Case Law Details

Case Name : C.R. developments Vs JCIT (ITAT Mumbai)
Appeal Number : ITA No. 4277/Mum/2012
Date of Judgement/Order : 13/05/2015
Related Assessment Year :
Courts : All ITAT (5330) ITAT Mumbai (1663)

Brief of the case

ITAT Mumbai has held in the case of C.R. developments Vs. JCIT  that  time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. Assessee eligible for deduction under section 54EC on investment of Rs. 50 Lakh Each made in two Financial Year against same transaction.

Assessee earned LTCG of Rs. 1.04 Cr. on sale of shares. It claimed exemption of Rs. 1 Cr. u/s 54 EC and declared remaining amount as LTCG. It was found that assessee had invested 50 lacs on 31/3/09 and 50 lacs on 30/4/09. A.O. restricted assesse’s claim to extent of Rs. 50 lacs taking a view that it was the maximum limit prescribed in Section 54 EC and it is related to transaction only and not to different financial years. Tribunal however relied upon a decision of HC in another case to effect that time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by assessee cannot be denied. Therefore, assesse’s claim was allowed.

Assessee was engaged in business of construction and development .It showed three vacant flats/shops as stock in trade , in its books. A.O. estimated letting value of said shops and brought their notional income taxable in ‘Income From House Property’ u/s 23. It was contented that said flats were assesse’s  ‘ trading assets’ , therefore could not be treated u/s 23.Tribunal upheld assessee’s contention and therefore held that  income from sale of said flats would be taxable as ‘Business Income’ of assessee.

Facts of the case

FACTS

  • The assessee was engaged in the business of construction and development.
  • During the course of scrutiny proceedings, the AO found that assessee had three shops as stock-in-trade as at the end of the year. The AO computed the notional income in respect of all the three shops u/s.23 as income from house property.

Contention of Assesse

  • That three shops at the end of the year was its trading assets cannot be charged to tax under the head income from house property as profit on sale thereof shall be chargeable to tax under the head of income from business.

Held by CIT(A)

  • The CIT(A) restored the matter back to the file of the AO.

HELD by ITAT

  • Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. Accordingly, no justification found  in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee’s stock in trade as at the end of the year. Accordingly, the AO was directed to delete the addition made by estimating letting value of the flats u/s.23
  1. FACTS
  • The assessee earned LTCG of Rs. 1.04 Cr. on sale of shares. It claimed for  deduction u/s.54EC against Rs.1 crore and declared remaining amount as LTCG.
  • The AO found that the assessee had invested 50 lacs on 31.3.2009 and Rs.50 lacs on 30.4.2009. However, the AO did not allow exemption in respect of Rs.50 lakhs invested on 30-4-2009 on the plea that limits prescribed u/s.54EC relates to transaction and not to the financial year.
  • By the impugned order, the CIT (A) confirmed the action of the AO.

HELD by ITAT

The issue is squarely covered by the decision of theThe Hon’ble Madras High Court in the case of CIT Vs. C. Jaichander & Sriram Indubal, wherein it was held that In any event, from a reading of Section 54EC(1) and the first proviso, it is clear that the time limit for investment is six months from the date of transfer and even if such investment falls under two financial years, the benefit claimed by the assessee cannot be denied. It would have made a difference, if the restriction on the investment in bonds to Rs.50,00,000/- is incorporated in Section 54EC(1) itself. However, the ambiguity had been removed by the legislature with effect from 1.4.2015 in relation to the assessment year 2015-16 and the subsequent years.  The  High Court also clarified that the legislature has also removed the ambiguity by inserting second proviso to Section 54EC w.e.f.1-4-2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature is to clarify that this amendment should be for the assessment year 2015-16 to avoid unwanted litigations of the previous years.

Thus, there was no merit found in appeal for disallowing claim of deduction u/s.54EC.

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Category : Income Tax (27930)
Type : Judiciary (12115)

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