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Income Tax Appellate Tribunal, DELHI BENCH ‘S.M.C’, NEW DELHI
Before: MS. SUSHMA CHOWLA
आदेश / ORDER आदेश आदेश आदेश PER SUSHMA CHOWLA, JM The appeal filed by assessee is against order of CIT(A), Karnal dated 10.01.2017 relating to assessment year 2006-07 passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The assessee has raised the following grounds in this appeal:-
“That inspite of directions given by the Hon’ble ITAT Bench ‘E’ in Appeal No.4093/Del/2009/2006-07 A.Y. Setting aside for a fresh consideration, the learned CIT(A) did not care and without properly considering confirmed additions of Rs.53353 on account of alleged interest not charged on advances. Order thus made is erroneous and additions be deleted.
2. That after sales of Agriculture land another land & house property purchased, which incidental expenses of Rs.821350/- claimed have wrongly & arbitrarily been disallowed and the CIT(A) erred in law confirming the same. 3. That expenses of Rs.821350/-incurred were incidental to the bargain and merely for technical considerations ignoring natural justice have been disallowed which is wrong & illegal and are allowable. 4. That after sale of agricultural land another land purchases jointly by the assessee, his mother & brother. And part land conveyance deed exclusively for Rs.16,50,000/- invested by the assessee is in the name of mother as per family arrangements and assessee is beneficial owner. Exemption from Capital Gains tax has wrongly been disallowed & the Learned CIT(A) erred in conforming the same.”
The issue raised vide ground of appeal no. 1 is against the disallowance of Rs. 53,353/-.
4. Briefly in the facts relating to the issue, the present appeal arises consequent to the order passed by the CIT(A) where the Tribunal in vide order dated 30.4.2013 had set aside the issues for reconsideration afresh. The assessee had advanced interest free loan of Rs. 6 Lacs to M/s A.S. Steel Tubes. The Assessing Officer was of the view that where the assesse had diverted interest bearing bank loans towards advances to various parties, without interest, then certain part of the interest should be disallowed on account of interest free advances made by the assessee. The case of the assessee before the authorities below was that it had sold agricultural land for Rs. 58,75,000/- and out of the said funds, sum of Rs. 6 Lacs was given to M/s A.S. Steel Tubes on 19.1.2006. It was also pointed out that the assessee had old deposits of Rs. 9,35,789/-from his relatives, on which no interest was being paid, in addition to the capital of the assessee and hence no disallowance to be made on account of interest free advances made to M/s A.S. Steel Tubes. The CIT(A) in the first round had allowed part of the claim and restricted the disallowance to Rs. 52,253/-, which was confirmed in second round.
The learned AR for the assessee pointed out that out of the sale proceeds of his agricultural land, the assessee had received an advance of Rs. 9 Lacs in April, 2005. Out of same, Rs. 8 Lacs was put in FDR with Punjab National Bank, for short period and the same matured on 6.7.2005.
The assessee out of the maturity proceeds gave Rs. 6 Lacs to A.S. Steel Tubes by cheque. He thus pointed out that where the investment was made out of the funds available with the assessee, no disallowance is to be made on account of interest attributable to such loans.
On perusal of the record and after hearing both the authorized representatives and perusing the bank statement placed at pages 5 and 6 of the paper book, the facts put forward by the learned AR for the assessee stand accepted. The loan to M/s A.S. Steel Tubes has been advanced on 5.8.2005 at Rs. 6 Lacs. The immediate source of the said funds is encashment of FDR of Rs. 8 Lacs which matured on 6.7.2005 and sum of Rs. 8,60,110/- (including interest) was deposited in the bank. The Revenue has failed to controvert the said plea of the assessee. In such facts and circumstances, there is no merit in the aforesaid disallowance made of interest under section 36(1)(iii) of the Act. Thus the claim of the assessee is allowed. The ground of appeal no. 1 is thus allowed.
Now coming to ground of appeal nos. 2 and 3 raised by the assessee which is against the non allowance of incidental expenses of Rs. 8,21,350/-.
8. Briefly in the facts relating to the issue, the assessee was owning joint agricultural land alongwith his family members in village Fareedpur, Tehsil and District Panipat. The said land was sold by the assessee. The assessee alongwith joint family members also purchased new agricultural land for total consideration of Rs. 1,67,72,284/-. The assessee explained that land transaction dated 14.12.2006 was in the name of his mother (individually) while land transaction dated 22.6.2006 and 14.7.2006 were in the joint names of the assessee, his mother and two other brothers. For purchasing the said land, the assessee had incurred court fee stamp, registration charges and other miscellaneous charges totaling Rs. 8,21,350/-. The Assessing Officer disallowed aforesaid expenses in the hands of the assessee. It was pointed out by the learned AR for the assessee that restricted claim to 1/4th expenditure of Rs. 3,72,716/- i.e. about Rs. 93,000/- was to be allowed. It was reiterated by the learned AR for the assessee that the assessee was only asking for expenditure of Rs. 93,000/-.
The learned DR for the Revenue has placed reliance on the orders of the authorities below.
On the perusal of record and after hearing both the authorized representatives, the assessee has revised its claim to the extent of only Rs. 93,000/- i.e. 1/4th of Rs. 3,72,716/-. The said expenditure was claimed to have been incurred on registration of the conveyance deed and other miscellaneous expenses. In the totality of facts and circumstances, the expenditure to the extent of Rs. 80,000/- is allowed in the hands of the assessee. Hence ground of appeal nos. 2 and 3 are partly allowed.
Now coming to the last issue raised vide ground of appeal no. 4 against disallowance of exemption under section 54B of the Act. The assessee purchased joint agricultural land alongwith his mother and two other brothers and the investment in the same, to the extent of assessee’s share, was allowed as deduction under section 54B of the Act. However, no deduction was allowed in respect of the land purchased in the name of the mother solely for Rs. 16,50,000/-. The plea of the assessee is that it was joint arrangement to purchase the said land though in the name of the mother singly and hence the deduction to be allowed to the extent of 1/4th share of the aforesaid investment of Rs. 16,50,000/-. There is no merit in the claim of the assessee where the land has been purchased in the sole name of his mother, as against the other lands which were purchased in joint names of the family members. Upholding the order of the CIT(A), the disallowance made under section 54B of the Act is confirmed. The ground of appeal no. 4 is thus dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 31st day of December, 2019.