspace LLP (Cloud 9) vide a common conveyance dated 29.06.2017 for a consideration of Rs. 46,71,15,000/-. Thereafter, the two societies had distributed the sale consideration of land among the members of respective societies and accordingly, the assessee had received total sum of Rs. 6,16,49,843/- (Rs.2,58,53,928/- from NCCHSL and Rs. 3,57,95,915/- from NCCCHSL). The Ld. Senior Counsel explained that the amount received by the assessee from the two societies was after adjusting the outstanding loans granted by the assessee to the two societies, which was as per the terms of the agreement made with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the land in favour of the two societies. Therefore, the consideration for the relinquishment of rights was required to be worked out on the basis of the amounts/consideration as received by the assessee from the two societies. If the AO had any doubt about the consideration as disclosed by the assessee, then enquiry should have been made by the AO with the two societies to find out the exact consideration paid by them to the assessee for relinquishment of its right in the lands. 8. The assessee had submitted that the consideration received for relinquishment of its right was after adjusting the outstanding loans advanced by the assessee to the two societies. The assessee has filed a ledger copy of the account with the two societies as per which the repayment of loan advanced by the assessee to the two societies was adjusted with the payments received. This fact was, however, not independently verified by the Revenue at any stage. The AO had mechanically adopted the land rate to work out the consideration for the rights transferred without making any effort to find out the exact consideration received by the assessee from the two societies, which was wrongly upheld by the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, the society should pay the amount to each and every member and until the said amount is not fully paid to the member of the society, the members will have their charge upon the land of the society and also upon the sale price and until the said amount is paid by the society, each and every member will have the ownership right upon the property of the society allotted to him and from the date of making full payment of the said amount by the society, the allottee right of the members shall be relinquished and transferred in favour of the society and charge thereof shall be released and over. In the society the existing members have been paid some amount as per the following table and the remaining amount shall be paid in short period: Sr. No. Name of the Members Amount receivable from the Society …… (2) Sanjay M Kothari HUF 4,90,98,759.00 …… 11. It is thus found that as per resolution passed by the two societies each member was to be paid the amount an mentioned in the resolution for relinquishing their individual and common rights upon the land of the propery of the society, in favour of the society. Accordingly the assessee had received R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regard: i. Kamlesh Chandrakant Patel vs. ACIT in ITA No.634/Ahd/2014, dated 20.01.2020 ii. CIT vs. Smt. B. S. Shanthakumari, 233 Taxman 347 (Karnataka) 13. Per contra, the Ld. Sr. DR submitted that the assessee had not fulfilled the conditions as stipulated u/s.54F of the Act and, therefore, the claim for deduction made by the AO was rightly disallowed by the AO. He strongly supported the orders of AO & Ld. CIT(A). 14. We have carefully considered the rival submissions. As regarding the condition of completion of construction within 3 years from the date of transfer of original asset, Hon'ble Karnataka High Court had held that in the case of Smt. B. S. Shanthakumari (supra) that once it was established that the assessee had invested entire net consideration in construction of residential house within the stipulated period, it would meet the requirement of Section 54F of the Act and the assessee would be entitled to get benefit of Section 54F of the Act. The Co- ordinate Bench of this Tribunal in the case of Kamlesh Chandrakant Patel (supra) had also held that delay in the completion of construction of the house will not be a bar to the assessee for claiming the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pense of Rs. 1,11,13,576/- was claimed. He explained that the assessee has taken loan from Kothari Finance in F.Y. 2010-11 which continued during the year and on which interest of Rs. 1,11,13,576/- was paid. The AO had held that loan to the extent of Rs. 5,96,55,233/- only was utilized for giving advances on which interest income was earned and offered to tax. Therefore, the AO had disallowed the proportionate interest of Rs. 58,40,796/-. The Ld. Senior Counsel explained that the AO had wrongly considered the opening balance of loan taken from Kothari Finance at Rs. 12,57,36,873/- as on 01.04.2017 to work out the disallowance. He submitted that the assessee had repaid loan to the extent of Rs. 4,15,76,025/- during the year and outstanding closing balance of Kothari Finance was Rs. 8,41,60,848/- only. He further submitted that the assessee had advanced loan of Rs. 2,36,33,946/- to New Chhatrachhaya Co-op Housing Society Limited and Rs. 2,32,44,831/- to New Chhaya Co-op Housing Society Limited for purchase of land which was repaid during the year. It was further submitted that the assessee had earned interest income on the loan advanced to the two societies in the earlier years but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture, which was not eligible for deduction u/s.57 of the Act. In view of these facts, the Revenue was correct in disallowing the proportionate interest expenditure. However, certain amount of loan taken from Kothari Finance was repaid during the year. Therefore, the AO was not correct in disallowing the interest on the basis of opening balance. The AO is directed to rework the disallowance by taking into account the closing balance of loan taken from Kothari Finance as well as the closing balance of the loans utilized for earning of interest income. 20. The reliance of the assessee on the decision of Rajendra Prasad Moody (supra) is found to be misplaced. It was held by the Hon'ble Supreme Court in that case that interest paid on money borrowed for investment in shares, which had not yielded any dividend was admissible for deduction u/s.57(iii) of the Act. In essence, the interest expenditure can be allowed as deduction if the entire borrowed fund is utilized and even though there is no corresponding income earned during the year out of such utilization. In the present case, however, the entire borrowed fund was not utilized or applied for earning of any income. Therefore, the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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