TMI Blog2015 (11) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the Board Circular which is not actually applicable to the facts and circumstances of the present case, therefore, the CIT(A) was right in concluding this issue in favour of the assessee. We are unable to see any perversity or any other valid reason to interfere with the order of the ld. CIT(A). - Decided against revenue Disallowance of claim of exemption u/s 54F - CIT(A) allowed the claim - Held that:- CIT(A) was right in concluding that during the course of assessment proceedings, the assessee filed the relevant details of capital gain and its utilization along with copies of the bank account statement and from these details, it is amply clear that the money of capital gain has been deposited in mutual fund and on redemption of the mutual fund, it has been deposited in the capital gain account scheme. It was also noticed that the assessee on sale of original assets has deposited the proceeds in his bank account. From there, he deposited the money temporarily with mutual funds and before the due date of deposit in Capital Gain Scheme, encashed the mutual funds and deposited the amount in Capital Gain Scheme as required by the relevant provisions of the Act. On vigil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR submitted that the ld. CIT(A) has erred on the facts and circumstances of the case and in law in allowing the notional loss of ₹ 37,73.273/- on F O foreign currency transaction. Ld. DR supporting the action of the Assessing Officer submitted that in view of the specific clarification contained in Board s Instruction No. 3/2010 dated 23.3.10, the impugned loss claimed by the assessee under the business head was rightly treated as notional loss and the same was not allowed to be set off from the other heads of income or to carry forward the same to the subsequent years. 5. Replying to the above, learned counsel of the assessee submitted that the loss suffered by the assessee on the basis of actual transaction in the foreign exchange derivatives is allowable and the observations of the Assessing Officer that the transactions are based on marked to market losses is factually correct. He further pointed out assessee s paper book page no. 64 to 66 and submitted that on 31.3.09, the assessee had a credit balance of ₹ 25,26,727 against the payment of ₹ 63 lakh made by the assessee during the year, thus, net loss suffered by the assessee during the relevant financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been made to the brokers. It has been further contented that in any case this being a loss incurred during the year is an allowable loss. 1 have perused the facts and on going through the same. It is observed that the appellant has entered into these F O transactions during the year. In respect of the various transactions entered into by the appellant he has incurred loss of ₹ 2,32,10,575/- and earned profit of ₹ 1,94,37,302/-. Thus there is an actual loss of ₹ 37,73,273/- during the year in such transactions. Against this the appellant has made a payment of ₹ 63 Lac on various dates to the Broker. After adjusting the above losses there is a credit balance with the broker of ₹ 25,26,727/-. In view of these facts the observation of the Assessing Officer that the above said loss is a notional loss and represents marked to market is not correct. It is not a notional entry which has been passed on the last day of the financial year and represents the value as per the market value on 31st March. It is a running account whereby profit and loss are being incurred on settlement day and amount being debited and credited on account of loss or the profit as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, ground no. 1 of the revenue fails. Ground No.2 9. Apropos ground no.2, ld. DR contended that the Learned CIT(A) has erred on facts and circumstances of the case and in law in allowing the claim of ₹ 2.00.87,987/- without the assessee fulfilling the conditions prescribed under section 54F of the Income tax act, 1961 because the assessee made a claim without verifying the pre-conditions prescribed under the said provisions. Ld. DR took us through relevant part of the assessment order and submitted that after detailed deliberations and consideration of the assessee s stand and explanation, the Assessing Officer rightly held that exemption u/s 54 of the Act is available only if on the date of transfer of the original asset, the taxpayer does not own more than one residential house property other than the new house. Ld. DR further submitted that since the assessee owned more than one house property on the date of transfer of original asset, therefore, he was not entitled for deduction u/s 54 of the Act. Ld. DR also reiterated the allegations of the Assessing Officer from page 9 to 12 of the assessment order and submitted that the assessee has not able to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai (2015) 56 taxmann.com 255 (Mumbai-Trib.) and submitted that in the similar set of facts and circumstances, it was held that gift of house to husband prior to the date of transfer of original asset other than any residential house cannot be disregarded for the purpose of reckoning assessee s eligibility for deduction u/s 54 of the Act even if the assessee along with her husband continue to reside in the same house after gift. The ITAT Mumbai also held that section 64(1)(iv) will not operate to nullify gift and would operate only to club income from gifted house in the hands of donor and in this situation, the gift cannot be regarded as sham transaction merely because gift was made by the assessee to his/her spouse. 11. On careful consideration of above submissions of both the sides, from the operative part of the impugned order of the first appellate authority, we note that the first appellate authority had dealt with this issue in para 10.2 at page 19 of the impugned order and the relevant observations of the ld. CIT(A) appear on page 12 which read as under:- On going through the provisions of section 54F it is noticed that the benefit is not available to an assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s flat to his wife on 29th January, 2009 thereafter the appellant despite not being owner of the flat, still the rental income from such income is to be clubbed in his hand in view of the provisions of Section 64(1 )(iv) of the Act. Thus there is no contradiction as alleged by the A.O. The explanation of the appellant in this regard is found to be correct that it is not his rental income. It is because of the clubbing of income provision that income earned is being included in his hands under Section 64(1 )(iv). This does not mean that the appellant is the owner of the property. The contention of the Assessing Officer that the appellant is taking contradictory stands is not correct. The fact remains that as on the date when the original asset on which the capital gain has arisen i.e. 2nd February, 2009 appellant was not the owner of the said flat. The next allegation of the Assessing Officer is that the appellant is owner of a farm house for which he has referred to definition of Farm House that is a type of building or house which serves the residential purposes in a rural or agricultural land. There can t be any dispute about the Farm House, if there is a house on the far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On going through the facts I notice that the above contention of the Assessing Officer is not correct. Further there is no requirement under the law that the appellant should deposit the money received on sale of original capital asset in the Capital Gain Scheme. The only requirement is that the money should be deposited in the capital gain account scheme before the due date of filing return. Admittedly in this case there is no dispute that the money has been deposited before the due date of filing the return. However the contention of the Assessing Officer that the capital gain realized has been first utilized for deposit with the mutual fund cannot be a ground for disallowing the exemption. There is no restriction on utilization of capital gain realized from sale of original asset till its deposit in the Capital Gain Scheme. The appellant is free to deal with the same as it may like. The allegation of the Assessing Officer that the appellant has not been able to prove the source of investment is also not correct. During the course of assessment proceedings the appellant has filed the relevant details of the capital gain and its utilization along with bank account. The mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that during the course of assessment proceedings, the assessee filed the relevant details of capital gain and its utilization along with copies of the bank account statement and from these details, it is amply clear that the money of capital gain has been deposited in mutual fund and on redemption of the mutual fund, it has been deposited in the capital gain account scheme. It was also noticed that the assessee on sale of original assets has deposited the proceeds in his bank account. From there, he deposited the money temporarily with mutual funds and before the due date of deposit in Capital Gain Scheme, encashed the mutual funds and deposited the amount in Capital Gain Scheme as required by the relevant provisions of the Act. On vigilant and careful consideration of contention of the Assessing Officer as well as conclusion of the CIT(A) as noted above, we are of the view that the Assessing Officer rejected the claim of the assessee u/s 54 of the Act without any justified reason and on incorrect premise which was rightly allowed by the CIT(A) after properly appreciating and considering the facts and circumstances of the case in the light of explanation of the assessee. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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