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TMI Blog2015 (1) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of expenses incurred to earn income which does not form part of the Total Income are not applicable to the nature of expenses incurred by the Appellant which have been enumerated above in para 1. GROUND NO 2 REDUCTION OF Rs. 23,62,840/- FOR DEDUCTION CLAIMED U/S 54F OF THE ACT 1 On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in restricting the claim of the Appellant for deduction u/s 54F of the Act to Rs. 5,20,65,966/- and thereby disallowing the claim of the Appellant for deduction u/s 54F of the Act to the extent of Rs. 23,62,8401- (Rs.9,90,0001- plus Rs. 13, 72,8401-). 2 On the facts and in the circumstances of the case and in law, the learned C.IT. (A) erred in ignoring the fact that the Appellant had rightfully claimed the capital expenditure incurred for the purposes of purchase of a residential flat, over and above the purchase consideration which entitled her for claim of deduction u/s 54F of the Act. 3 On the facts and in the circumstances of the case and in law, the learned C.IT. (A) erred in ignoring the fact that the Appellant had paid Contribution of Rs. 9,90,0001- towards Building Repairs & Development Fund, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.766/- being total expenditure claimed by the assessee. Aggrieved by the order of CIT(A), both assessee and revenue filed cross appeals on this issue. 4 Before us, the Ld. Authorized Representative of the assessee has submitted that no expenses were incurred by the assessee for earning the dividend income, therefore, no disallowance can be made u/s 14A. He has further contended that the Assessing Officer worked out the administrative expenses under Rule 8D(2)(III) which is many times more than the actual expenditure claimed by the assessee in the P&L Account. He has further contended that the expenditure claimed by the assessee in the P&L Account cannot be attributed to the earning of dividend income. 5 On the other hand, the Ld. DR has relied upon the order of Assessing Officer and submitted that the disallowance has to be worked out as per Rule 8D and, therefore, the Assessing Officer is justified in disallowing the amount of edxpenses under Rule 8D. 6 We have considered the rival submissions as well as relevant material on record. The assessee has claimed the expenses while computing the income from profits & gains of business as under:- Nature of expenses incurred Amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Even, otherwise, these two item of expenditure i.e. audit fee and bank charges do not fall under the category of the expenditure incurred for a composite activity resulting taxable and non taxable income, therefore, there is no direct or proximate nexus of these two expenditures with the earning of dividend income. Under the provisions of section 14A, the apportionment of an expenditure is required to be made only when the expenditure is incurred for a composite activity or indivisible activity which results taxable and non taxable income. In the absence of any nexus of the expenditure in question with earning of the dividend income, no disallowance is called for u/s 14A of the Act. Accordingly we delete the disallowance made u/s 14A on account of administrative expenditure. 10. Ground no. 2 is regarding reduction of claim u/s 54F. The assessee has earned the Long Term Capital Gain of Rs. 7,53,44,067/- from the sale of shares of M/s Hindustan Platinum Ltd., the assessee claimed deduction u/s 54EC to the extent of Rs. 50 lakh for investment in REB (rural electrification bonds) and also claimed deduction u/s 54F of Rs. 5,44,28,806/- for investment in new residential house. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of the society and has no connection with acquisition of or transfer of flat in question. The stand of the society in the assessment proceedings of the society is that the amount is collected from the members for carrying out repair of the building of the society and not of any particular flat. Such repair is carried out once in every 10 to 12 years, therefore, when the payment is not for acquisition or transfer of flat then it cannot be part of the cost of the new flat for the purpose of exemption u/s 54F of the Income Tax Act. Accordingly, we do not find any error or illegality in the order of CIT(A) qua this issue. 15. Ground no. 2 is regarding reduction of deduction u/s 54F on account of expenditure on renovation. In the claim of deduction u/s 54F, the assessee also included the renovation expenditure of Rs. 13,72,814/-. The Assessing Officer noted that at the time of deed of transfer on 30.12.2008, the vendor was residing in the flat. The Assessing Officer accordingly disallowed the deduction u/s 54F on this amount of Rs. 13,72,814/- claimed by the assessee as incurred for making the property in a habitable condition. 16. On appeal, the assessee placed reliance on variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing grounds:- "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,02,5881- made u/s14A of the Income Tax Act without appreciating the fact that the disallowance uls 14A has been made as prescribed under Rule 8D of the Income Tax Rules. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 60,95,0001 - being income from other sources without appreciating the fact that no remand report was called for from the AO to substantiate the claim of the assessee. 23. Ground no. 1 is regarding disallowance u/s 14A restricted by the CIT(A). 24. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. We find that this ground is common to the ground no. 1 of the assessee's appeal and in view of our finding in ground no. 1 of the assessee's appeal, this ground of the revenue's appeal is dismissed. 25. Ground no. 2 is regarding deletion of addition of Rs. 60,95,000/- u/s 68. 26. The assessee has shown a receipt of Rs. 60,95,000/- against the transfer of half share in the immovable property at Pawana. The Assessing Officer rejected the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, the earlier returns of the appellant were available with the AO. and he has given no finding that these balance sheets were different from the balance sheet submitted along with the return of income field by the appellant. (iii) It is seen that appellant has been showing this property under the head "investment" with a narration "Pawana Property". The copies of balance sheets have been filed right from the year 2000-01 onwards. The land of this property has been separately shown in the Balance Sheet through these years on a value of Rs. 25,000/-. The year-wise construction and corresponding increase in the value of property has been shown as below:- 1) 31-03-2000 RS.33,85,000/- 2) 31-03-2001 RS.54,75,000/- 3) 31-03-2002 RS.56,25,000/- 4) 31-03-2003 Rs.56,25,000/- 5) 31-03-2004 Rs.57,35,000/- 6) 31-03-2005 Rs.58,25,000/- 7) 31-03-2006 Rs.60,20,000/- 8) 31-03-2007 Rs.60,95,000/- (iv) The appellant has given the details of cheque numbers and bank account details for this payment of Rs. 60,95,0001-. All these payments have been made from her bank account NO.125296 in Bank of Baroda and these payments have been made from 06-04-1999 onwards. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 total amounting to Rs. 60,95,000/-. As per MOU the assessee has received back only the invested amount of Rs. 60,95,000/- without any surplus or gain on the same. Further we note in the case of Shri Chandrakant S. Choksi HUF Vs. ACIT in ITA No. 3540/Mum/2013, the Tribunal vide order dated 18.11.2014 has accepted the fact of transfer of the share in the property in question by the assessee in favour of the HUF. The relevant part of the Tribunal's order in para 4.3 is as under:- "4.3 Lastly, regarding whether registration of MoU is compulsory or not, we find that this issue is squarely covered by the decision of the Hon'ble Bombay High Court in the case of CIT v. Laxmichand Narpal Nagda (supra) and Delhi High Court in the case of Balraj v. CIT (supra). In the latter decision, the Hon'ble Delhi High Court held that for the purpose of attracting the provisions of section 54, it was not necessary that the assessee should become owner of the property on only through registration, as the section speaks of "purchase" and registration of document was not imperative. Thus, on all counts, the reasoning given by the A.O. as well as CIT(A) cannot be sustained in view of the aforesaid legal p ..... 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