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2015 (7) TMI 645 - ITAT BANGALORE

2015 (7) TMI 645 - ITAT BANGALORE - TMI - Eligibility for exemption u/s. 54EC - CIT(A) allowed claim - according to AO the sale proceeds of the capital asset were not invested in REC/NHB Bonds and what was invested was only loan taken from the partnership firm, M/s. Tallam Textiles, the claim of exemption u/s. 54EC was not to be allowed - Held that:- The evidence filed by the assessee before the CIT(A), in our view, clearly demonstrates that there was no loan taken by the assessee from M/s. Tall .....

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C Bonds, that cannot be a bar to claim exemption u/s. 54EC of the Act. In our view, the decision of the Mumbai Bench of the Tribunal in Bombay Housing Corporation (2001 (2) TMI 1020 - ITAT MUMBAI) clearly supports the claim of the assessee in this regard - Decided in favour of assessee. - ITA No.1129/Bang/2014 - Dated:- 10-7-2015 - SHRI N.V. VASUDEVAN AND SHRI JASON P. BOAZ, JJ. For The Appellant : Shri P. Dhivahar, Jt. CIT(DR) For The Respondent : Shri Vishnu Bharath, CA ORDER Per N.V. Vasudeva .....

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rtment had information that one of the member of the HUF, Shri T.N. Nanjunda Shetty had deposited money in REC Bonds during the previous year ending 31.3.2005. This is because while making the said deposit, T.N. Nanjunda Shetty had given his individual PAN: AASPN 9963. In the course of individual assessment 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 t .....

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he 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 pr .....

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has his credit balance of ₹ 2,61,68,466.65 as on 31-03-05 in his current account. 5. Before the CIT(Appeals), the assessee filed an affidavit which reads in which the Assessee affirmed that he had withdrawn monies from his current account with the partnership, wherein he had enough credit balance and the withdrawal from the firm Tallam Textiles, was not as a loan but a withdrawal from his current account in the firm in which he had sufficient credit balance. The affidavit filed in this re .....

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ment. I had Credit balance in my account on 1/4/2003 ₹ 2.25 Crs and as on 31/3/2004 ₹ 2.18 crores and had Credit balance more than 2 Crs throughout the period and I have not borrowed any amount to invest in the Bonds. I had not given any declaration to the effect that I have borrowed and invested and in fact the firm M/s. Tallam Textiles had made error in their letter Dt. 21/8/2007, for which details furnished with the Income Tax Officer Ward 3(4) Bangalore. I should not be made vict .....

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he 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 ₹ 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 ₹ 65,27,000.00 which was deposited in our firm and the investment was made for ₹ 66,50,0 .....

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eration of the above evidence, came to the following conclusion:- 3.5 I have carefully considered the appellant s submissions and the reasons given by the AO in the assessment order. The only ground on which the AO refused to give deduction u/s 54EC to the appellant is that it had a loan from M/s Tallam Textiles for making the investment in the specified securities viz, bonds of Rural Electrification Corporation Ltd. and National Housing Bank in sums of ₹ 66,50,000/- and ₹ 9,10,000/- .....

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ng to the appellant, even if it had taken a loan and invested the same in the specified securities it was entitled to the deduction u/s 54EC of the Act. In the case of IAC vs. Jayantilal Chimanlal (HUF) [32 TTJ 110] relied on by the appellant, it has been clearly held by the Hon ble ITAT, Ahmedabad that the source of funds for investment in the specified assets is irrelevant if the investment had been made within the period of six months from the date of sale of the immovable property. The relev .....

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islature itself has appreciated the fact that it would not always be possible to invest the sale realizations immediately after the sale transaction. Therefore, six months time is given for the investment in the Rural Bonds. It is not expected of an assessee to keep the sale realizations intact and invest the same money in the Rural Bonds within a period of six months. In this view of the matter, we entirely agree with the submissions made on the matter, we entirely agree with the submissions ma .....

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sees 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 p .....

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n u/s.54EC of the Act. Aggrieved by the order of CIT(Appeals), the Revenue has preferred the present appeal before the Tribunal. 9. We have heard the submissions of the ld. DR, who reiterated the stand of the Revenue as reflected in the order of AO. He also distinguished the decision relied on by the ld. CIT(Appeals). According to him, the decision of the Tribunal in the case of Jayantilal Chimanlal (HUF) (supra) was a case of partition amongst members of HUF, whereas in the present case, there .....

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demonstrates that there was no loan taken by the assessee from M/s. Tallam Textiles. It was a case where assessee deposited the sale proceeds in his capital account (current account) and withdrew monies therefrom and made investments in the Bonds. Therefore, there was no question of denying exemption to the assessee u/s. 54EC on the premise that assessee took a loan from Tallam Textiles and made investments in the Bonds and not out of sale proceeds received on sale of capital asset. 12. Even ass .....

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ern for a price of ₹ 3.55 crores. This was as per the balance sheet as on 26th Sept., 1991. The business was sold to M/s Monde Consultants (P) Ltd. The sale price was received in full between 27th Sept., 1991, and 22nd Oct., 1991. A sum of ₹ 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 ₹ 1.5 crores received on 10th Oct., 1991, was paid to B.C. .....

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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 the net consideration in the specified assets. It cannot be the intention of the section that the other normal transactions or activities of an assessee shou .....

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