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Assistant Commissioner of Income Tax Versus Shri Kamlakar Moghe

2015 (9) TMI 393 - BOMBAY HIGH COURT

Deduction u/s. 48(1) - ITAT allowed deduction - Held that:- As 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 ₹ 15 lakh and each niece shall be given Rs. Five lakh. Accordingly, when the property was sold on 07.07.2006, this family settlement has been given effect to. It is, t .....

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diture in connection with transfer of property. The sisters had a title in property and without their cooperation there could not have been any sale. In this situation, we do not find any error in concurrent findings reached by the CIT as also by the ITAT. - Decided against revenue

Deduction claimed under Section 54EC for investment in purchase of REC Bonds allowed by ITAT - Held that:- Section 54EC gives assessee an option to invest either in bonds of National Highway Authority of In .....

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nnot be forced to invest in the bond whichever is available because period of six months is about to expire. This option or discretion given by the Parliament to the assessee needs to be honoured here. If said option was available when period of six months was to expire and could have been expressed by the assessee when said period was about to expire, the situation would have been otherwise. In present matter, the REC Bonds became available in VIA issue on 22.01.2007 and, therefore, investment .....

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evenue and Shri Bhattad, learned counsel for the respondent - assessee, it was felt that no substantial questions of law arise for determination in this appeal. In view of this, we have heard the respective counsel at length and disposed of the appeal by this judgment. 2. The following two questions of law are sought to be raised by the Revenue in this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act). 1. Whether in the facts and circumstances of the case .....

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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. Wadeka .....

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gave life interest to her two daughter-in-laws and it was thereafter to go to her daughters. Assessee had only one daughter while his brother P.M. Moghe had one son and three daughters. The said son of P.M. Moghe expired in the year 1985 i.e. before death of Kamlabai Moghe. The assessee, therefore, received property with clause providing overriding title in favour of his three sisters. In this situation, assessee decided to pay ₹ 15 lakh each to his three sisters so that in future they sh .....

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pital Gains. The assessee also invested an amount of ₹ 22 lakh in Rural Electrification Corporation Limited Bonds (REC Bonds) and sought its deduction under Section 54EC of the Act. The Assessment Officer does not accept these claims and the assessee, therefore, approached CIT in appeal. On 04.11.2010, CIT partly allowed his appeal and claim towards amount of Rs. Five lakh each i.e. total ₹ 15 lakh paid to three nieces was not accepted. Similarly, addition of ₹ 20 lakh made und .....

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fore this Court challenging dismissal of its appeal. It has raised two questions mentioned supra as substantial questions of law. 4. Shri Parchure, learned counsel submitted that payment made to sisters was not necessary and it cannot be treated as cost for acquiring the title to property. It is not an expenditure 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 u .....

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g for its adjustment, the assessee could not have sold property. As such, the amount of ₹ 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 d .....

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24.01.2007, REC Bonds were not available, as such purchase vide cheque dated 24.01.2007 is in accordance with law. He has invited our attention to the provisions of Section 54EC of the Act to urge that the said provision even contemplates this situation and enables extension of time for purchase of such bonds. He has placed reliance upon a Division Bench judgment of this Court in Income Tax Appeal No. 3731 of 2010 decided on 27.07.2012 (Commissioner of Incometax, Central III vs. M/s. Cello Plas .....

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.1978 became effective. The owner of first portion Shri P.M. Moghe had a son who expired in 1985 i.e. before death of Kamlabai. Thus, on the date of death of Kamlabai, P.M. Moghe had only three daughters surviving him. Shri P.M. Moghe in turn made a Will and bequeathed is share in the name of his sisters. The assessee only had one daughter. Clause No. 7 in Will dated 17.12.1978 executed by Smt. Kamlakar is reproduced in para 4 of the Assessment order. It reads as under : 7. The house is apportio .....

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s 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 righ .....

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given ₹ 15 lakh and each niece shall be given Rs. Five lakh. Accordingly, when the property was sold on 07.07.2006, this family settlement has been given effect to. It is, therefore, obvious that in the absence of such family settlement and payment, the sale of property on 07.07.2006 by the assessee could not have materialized. The CIT(A) in the Appeal filed by the assessee has not accepted payment of Rs. Five lakh each given to three nieces and that finding has been maintained even by th .....

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tion No. 1 attempted to be raised by the revenue before us does not arise here for determination as the substantial question of law. 9. Section 54EC of the Act needs to be looked into while considering the second question sought to be raised by the Revenue. A substantive provision under Section 54EC(1) mandates investment within a period of six months after the date of transfer. Its subsection (3) explanation (b) defines long term specified assets for making investment for the period from 01.04. .....

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es assessee right to choose. Here, the assessee wanted to invest in REC Bonds and has in fact invested in those bonds on 24/27.01.2007. His specific stand that bonds were not available during this period, is not found to be incorrect or false by any of the authorities. 10. A show cause notice dated 03.12.2009 was issued to the assessee in connection with this investment and to it assessee replied on 15.12.2009 stating that the issue No. VI of said Bonds was on top from 01.07.2006 to 02.08.2006. .....

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me 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 ques .....

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