TaxTMI 
TaxTMI 
2015 (9) TMI 393
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.... the ITAT was justified in allowing deduction of Rs. 22 lacs claimed under Section 54EC for investment in purchase of REC Bonds ?" The facts which are necessary for this adjudication can be briefly stated below. The mother of assessee viz. Mrs. Kamlabai Moghe executed a Will on 17.12.1978 and she expired on 18.05.1988. By that Will she divided her residential bungalow in Ramdaspeth area of Nagpur into two parts. Ground floor, garage, garden and out house of her residential bungalow were given to her son - assessee while first floor with staircase of the residential bungalow was given to her other son Shri P.M. Moghe. Shri P.M. Moghe expired on 20.03.1996. He made a Will and bequeathed his share i.e. first floor premises mentioned supra excluding undivided share of land in the name of his sisters viz. Mrs. Wadekar, Mrs. Sinha and Mrs. Kale. The assessee then purchased construction of first floor for Rs. 90,000/. This sale price did not include value of undivided share of land on which bungalow was built. As per Clause No. 7 of said Will of Kamlabai Moghe, assessee did not receive property absolutely. Kamlabai Moghe had provided a share for her daughters i.e. sisters of assessee if....
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....re which can be connected with transfer of property. He has taken us through reasons recorded by the Assessment Officer as also by CIT and by ITAT for the said purpose. Insofar as claim under Section 54EC of the Act is concerned, he submits that the amount has not been invested within prescribed period of six months and as such the purchase of REC Bonds could not have been looked into and Section 54EC of the Act, was not applicable in present facts. 5. Shri Bhattad, learned counsel, on the other hand, submits that in view of the Will of late mother Smt. Moghe and thereafter Will of P.M. Moghe, three sisters had a right in property and without extinguishing it or without providing for its adjustment, the assessee could not have sold property. As such, the amount of Rs. 45 lakh paid to three sisters is correctly found to be an expenditure incurred in connection with transfer of property. He submits that the issue has been correctly appreciated by CIT(A) and ITAT has upheld it. The arrangement worked out by three sisters and brothers as also three daughters of the deceased Shri P.M. Moghe, is bonafide one and revenue, therefore, cannot question it. The order of ITAT does not give ris....
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....s property which is constructed by my husband Dr. Mahadeo Atmaram Moghe out of his hard earned money should go to only my two sons namely Shri Purushottam and Shri Kamlakar and their sons. If anybody out of both the sons does not have son or if son is not alive, then his portion will go to the other brother. If both of them do not have any son and if their son is not alive, then my daughter-in-law Mrs. Usha w/o Purushottam Moghe and Mrs. Leela w/o Kamlakar Moghe will enjoy the property. But they will never get ownership of property. My daughters-in-law will not have any right to mortgage, sale or gift such property. This property should be given to my legal heirs - two sons, their sons or to my daughters. On this condition, this property is apportioned by me by this WILL." 8. This situation, therefore, shows that after expiry of Shri P.M. Moghe on 20.03.1996, the assessee and his three daughters were faced in a peculiar position. They resolved the situation and a family settlement was reduced into writing. It was agreed that at the time of sale, each sister shall be given Rs. 15 lakh and each niece shall be given Rs. Five lakh. Accordingly, when the property was sold on 07.07.200....
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....n 22.01.2007 and the assessee who was waiting for making investment in REC Bonds only, invested Rs. 22 lakh on opening date i.e. on 22.01.2007. It is claimed that the assessee was thus prevented by reasonable cause from making investment within six months. Though the issue has been looked into by the Assessing Officer, he has not found the statement that the issue No. VIA opened on 22.01.2007 incorrect. 11. The Division Bench of this Court at Bombay, while deciding Income tax Appeal No. 3731 of 2010 (supra) has considered almost identical facts. Those facts are given in paragraph 9 of said judgment. The period of six months in said matter expired on 21.09.2006. Bonds were purchased by the assessee on 31.01.2007. As this investment was beyond the period of six months, the Assessing Officer disallowed it on 26.09.2008. CIT(A) by the order dated 05.02.2009 maintained this order. The ITAT on 19.06.2010 allowed the assessee's appeal. This order of ITAT was questioned before the High Court. In paragraph 17, this Court has observed " Thus, the availability of the bonds only for a limited period during this period cannot prejudice the assessee's right to exercise the same up to la....