2017 (1) TMI 667 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on section 54 exemption for A.Y. 2010-11

Shri Vishwanath Acharya Versus ACIT–11 (1), Mumbai and Vice-Versa

The Tribunal dismissed both the Revenue's appeal and the assessee's appeal for A.Y. 2010-11. The exemption under section 54 was allowed by upholding the ... Allowance of deduction u/s. 54 - property sold was in the sole name of the assessee and the property purchased was in the joint names of the assessee and his wife - Held that:- In respect of the issue of purchase of the new asset (flat No. 3205 & 3206 at Oberoi Springs) in the joint names of the assessee and his wife, we find that the provisions of section 54 of the Act do not prohibit the same or mandate that the purchase of the property should be shown entirely in the assessee’s name. In the case on hand even though the wife is shown as joint owner in the sale deed, the AO has not doubted that the consideration for acquisition of the new asset has flown from the assessee; including the loan taken from Kotak Mahindra Bank. In fact, the property is admittedly reflected in the assessee’s Balance Sheet. In this factual matrix of the case, in our considered view, the assessee cannot be denied exemption under section 54 of the Act. See DIT (IT) vs. Mrs Jennifer Bhide [2011 (9) TMI 161 - KARNATAKA HIGH COURT ] - Decided in favour of assessee. Issues Involved:1. Disallowance of 20% of Professional Expenses2. Disallowance out of Interest Expenditure3. Disallowance of 20% of Film Production Expenses4. Addition on Account of Unreconciled Income5. Disallowance of Exemption under Section 54 of the Income Tax ActIssue-wise Detailed Analysis:1. Disallowance of 20% of Professional Expenses:The Assessing Officer (AO) disallowed 20% of professional expenses amounting to Rs. 3,86,890/-. The CIT(A) deleted this disallowance, providing partial relief to the assessee. The Tribunal upheld the CIT(A)’s decision, thus no further details on this issue were discussed in the judgment.2. Disallowance out of Interest Expenditure:The AO disallowed interest expenditure amounting to Rs. 5,77,205/-. The CIT(A) provided partial relief by confirming a disallowance of Rs. 2,48,325/-. The assessee contested this disallowance before the Tribunal but later chose not to press this ground during the hearing. Consequently, the Tribunal dismissed this ground of appeal.3. Disallowance of 20% of Film Production Expenses:The AO disallowed 20% of film production expenses amounting to Rs. 8,62,000/-. The CIT(A) provided partial relief by confirming disallowance of 1/20th of specific expenses where payments were not made by cheques. The assessee raised this issue before the Tribunal but did not press it during the hearing. Thus, the Tribunal dismissed this ground of appeal.4. Addition on Account of Unreconciled Income:The AO added Rs. 1,69,318/- on account of unreconciled income. The CIT(A) provided partial relief but the specifics were not contested further by the assessee before the Tribunal. Hence, no detailed discussion on this issue was carried out in the judgment.5. Disallowance of Exemption under Section 54 of the Income Tax Act:The AO disallowed the exemption under section 54 amounting to Rs. 1,60,65,590/- on the grounds that the new property was purchased in joint names of the assessee and his wife, and the investment was not made from the sale consideration of the original asset. The CIT(A) allowed the exemption, stating that section 54 does not prohibit purchasing the new asset in joint names or from borrowed funds. The Tribunal upheld the CIT(A)’s decision, citing the Karnataka High Court’s decision in DIT(IT) vs. Jennifer Bhide (2012) 349 ITR 80 (Kar), which clarified that the source of funds and joint ownership do not affect eligibility for exemption under section 54.Separate Judgments:The Tribunal delivered a consolidated judgment for both appeals, thus no separate judgments by different judges were mentioned.Conclusion:Both the Revenue’s appeal and the assessee’s appeal for A.Y. 2010-11 were dismissed. The Tribunal upheld the CIT(A)’s decision allowing the exemption under section 54 and provided no further relief on the other contested issues. The judgment was pronounced in the open court on 4th November 2016.