By Ajay R. Singh Advocate and CA Rohit Shah
1. Appeal [CIT(A)]-Fresh claim-Claim first time raised as to deduction under section 54B
Facts:
Assessee both in his Original return of income filed under section 139(1) as well as that filed in compliance to Notice under section 148 (i.e. by requesting that his original return be treated as a return of income filed in compliance to Notice under section 148) claimed that income arising from transfer of his ½ share in agricultural land at Village: Dharampura was not exigible to tax under the Act. However, did not find favour with aforesaid claim of assessee. Thus, AO holding a conviction that agricultural land in question did not fall within the meaning of “agricultural land” as contemplated in section 2(14)(iii), rejected claim of exemption so raised by assessee. On finding his claim of exemption scuttled, assessee who prior to sale of the agricultural land in question had purchased certain new agricultural lands, i.e., on 6-10-2006 for Rs. 1,44,050 and on 20-11-2006 for Rs. 2,87,531, thus, in the course of the assessment proceedings raised a claim for deduction as regards such investments aggregating to Rs. 4,31,581 under section 54B. However, AO was not persuaded to subscribe to the aforesaid claim of deduction so raised by the assessee before him. Observing that assessee had not raised the aforesaid claim for deduction under section 54B either in his Original return of income filed under section 139(1) or by filing a revised return of income under section 139(4) or by moving a rectification application under section 154 of the Act; or in the return of income filed in compliance to Notice under section 148 of the Act, the AO was of the view that same could not be raised on the basis of a simpliciter claim in the course of the assessment proceedings. Backed by his aforesaid conviction, AO refused to entertain assessee’s claim for deduction under section 54B vide his order passed under section 148/143(3). CIT(A) allowed assessee’s claim. Revenue challenged this.
Held:
Assessee at the time of filing of his returns of income under section 139(1) and under section 148 had remained under a bona fide belief that as the agricultural land in question, i.e., at Village Dharampura was situated beyond municipal limits, and thus not a capital asset, therefore, gain on transfer of the same was not liable to tax under the Act. Accordingly, backed by his aforesaid conviction, assessee had no occasion to have raised in his returns of income filed under section 139(1) and under section 148 claim for deduction under section 54B with reference to the investment that was made by him towards purchase of new agricultural lands. In fact, it was only after the aforesaid claim of assessee for exemption of gain on transfer of the agricultural land in question was scuttled by for the reason that agricultural land in question was situated within the municipal limits, and thus, was a capital asset, that the assessee on account of such changed circumstances raised the aforesaid claim for deduction under section 54B. Insofar declining of assessee’s claim for deduction under section 54B by AO was concerned, as the same was raised by the assessee on the basis of a simpliciter claim in the course of the assessment proceedings and not by filing of a revised return of income, therefore, no fault could be attributed to AO for refusing to entertain claim of deduction of assessee. But then, assessee remaining well within his rights had rightly raised the claim for deduction under section 54B before CIT(A) remaining well within the realm of his jurisdiction rightly entertained the assessee’s claim for deduction under section 54B, and finding the same in order directed AO to allow the same.
Income Tax Officer, Jagdalpur vs. Shri Raja Vikram [ITA No.347/RPR/2014]
2. Income from house property–Computation of annual value–Assessee rented out building taken on lease from Bombay Port Trust (BPT)–Simultaneous claim of deduction towards lease rent paid to Bombay Port Trust (BPT) and standard deduction under section 24(a)
Facts:
Assessee-firm had obtained a building on lease from Bombay Port Trust (BPT), which was given on rent to various parties/tenants. Assessee offered rental income after claiming deduction of lease rent paid to Bombay Port Trust (BPT). AO alleged that assessee was not eligible to claim the deduction of lease rent paid to the BPT on allegation that it claimed statutory deduction of 30% of NAV under section 24(a) and therefore no other deduction was allowed.
Held:
The scheme of taxation of income from house property. Section 22 says that the measure of income from house property is its annual value. The annual value is to be decided in accordance with section 23. Sub-section (1) of section 23, has two limbs, namely, clauses (a) and (b). Clause (a) states that the annual value is the sum for which the property might reasonably be expected to be let from year to year. Clause (b) covers a case where the property is let and the actual rent is in excess of the sum for which the property might reasonably be expected to be let from year to year. In other words, insertion of clause (b), covers a case where the rent for a year actually received by the owner is in excess of the lawful rent which is known as the fair rent or standard rent under the rent control legislation. The provisions of section 23(1)(a) of the Income Tax Act apply both to owner-occupied property as also to property which is let out and the measure of valuation to decide the annual value is the standard rent or the fair rent. However, section 23(1)(b) only applies to cases where the actual rent received is more than the reasonable rent under section 23(1)(a) of the Act and it is for this reason that section 23(1)(b) contemplates that in such cases the annual value should be decided on the basis of the actual rent received.”
Assessee firm had to pay the lease rent of building to its owner Bombay Port Trust (BPT) and also assessee had entered into the leave and license agreement with tenants and receiving the rent. Referring to the factual aspects and provisions of section 23(1)(b), Tribunal opined that assessee was entitled for claim of deduction of lease rent paid to the Bombay Port Trust (BPT) against the Leave and License fee/rent received from the tenants in determining the annual value of the property.
Transmarine Corporation v. ACIT 17(3), Mumbai [ITA No. 7001/Mum/2018] AY 2013-14