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TMI Blog2015 (7) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment of Shri T.N. Nanjunda Shetty, he explained that he had not made the investment in REC Bonds in his individual capacity. He submitted that T.N.N. Shetty (HUF) owned a property and on sale of that property, they derived long term capital gains, the proceeds of long term capital gains had been deposited in the capital account of the HUF with a firm, M/s Tallam Textiles. A sum of Rs. 75,60,000 was withdrawn by the HUF from its capital account and deposited in NHB Bonds worth Rs. 9,10,000 and Rs. 66,50,000 in REC Bonds. The explanation was accepted in the assessment of the individual who was the member of the HUF. To verify the correctness of the claim made by the member of the HUF, assessment of HUF was reopened by issue of notice u/s. 148 of the Act. 4. In the reassessment proceedings, the question whether the assessee should be allowed exemption u/s. 54EC of the Act came up for consideration before the AO. According to the AO, the sale proceeds of the property from the HUF were credited in the partner's capital account in M/s. Tallam Textiles and HUF obtained a loan from the firm and out of the said loan, the Bonds of NHB and REC were purchased. Since the sale proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no loan taken by it from M/s. Tallam Textiles, but it was drawings from the capital account. The assessee followed it up with a confirmation letter from M/s. Tallam Textiles dated 13.4.2013, which reads thus:- "This is to clarify that there is an error in our letter dt 21-8-2007 to the extent of stating that Loan of Rs. 3.56 crores was given for the investment in Bonds. It is factually wrong as the sale proceeds of flats sold by Sri. Tallam N.Nanjunda Setty is only Rs. 65,27,000.00 which was deposited in our firm and the investment was made for Rs. 66,50,000.00. The account extracts were enclosed and the deposit and withdrawals are not credited to the current account and separate account was maintained and the credit balance of Sri.Tallam Nanjunda Setty, throughout the period is more than 2 Crores as per the account copies filed in your office. We are withdrawing the letter dt 21-8-2007 which was written wrongly and this is to request you to replace the same with this letter dt 13-3-2013 which is factually correct." 7. The CIT(Appeals) on a consideration of the above evidence, came to the following conclusion:- "3.5 I have carefully considered the appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that in order to qualify for exemption u/s. 54E of the Act, it would be sufficient if investment is made in the Rural Bonds equivalent to the sale realization, irrespective of the fact from which funds such investment is made." 3.6 The Hon'ble ITAT, Kolkata in the case of Harishchandra G.Kathpal [ITA.No.6264 of 2020 dated 21/10/2011], Hon'ble ITAT, Mumbai in ACIT v. Pasricha (20 SOT 468) and Bombay Housing Corporation v. ACIT (81 ITD 545) have also held that the assessees were entitled to exemption u/s 54EC though they had made investments in the specified securities out of money taken on overdraft. Respectfully following the said decisions, I hold that the appellant is entitled to the deduction u/s S4EC claimed by it in respect of the investment made by it out of withdrawals made from its capital account or even out of loan taken from the said firm. The appellant, at the time of appeal hearing, has furnished .evidence to show that the sale proceeds of the property had been kept by it in its capital account with the firm. In the circumstances, addition of Rs. 75,10,620/- made by the A0 is deleted." 8. Thus the CIT(A) did not decide the question as to whether the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o M/s Monde Consultants (P) Ltd. The sale price was received in full between 27th Sept., 1991, and 22nd Oct., 1991. A sum of Rs. 84 lakhs was received on 27th Sept., 1991, and this was paid over to B.C. Vaswani (HUF) for the credit of different partners of the assessee-firm on the very same day. The amount of Rs. 1.5 crores received on 10th Oct., 1991, was paid to B.C. Vaswami (HUF) and to Vaswani Trust for the credit of the partners of the assessee-firm on the very same day. Similarly, the balance amount of Rs. 1.21 crores received on 22nd Oct., 1991, was paid to Vaswani Trust for the credit of the assessee's partners on the same day. On 28th Oct., 1991, the assessee borrowed a sum of Rs. 1.42 crores from M/s Vaswani Trust and the borrowed amount was invested in IDBI Bonds on 30th Oct., 1991, which are specified assets for the purpose of s. 54E. 13. On the question whether deduction u/s.54E of the Act, which is identical to Sec.54EC of the Act, could be allowed on the above facts, the Hon'ble Mumbai Bench, held as follows:- "9. ......What the section requires as we understand it, is that it is necessary for the assessee only to invest an amount which is arithmetically equal to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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