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II. Direct Taxes Case Laws:
1. CIT Vs. Mrs. Shakuntala Devi, I.T.A. No. 340/2009, Date of Order: 28.09.2016, High Court of Karnataka
Issue:
Whether the sale consideration received by the assessee is
entitled to benefit u/s 54 of the Income Tax Act, even though the
transaction for purchase of new property was not completed and
possession was also not handed over to the assessee within 2 years?
Held: Yes
Brief Facts:
Assessee had sold a flat at Mumbai and had worked out a LTCG and had
claimed exemption u/s 54 of the Act on the ground that she had
reinvested the said amount for purchasing another property at Mumbai by
paying an advance. The AO held that the sale transaction of new property
had not been concluded, no registration of sale deed had taken place
and balance consideration amount was yet to be paid even after 2 years
of sale of the flat and as such, deduction claimed was disallowed. The
ld. DR contended that the entire sale consideration had not been paid by
the assessee for purchase of new property and what had been invested by
her is only a portion of total sale consideration and also that
possession of the property proposed to be purchased was not delivered to
the assessee within two years and as such, assessee would not be
entitled to claim benefit under Section 54. Whereas the ld. AR contended
that it is the utilization of amount, which was received by the
assessee by sale of property, which had to be reinvested for the
purposes of claiming benefit and said exercise having been undertaken,
must grant the assessee benefit of claiming LTCG as provided u/s 54.
Held:
It was held that the intention of Legislature was to encourage the
investment in the acquisition of residential house or construction
thereof and the condition precedent for claiming benefit under said
provision is that the capital gains realized from sale of a capital
asset should be reinvested either in purchasing a residential house or
utilised for constructing a residential building and thus, if it is
established that consideration so received on alienation of property has
been invested in either purchasing a residential building or spent on
construction of residential building, an assessee would be entitled to
the benefit of Section 54 irrespective of the fact that transaction not
being complete in all respects. The main purpose of Section 54 is to
give relief in respect of profits on the sale of a residential house and
in the instant case consideration paid by assessee under Memorandum of
Understanding of the purchase of new flat covered fully the
consideration of capital gains portion for being eligible to claim
exemption.
(Please click here for judgment)
2. M/s Power Grid Corporation of India Ltd. Vs. DCIT, I.T.A.
Nos. 2397 & 2398/Del/2014, Date of Pronouncement: 06.10.2016, ITAT -
Delhi
Issue:
Whether Section 14A can be invoked, where no regular activities
were undertaken by the Assessee in respect of the investments to earn
exempt income and no change in the investments during the year?
Held: No
Brief Facts:
The assessee company is engaged in the business of transmission of
power, telecom and consultancy. It filed its return of income on
22.09.2009 showing NIL income. MAT was paid on book profit under Section
115JB of the Income Tax Act, 1961. The return was revised by the
company to claim the credit of TDS not claimed in the original return of
income. During the course of scrutiny assessment proceedings, the AO
found out that the assessee had made investment in the shares,
securities and advances and has also received dividend as well as
interest income from tax free bonds and advances. The assessee has so
motu disallowed the expenses in respect of exempted income. However, the
AO made the disallowance of the expenditure attributable to the income
not forming part of the total income as per the provisions of Section
14A of the Income Tax Act, 1961 read with rule 8D. On making an appeal
to the CIT(A), the orders of the AO were upheld. Aggrieved by which, the
assessee is in appeal before the ITAT.
Held:
The assessee received dividend incomes. From the annual accounts of
the assessee company, it is observed that there is no change in the
investments during the year. The dividend received from the companies
has been credited to the bank account. Also, there is no regular
activities were undertaken by the Assessee in respect of the investments
to earn income there from. Therefore, there was no basis for the AO to
hold that the expenditure as disclosed by the Assessee towards earning
exempt income was insufficient. The appeal of the assessee was allowed
(Please click here for judgment)
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