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2015 (5) TMI 1161 - AT - Income TaxNotional Income as Income from House Property in respect of the 3(three) unsold shops shown as Stock-in-trade - estimating rental income from the vacant flats - Held that:- Assessee is engaged in business of construction and development, which is main object of the assessee company. The three flats which could not be sold at the end of the year was shown as stock-in-trade. Estimating rental income by the AO for these three flats as income from house property was not justified insofar as these flats were neither given on rent nor the assessee has intention to earn rent by letting out the flats. The flats not sold was its stock-in-trade and income arising on its sale is liable to be taxed as business income. No justification in the order of AO for estimating rental income from these vacant flats u/s.23 which is assessee’s stock in trade as at the end of the year. AO is directed to delete the addition made by estimating letting value of the flats u/s.23. Claim of deduction u/s.54EC - Held that:- The assessee is also aggrieved for restricting the claim of deduction u/s.54EC to ₹ 50 lakhs as against ₹ 1 crore claimed by the assessee. From the record we found that the assessee has shown long term capital gain of ₹ 40,15,660/- on sale of equity shares of India Finance &. Construction Co. Pvt. Ltd. after availing deduction u/s.54EC amounting to ₹ 1,00,00,000/-. The.AO noted that assessee company sold equity shares of India Finance & Construction Co. Pvt. Ltd on 31.03.2009 and earned long term capital gains of ₹ 1,40,15,680/- on which assessee has claimed deduction of ₹ 1,00,00,000/- u/s. 54EC and declared LTCG at ₹ 40,15,660/-. AO also noted that proviso to sub-section (1) of section 54EC wherein the Legislature has prescribed limit of ₹ 50 lakhs for the purpose of deduction under that section by the Finance Act, 2007 which is effective from 01.04.2007. The assessee had invested ₹ 50 lacs on 31.3.2009 and ₹ 50 lacs on 30.4.2009. However, the AO did not allow exemption in respect of ₹ 50 lakhs invested on 30-4-2009 on the plea that limits prescribed u/s.54EC relates to transaction and not to the financial year. By the impugned order, the CIT(A) confirmed the action of the AO. The legislature has also removed the ambiguity by inserting second proviso to Section 54EC w.e.f.1-4-2015. The memorandum explaining the provisions in the Finance (No.2) Bill, 2014 also states that the same will be applicable from 1.4.2015 in relation to assessment year 2015-16 and the subsequent years. The intention of the legislature is to clarify that this amendment should be for the assessment year 2015-16 to avoid unwanted litigations of the previous years. Respectfully following the decision of CIT Vs. C.Jaichander & Sriram Indubal (2014 (11) TMI 54 - MADRAS HIGH COURT), we do not find any merit for disallowing claim of deduction u/s.54EC. - Decided in favour of assessee
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