Unreported Decisions – June 2022
By Ajay R. Singh, Advocate and CA Rohit Shah
1. Section 54F- Denial on the ground of Non-Completion of Construction within 3 Years
The assessee is an individual sold plots and invested the same in a villa project in Bangalore and claimed exemption u/s 54F of the I.T. Act . The A.O. disallowed and brought to tax as the sale consideration of plots was not deposited in capital gains scheme on or before the due date of filing of the return u/s 139(1) of the I.T. Act. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal to the first appellate authority. The CIT(A) held that the assessee was not able to prove that the house has been constructed within three years from the date of sale of original asset. It was further held by the CIT(A) that completion certificate issued by the builder showed the date of completion as 25.07.2015 did not prove the construction of the house is completed unless the same is issued by the local municipal authority. Accordingly, the CIT(A) confirmed the addition made by the Assessing Officer. Aggrieved by the order of the CIT(A), the assessee preferred appeal before the Tribunal.
Tribunal held that exemption u/s 54F has to be granted if the stipulated conditions are fulfilled. The requirement of depositing the amount in Capital Gain Account Scheme (CGAS) arises only if the following conditions are not satisfied:
(a) Net consideration invested in new asset within one year before the date on which the transfer of the original asset took place, or
(b) Not utilized by the assessee for purchase or construction of the new asset before the date of furnishing of return of income u/s 139 .
If these conditions are not satisfied, only then, such unutilized amount has to be deposited in CGAS before due date for filing return of income u/s 139. It is clear from sub-section (4) in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in section 54F(1), if the assessee wants the benefit of section 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. Tribunal also observed that the provisions of section 54F of the Act only provides that the sale proceed should be invested in construction of house property within three years. In other words, in order to get the benefit u/s 54F of the Act, the assessee need not complete the construction of the house in all aspects and occupy it. The essence of the said provision is whether the assessee who received capital gains has invested the proceeds in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respect and as required under the law, that would not disentitle the assessee from the said benefit. Tribunal also relied in the case of CIT v. Smt. B. S. Shanthakumari (Kar), wherein the Hon’ble High Court allowed Exemption us 54 and thus allowed appeal.
Smt Chandrakala Shashidhar v. ITO Ward 5(2)(4) Bengaluru [ITA No.1039/Bang/2018 A.Y. 2014-15 ; Bench B Bangalore ; dt: 14/7/2021 ]
Smt Chandrakala Shashidhar2. S. 194C: Transportation expenses- Supplier booked the transporters for supply of goods – Payment made by assessee – Inference – No contract between assessee and transporters :
Assessee was engaged in business of trading of pineapple fruits. He incurred expenses under the head transportation without deducting tax at source under section 194C of the Act . Accordingly, AO made disallowance of such expenses. On appeal before CIT(A), the assessee submitted that the transportation expenses had actually been incurred by supplier who used to raise bills for the transport expenses along with sales bills raised to the assessee. Accordingly, the assessee contended that such transportation expenses were part of the purchases and therefore, the same were outside the purview of the provisions of TDS. However, CIT(A) disagreed with the contention of the assessee, upheld the disallowance made by the AO.
Admittedly, assessee was buying pineapples from different States, which were brought to the State of Gujarat. Such goods could not be transported by the assessee without incurring the transportation cost. Generally, transportation expenses are subject to provisions of section 194C and the said provision requires the assessee to deduct tax at source on expenses incurred in pursuance to contract. In case on hand, on perusal of truck numbers to whom the assessee made payment for the transportation expenses, it was found that all of those numbers were registered with the State of Kerala from where the assessee was transporting the goods. Thus, it could be inferred that all those transporters were engaged by supplier but the payment was made by the assessee in his books of account. Hence, there was no contract between the assessee and the transporters and accordingly, the provisions of section 194C could not be invoked in the case on hand. Consequently, there could not be any disallowance of expenses on account of nondeduction of tax at source
Hanifbhai Hajimohammed Pinepalwala v. ITO\ [ITA No. 1177/Ahd/2018 AY 2008-09 Bench SMC Ahmedabad dt 23/3/2021]