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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Deputy Commissioner of Income-tax, Circle 11(1), Bangalore. … Appellant Vs. M/s.Alternative Food Process Pvt. Ltd. No.49, 15th Cross, I Block, R.T.Nagar, Bangalore-560033. … Respondent PAN:AADCA4411H AND (Assessment year: 2010-11) M/s.Alternative Food Process Pvt. Ltd. No.49, 15th Cross, I Block, R.T.Nagar, Bangalore. … Appellant Vs. Asst. Commissioner of Income-tax, Circle 11(1), … Respondent Bangalore. Assessee by: Shri E.Balasubramanyam, CA. Revenue by: Shri T.S.N.Murthy, CIT(DR). Date of hearing : 15/04/2015 Date of pronouncement: 11/06/2015 O R D E R Per Smt. P.MADHAVI DEVI, JM: These cross-appeals by the assessee as well as the revenue are directed against the order of the CIT(A)-I, Bangalore, dated 31/07/2013 for the assessment year 2010-11. & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd. Page 2 of 6 2. Brief facts of the case are that the assessee-company filed its return of income for the assessment year 2010-11 on 1/10/2010 declaring an income of Rs.3,61,59,904/-. During the assessment proceedings u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] the Assessing Officer (AO) perused the books of account and other details furnished by the assessee and observed that the assessee had declared long term capital gain of Rs.4,55,27,758/- on the sale of immovable property. From the computation, the AO noticed that the assessee had claimed an amount of Rs.1.00 crore as deduction u/s 54EC of the Act. He observed that the land was sold in the month of January 2010 and the assessee had invested an amount of Rs.50 lakhs in REC bonds on 31/1/2010 and another investment of Rs.50 lakhs in the REC bonds was made on 31/5/2010, thus making the overall investment in the long term specified asset i.e. REC bonds to Rs.1.00 crore. Observing that the claimed deduction is restricted only to Rs.50 lakhs, the assessee was asked to explain the eligibility of the excess claim of Rs.50 lakhs made by the assessee. Vide his submissions dated 14/9/2012 the assessee explained that the assessee has sold property in January 2010 and accordingly the assessee has to invest the eligible amount within six months there-from i.e. July 2010 to be eligible for deduction u/s 54EC of the Act. He submitted that the proviso thereto specified that the amount of investment made after 1/4/2007 in any financial year & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd. Page 3 of 6 cannot exceed Rs.50 lakhs but it does not restrict the deduction of capital gains only to Rs.50 lakhs. But since deposit during the financial year 2010-11 is Rs.50 lakhs and Rs.50 lakhs in the subsequent financial year, the condition is satisfied. The assessee also referred to CBDT circular No.3 of 2008 dated 12/3/2008 in support of his contention. The AO was, however not convinced with the contention of the assessee and held that the deduction claimed by the assessee is to be limited to Rs.50 lakhs for the relevant financial year. Thereafter, referring to the decision of the ITAT, Jaipur in the case of ACIT vs. Shri Raj Kumar Jain & Sons (HUF) and also American Hotel & Lodging Association Educational Institute vs. CBDT (289 ITR 46) he brought the excess claim of Rs.50 lakhs deduction made u/s 54EC to tax.
The AO further observed that the assessee had earned dividend income of Rs.1,94,060/- and since the same was claimed as exempt u/s 10(34) of the Act, he was of the opinion that the disallowance u/s 14A read with rule 8D is to be made. The assessee’s explanation was called for wherein it was stated that the investment to yield tax-free income was made only in the month of January 2010 and till that point of time the company had not made any investment. The AO was, however, not convinced with the contention of the assessee and therefore, applying the provisions of rule 8D, he made the disallowance of Rs.28,535/-. & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd. Page 4 of 6 4. Aggrieved by the above, the assessee preferred an appeal before the CIT(A) and in addition to the above disallowances, the assessee also challenged the non-allowance of the claim of expenditure of Rs.55 lakhs against long term capital asset. It was contended that the assessee had incurred an expenditure of Rs.55 lakhs towards the transfer of long term capital gains, the details of which were given in its letter dated 8/8/2012 and that the said amount was disallowed while computing income from business even though the assessee failed to claim the deduction while computing the long term capital gains. The CIT(A) granted relief to the assessee by deleting the disallowance of Rs.50 lakhs u/s 54EC of the Act as well as the disallowance u/s 14A read with rule 8D of the IT Rules. However, as regards the claim of the expenditure of Rs.55 lakhs towards the transfer of long term capital gain, the CIT(A) rejected such claim. Against the relief given by the CIT(A), the revenue is in appeal before us whereas the assessee is in appeal against relief denied by the CIT(A).
Coming to the assessee’s appeal, the learned counsel for the assessee submitted that the assessee has not made the claim before the AO but has made the claim for the first time before the CIT(A) and now before us, has filed additional evidence in support of its claim. He has filed the paper book containing the additional evidence and has prayed that the matter may be remitted to the file of the AO for verification. & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd. Page 5 of 6 The learned Departmental Representative opposed the admission of the additional evidence.
Upon hearing both the parties and after considering the rival contentions and the material on record, we find that the additional evidence goes to the root of the matter and therefore, in the interests of justice, the same is admitted and remanded to the file of the AO for de novo consideration of the issue in accordance with law in the light of the additional evidence filed by the assessee. Therefore, the assessee’s appeal is treated as allowed for statistical purposes.
Coming to the revenue’s appeal, we find that the proviso to sec.54EC(3) only restricts the investments in a financial year made in the long term specified assets by an assessee after 1st day of April 2007 to Rs.50 lakhs. The learned Departmental Representative has placed reliance upon the decision of the Jaipur Bench of the Tribunal in the case of ACIT vs. Shri Raj Kumar Jain & Sons (HUF) (cited supra) in support of his contention. We find that the CIT(A) has followed the decision of ITAT at Bangalore in the case of Vivek Jairazbhay vs. DCIT in in allowing relief to the assessee. The revenue is challenging the order of the CIT(A) by relying upon the order of ITAT in the case of Raj Kumar Jain (cited supra) and on the ground that the ITAT’s decision in the case of Vivek Jairazbhay has not attained finality as it has been appealed & 1428/Bang/2013 M/s.Alternative Food Process Pvt.Ltd. Page 6 of 6 against us 260A of the Act. On going through the decision of this Tribunal in the case of Vivek Jairazbhay, we find that the Tribunal had considered the decision in the case of D.Raj Kumar. Since Vivek Jairazbhay has not been suspended by the Hon’ble High Court, it does not lose its precedential value. In view of the same, we do not see any reason to interfere with the order of the CIT(A) on this issue.
As regards the disallowance u/s 14A of the Act r.w.8D of the IT Rules, the learned counsel for the assessee has conceded the disallowance, at the time of hearing. Therefore, the ground No.4 of the revenue is allowed.