ACIT v. Subhash Sevaram Bhavnani Assessee sold his residential house on consideration of sum of Rs. 35,00,000/- on 03.11.2007 and has spent a sum of Rs. 30,44,695/- on purchase of plot and on construction of a residential house thereon. The construction of this residential house was completed in the month of March, 2008. Since the construction was completed within three years of transfer of capital asset, the ratio as laid down in the case of Subramaniya Bhat (supra) is applicable to the facts of this case as it has been clearly held in that case that for claiming deduction u/s 54, the construction of the house should be completed within the prescribed time limit and date of commencement of construction is not material for claiming deduction.
The capital expenditure incurred by the assessee on purchase of motor cars could not be considered as expenditure incurred by the assessee on in-house research & development and, therefore, the same was not eligible for weighted deduction under section 35(2AB). Similarly, capitalized interest on purchase of car was also not eligible for this benefit for same reasons because it was equal or similar to cost of car. Hence, this ground was to be rejected.
Chimanlal Manilal Patel Vs. ACIT The AO has not disputed the consideration received by the assessee. The addition has been made on the basis of deeming provisions of section 50C. The assessee has furnished all the facts of sale, documents! material before the AO. The AO has not doubted the genuineness of the documents/details furnished by the assessee. Only because the assessee agreed to the additions because of the deeming provisions it cannot be construed to be filing of inaccurate particulars on the part of the assessee. The assessee agreed to addition on the basis of valuation made by the stamp valuation authority cannot be a conclusive proof that the sale consideration as per the sale agreement is seemed to be incorrect and wrong. In view of these facts we are of the considered view that penalty cannot be levied on the basis of deeming provision.
Tribunal is not empowered to pass an order ‘thereon’ on the subject-matter which is not in appeal as per the appeal memo to be adjudicated upon. As far as the question of withdrawal of cross-objection is concerned, in the light of the above discussion, had the cross-objection was not withdrawn, even then, such a legal issue was beyond the scope of the adjudication through a cross-objection under section 253(4) because the impugned legal issue was altogether an independent as well as a separate issue.
It is a fact that the assessee was employed as ‘Service Provider’ and during the period under dispute he was providing the service from Bangalore in India. As per the Co¬operation agreement dated 14.12.2004 entered into between the assessee and the Polish Company, the function of the assessee was ‘to support establishing and preparing organization of the company’s representative office in India by the date of 31st May 2005’. We are of the view that the function to support establishing and preparing organization can at best be termed as a management function but cannot be equated with ‘Top Level Managerial Position’.
Section 54EC clearly states that the investment in specified bond is to be made “within a period of six months after the date of such transfer. The intention of the legislature is clear. It was not desired by them to give the exemption u/s 54EC even investment made before the transfer of the long term capital assets. There is no direct case law of Section 54EC for claiming of exemption even investment made before, has been brought in the knowledge of the Bench.
Statute has either mentioned that the date on which the order sought to be appealed should be the date of communication, or the date when the order is served or the date of service of the notice of demand. However, the Statute has not given any such indication while drafting the language of section 254(2) of the I.T.Act rather it has plainly mentioned, without any ambiguity, that the Appellate Tribunal may at any time within four years from the date of the order shall make such amendment if the mistake is brought to its notice by the assessee.
The instant case is that of the partner and therefore what is to be examined is whether the share income is excluded from his total income. The answer is obviously in the affirmative. In such a situation, provision contained in section 14A will come into operation and any expenditure incurred in earning the share income will have to be disallowed. section 14A uses the words expenditure incurred by the assessee in relation to income. A statutory allowance under section 32 i.e. Depreciation is not an expenditure.
Explanation-3 to section 43(1) says that where the AO is satisfied that the main purpose of the transfer of such assets to the assessee was the reduction of liability to income tax by claiming depreciation with a reference to an enhanced cost, then the actual cost to the assessee shall be such an amount as the AO may determine having regard to all the circumstances of the case.
In terms of the provisions of section 194C(2) as clarified by the Board vide its Circular No. 715, dated 8-8-1995, conditions to be satisfied are (i) that the assessee should be a contractor, (ii) that the assessee should enter into a contract with a sub-contractor, (iii) that the sub-contractor should carry out any part of the work undertaken by the contractor and (iv) that the payment should be made for the work done. In a case, when a ‘contract’ is assigned, generally the clauses are stringent that the contractor is to be responsible for all the acts and defaults committed.
