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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the CIT(A)-2, Indore dated 4.12.2017 pertaining to the
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] assessment year 2012-13. The assessee has raised following grounds of appeal:
The Ld. CIT(A) has erred in maintaining the disallowance of deduction claimed u/s 54EC. 1.1 It was proved before the lower authorities that the cheque was issued within six months for the purchase of the bond which is established from the copy of the bond and the bank statement.
The Ld. CIT(A) has erred in maintaining the addition u/s 50C when it was accepted that the sale consideration was in confirmation with the prevailing market value. 3. The Ld. CIT(A) has erred in not allowing the expenses incurred by the assessee, discount allowed and the registration charges borne by the seller. The deductions claimed at Rs.24,86,670/- may please be allowed. 4. The disallowance of brokerage of Rs.200000/- is uncalled for. The addition may please be deleted. 5. The assessee prays to alter, amend, add or delete any of the grounds of appeal
2. The facts giving rise to the present appeal are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 5.3.2015. The assessing officer while framing the assessment made addition by disallowing the deductions claimed by the assessee in respect of the investment made in REC Bonds, disallowance on brokerage expenses and addition made u/s 50C of the Act amounting to [ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] Rs.26,86,670/-. Thus, the A.O. made the addition of Rs.48,86,670/- and assessed income at Rs.88,28,940/- against the income declared at Rs.39,42,269/-. The assessee aggrieved by this preferred an appeal before the Ld. CIT(A), who after considering the submissions dismissed the appeal.
3. Ground Nos.1 & 1.1 are against disallowing the deduction claimed in respect of the investment made in the REC bond. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. Ld. Counsel for the assessee submitted that during the year under appeal, the assessee had sold two properties and capital gain was shown. In respect of the sale of agricultural land, the assessee claimed deduction u/s 54EC of the Act in respect of the purchase of rural electrification bonds and in respect of sale of plot the assessee claimed registration expenses of Rs.10,96,359/-, payment of property tax of Rs.10,89,911/- and discount
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] allowed for distress sale of the plot at Rs.6 lakhs. He submitted that it was stated before the A.O. that assessee had sold land on 19.7.2011 and handed over cheque on 18.1.2012 for purchase of the rural electricity bonds, which was encashed on 21.1.2012. He submitted that the requisite fund was available in the bank account, therefore, the authorities below erred in not granting deduction u/s 54EC of the Act.
On the contrary, Ld. D.R. opposed these submissions and supported the order of the authorities below. He submitted that deduction u/s 54 EC of the Act would be available only in the event when the assessee invested the amount within 6 months of the sale of the property.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. Before Ld. CIT(A), it was stated by the assessee that the agricultural land was transferred on 19.7.2011 at a sale consideration of Rs.49,25,000/-. The 4
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] A.O. allowed the deduction of Rs.20 lakhs claimed u/s 54EC of the Act for reasons that he was of the view that such REC bond was purchased after the period of 6 months. It was stated that a sum of Rs.20 lakhs was credited in the account of REC on 21.1.2012. Assessee had handed over the cheque on 18.1.2012, which was presented by the REC and was credited the sum on 21.1.2012. It is argued that the limitation would expire only on 20.1.2012, however, the assessee had issued cheque on 18.1.2012 and handed over to the REC which was before the expiry of 6 months. This explanation of the assessee was not accepted by the authorities below. Ld. CIT(A) has decided this issue in para 4.1, 4.2 & 4.3 as under:
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore]
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore]
The issue to be decided is whether the assessee has invested money within the time prescribed under the Act.
As per the assessee, cheque bearing No.71638 dated 18.1.2012 drawn on Indore Paraspar Sahakari Bank Ltd. was handed over to the REC along with application for allotment of the Bond. We find that as per REC allotment advice dated 9.4.2012, the bond was allotted to the assessee on 21.1.2012 and amount was also debited from the bank account of the assessee on 21.1.2012. There is [ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] nothing on record as to when the application for allotment of bond was made and cheque was handed over to REC.
The assessing officer has also not made any enquiry from REC to verify the date when application along with the requisite cheque was given to REC for making investment in the bond. In our view, merely furnishing a cheque dated 18.1.2012 would not be sufficient to conclude that the assessee had made investment before the date prescribed under the Act. However, in the interest of justice, we restore this issue to the file of the A.O. for a limited purpose to verify as to when application for allotment of bond was made by the assessee and the date of presentation of cheque for encashment. In case the application along with cheque is given on 18.1.2012, the A.O. would allow deduction to the assessee.
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] 7. Ground Nos.2 & 3 are inter-related and are against sustaining the addition made by invoking the provisions of section 50C of the Act amounting to Rs.26,86,670/-. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis as well as the submissions made before Ld. CIT(A). Ld. Counsel for the assessee submitted that the A.O. was not justified in invoking the provisions of section 50C of the Act. He submitted that the sale consideration was correctly reflected in the sale deed as per the market value of Rs.1,23,02,500/-. The Ld. Counsel for the assessee drew our attention to the sale deed at page 18, wherein the sale consideration is stated to be Rs.1,23,02,500/-. However, the A.O. observed that only a sum of Rs.96,15,830/- has been received by cheque.
Therefore, he invoked the provisions of section 50C of the Act and adopted the market value, thereby he made addition of Rs.26,86,670/-.
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] 8. Ld. D.R. opposed these submissions and supported the order of the authorities below.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find that in computation of income, the assessee has disclosed full consideration at Rs.1,23,02,500/-. However, he has reduced expenditure of Rs.26,86,670/-. The bifurcation of this expenditure as per the assessee includes property tax of Rs.10,84,010/- and discount of Rs.6 lakhs. The contention of the assessee is that both these expenses are deductible from the sale consideration for the purpose of computing capital gain. In our considered view, this expenditure would not qualify for deduction provided u/s 48 of the Act as the expenditure as claimed is not in connection with the transfer. Therefore, this sum has been rightly disallowed by the A.O. However, the rest of the expenditure i.e. stamp duty charges and [ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] other expenses of drafting of the sale deed, etc. would be allowable expenditure since the same is in connection with the transfer of the property. The case laws as relied by the Ld. Counsel for the assessee are not applicable on the facts of the present case as the expenditure is not in connection with the transfer of the property since discount and the payment of property tax by no stretch of imagination can be held as the expenditure in connection with the transfer of the property. Hence, ground Nos.2 & 3 are partly allowed. The A.O. is directed to delete disallowance of Rs.9,96,359/- out of addition of Rs.26,86,670/-.
Ground No.4 is against disallowance of brokerage of Rs.2 lakhs. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions.
Per contra, Ld. D.R. supported the order of the authorities below.
[ITA No.293/Ind/2018] [Shri Manmohan Gambhir, Indore] 12. We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find that the assessee has filed soda chitti before the authorities below. This was not accepted. We find that the A.O. has not made any enquiry before discarding the submission of the assessee, we, therefore, cannot sustain the disallowance made on adhoc and casual basis, accordingly, the A.O. is directed to delete this disallowance.
In the result, the appeal of the assessee is partly allowed.
Order was pronounced in the open court on 30.05.2019.