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Jatender Singh Marvaha Versus DDIT (IT) -1 (1) , Kolkata

2018 (2) TMI 668 - ITAT KOLKATA

Disallowance towards lodging, fooding and travelling expenditure and other expenses - Held that:- The assessee came to India to complete the sale transaction of the said ancestral property. During the sale transaction, the assessee stayed in India and incurred other expenses of ₹ 3 lakhs towards airfare, fooding & lodging expenses. We find that the assessee did not produce any documentary evidence either before the AO or the CIT-A in support of the claim of towards lodging, fooding and tra .....

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xpenses is dismissed. - Addition towards claim of exemption u/s. 54EC - Held that:- Section 54EC mandates that investment in specified bonds to be made within prescribed time by the assessee either out of sale proceeds of capital asset or out of any other means. In the present case, admittedly the assessee had not made any investments in the specified bonds as per provisions of section 54EC of the Act, which has rightly been denied by the AO and confirmed by the CIT-A. In view of aforesaid d .....

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against the order dt: 21-10- 2014 of the CIT-A, VI, Kolkata for the A.Y 2011-12. 2. Brief facts of the case are that the assessee is an individual and a citizen of United Kingdom. A search & seizure operation was conducted u/s. 132 of the Act on the assessee at the Netaji Subhash Chandra Bose International (NSCB) Airport on 26-01-2011. In consequence of the said search & seizure operation, the AO issued notice u/s. 153A of the Act to the assessee to file the return of income for the A.Y .....

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of ₹ 4,50,000/- under the head brokerage & other expenses and ₹ 40,00,000/- towards claim of exemption u/s. 54EC of the Act and determined the long term capital gains at ₹ 70,06,500/- vide his order dt. 13-03-2013 u/s. 143(3), 153A and 153B(1)(b) of the Act. 3. Ground no.1 relates to restriction of disallowance to ₹ 1,50,000/- under the head brokerage & other expenses by the CIT-A against ₹ 4,50,000/- made by the AO. 4. The facts relating to ground no.1 are .....

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warrant of authorization u/s. 132(1) of the Act was issued. The said warrant was executed on the assessee at NSCBI Airport, Kolkata and returned an amount of ₹ 2,19,000/- to the satisfaction and seized amount of ₹ 49,00,000/- and 20,000 Pound Sterling was handed over to AD, Directorate of Enforcement, Kolkata on 27-01-11. 5. According to AO, as per the statement recorded u/s. 131 of the Act the assessee was coming from Phagwara, Dist: Jalandhar, Punjab by Flight No. SG 212, Delhi to .....

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h Kumar @ ₹ 4.25 lakhs per Marlas. The assessee received ₹ 1,00,000/- as token money and ₹ 10,00,000/- as advance money and remaining balance of ₹ 66,00,000/- in cash on 24-01-2011, but the land was registered at ₹ 20,00,000/- instead of actual value received. The AO requested the assessee to furnish the evidences of payment of brokerage and other expenses. In response to which, the assessee stated that the brokerage of ₹ 1,50,000/- was paid to Shri Avtar Sing .....

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ncurred wholly and exclusively in connection with the transfer of the capital asset. The expressions "wholly" should be understood to mean the quantum of expenses and "exclusively" to mean the purpose of incurring such expenditure and both the situations have to be cumulatively satisfied and demonstrated by the assessee by way of production of tangible evidences. In the written submission, the AR argues that payment of brokerage of ₹ 1,50,000/- should be allowed for ded .....

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the AR was unable to produce any documentary evidence which could prove a nexus between the alleged expenditure and the sale of the property. In the written submission, the AR stated that the assessee came to India for 15 days with a purpose to sell the property in question. He also made a very naive and simplistic statement that 'the cheapest round-trip airfare for economy class between London and India is approx. ₹ 50,000/- and lodging expenses in India is normally @ ₹ 7,000/- .....

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me guesstimate of figures like "approx.". Second, lodging and fooding charges have been estimated for 15 days, for the period of assessee's stay in India from J 7th January, 2011 to 2nd February, 2011. It is evident from record of proceedings that the assessee landed in New Delhi Airport on 17th January,2011 and conveyance of the sold out property was given to the purchaser on 24th January 2011 after receipt of the entire sale consideration of ₹ 76,50,000/- in the forenoon of .....

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ich was ostensibly made to reduce his tax liability. The claim is, accordingly, rejected. In view of above, the AO disallowed the sum of ₹ 4,50,000/- under the heads Brokerage & Other expenses and added the same to the total income of the assessee. 6. Aggrieved, the assessee filed appeal before the CIT-A. Before him the assessee contended that the said expenditure were incurred during the course of sale of said ancestral property (land) and they were directly related to the source of i .....

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onsideration of the said land was paid to said agent. It was also submitted the airfare, travelling, lodging and fooding expenses incurred by the assessee during the course of sale transaction of said ancestral property. The assessee travelled from London to India and stayed in India from 17-01-2011 to 2-2-2011 to complete the said transaction and urged to allow the same as it were incurred during the course of said transaction. 7. The CIT-A considering the submissions of assessee deleted the di .....

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ccount of lack of documentary evidence. However, it is noted that in the statement recorded u/s 131 of the IT Act, 1961 on 27.1.2011 i.e. during the search proceedings itself, the appellant had stated that the cash found on him was out of sale proceeds of land which was carried out through Shri Avtar Singh, broker. In the subsequent statement dated 28.1.2011, he stated that he had paid brokerage of ₹ 1.5 lakhs to Shri Avtar Singh. The appellant is a citizen of UK and had few local contacts .....

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r bills or other documentary evidence is maintained by the parties. The land sold was for ₹ 76.5 lakhs and brokerage of ₹ 1.5 lakhs which comes to around 2%. It is common knowledge that brokers normally charge brokerage in that range for land transaction. Considering these facts, I am of the view that the claim for brokerage of ₹ 1.5 lakhs made by the appellant is reasonable. The disallowance of brokerage is therefore, deleted. 3.3. Coming now to the balance claim of deduction .....

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r, it is undisputed that the appellant was based at UK and had made trip to Phagwara, Punjab and had sold land there. Obviously, he must have incurred expenses on travel as well as food and lodging. However, though the appellant is a citizen of UK, he is a person of Indian origin and had ancestral property at Phagwara, Punjab. It is quite reasonable to expect that his visit to Phagwara would also be utilized to meet friends and relatives etc. Moreover, as pointed out by the assessing officer, th .....

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personal and social purpose. Considering all these facts, I am of the view that it would meet ends of justice if claimed for the said expenses on travelling, food and lodging is allowed to the extent of 50%. 3.4. Considering the above discussion the assessing officer is directed to reduce the disallowance of ₹ 4.5 lacs to ₹ 1.5 lakhs. 8. Before us the ld.AR reiterated the same submissions made before the authorities below. He further submits that all the details were submitted befor .....

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and prayed to allow ground no.1 raised by the assessee. 9. On the other hand, the ld.DR argued that the break-up of other expenses and supporting evidences towards such claim were not given by the assessee before the AO & CIT-A. The assessee only produced some calculation and on that basis sought allowance without there being any evidence. For non submission of evidence the AO has rightly disallowed the same and relied on the order of AO. 10. Heard rival submissions and perused the material .....

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incurred by the assessee during the said transaction. However, the CIT-A considering the submissions of assessee has restricted the same to ₹ 1.50 lakhs i.e. 50% of ₹ 3 lakhs under the head other expenses . In our opinion, it is quite, reasonable and justified in the facts and circumstances of the case. Therefore, our interference is uncalled for on this issue. We uphold the order of the CIT-A in restricting the same on this issue. Therefore, the ground no. 1 relating to other expens .....

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disallowed. In reply, the assessee through a letter dt. 6-2-2013 stated that the assessee intended to purchase bonds of National Highway Authority of India, but due to seizure of ₹ 49,00,000/- by the search team during the said search & seizure operation, the assessee could not actually invest the said amount as per section 54EC of the Act. The AO found the submission of the assessee not acceptable and for non submission of any evidence as required by him, disallowed the claim of exemp .....

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zed)'. Section 54EC(I) of the Income Tax Act provides that [Capital gain not to be charged on investment in certain bonds. 54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the ca .....

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capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 : Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees. ] [Emphasis added] 16. In light of the above provision, the AR of the assessee vide order sheet noting dt.04.03.20 13 was requested to show caus .....

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₹ 40,00,000/- was made by the assessee. The assessee has claimed the said exemption based on his intention to invest in such bonds however, the Section 54EC(1) of the Act specifically provides that exemption can be allowed provided that the investment has been made within a period of six months from the date of transfer of the capital asset. In the instant case, it is evident that no investment as required u/s. 54EC was made by the assessee. Therefore, the exemption claimed u/s. 54EC to th .....

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ount was not received by the assessee and was not in possession of sale consideration to invest in specified bonds and as such, the assessee was prevented from making such investments. The assessee also submitted that the seized amount was in the account of the Government and the same was used for welfare of the country and the assessee is entitled to claim the benefit of exemption u/s. 54EC of the Act. The submission of the assessee before the CIT-A is reproduced herein below:- 4.1 The appellan .....

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he act specifically provides that exemption can be allowed 'provided' that he investment has been made within a period of six months from the date of transfer of the capital asset. In the instant case, it is evident that no investment as required u/s. 54 C was made by the assessee. " In this regard, I would like to draw the attention of your honour towards the dates of incidents and facts of the case. The appellant sold the property on 24th January 2011 and received the sale proceed .....

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had taken exemption of ₹ 40,00,000/- U/s. 54EC Of the Income Tax Act, 1961. Section 54EC of the Income Tax Act, 1961 states that: . "54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term speci .....

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whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45:" It is to be noted that for the investment in specified bond within the time limit as specified in the above section the appellant must be in possession of the sale consideration which he had received by sale proceeds. The section explains about the exemption amount and the time limit of investments from the .....

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stance the intention of the appellant had to be given a thought. Moreover it shall be noted by your honour that till date the seized amount is not been received by the appellant and hence it can be rightly concluded that the appellant was in no position to invest the amount as he was not having the possession of the sale consideration. It is to be note that the sale consideration was not laying anywhere else but, was in the account of the Government it elf. As such being the amount being ultimat .....

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the specified asset the assessee will require cash realized from the transfer of the asset. In the instant case it was impossible for the appellant to make payments in specified bonds and in natural justice law cannot compel anybody to do the impossible which your honour clearly exist in the present case. It is to be noted that a taxing statue or any other statute has to be construed reasonably and every effort should always be made to ascertain the intention of the parliament from the words emp .....

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) (ITA No. 1146/kol/2011)] whereby it was held that - "In view of the above consistent principle adopted by Hon'ble High Courts in respect to interpretation of a beneficial provision i.e. exemption provision under capital gains tax, we have to take similar approach in deciding the issue in hand i.e. the claim of assessee for exemption u/s. 54EC of the Act because this is exactly similar to section 54E, 54B or 54EA or EB of the Act. In the present case before us, admittedly assessee rece .....

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page 3 of this order. AO is directed accordingly. This issue of assessee's appeal is allowed. Similar are the facts in ITA No. 1146/Kol/2011 in the case of Shri Chanchal Kr. Sircar, hence AO will allow exemption in this case also. I would like to draw the attention of your honour towards the decision taken in the case of Mahesh Nemichandra Ganeshwade Vs. income tax officer ([2012]17 ITR (trib.)116(pune)) wherein the Hon'ble ITAT had made the following decision - "Though s. 54EC requ .....

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k-in-trade. The CBDT appreciated the impossibility of the assessee being able to invest the amount in specified assets within six months from the date of transfer. This interpretation of the CBDT supports the assessee s claim that where the consideration is received much after the date of transfer and it is not possible to invest the same within 6 months of the date of transfer, the period of 6 months must be reckoned from the date of receipt of consideration. Keeping in consideration the above .....

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make the investment in the specified bonds and vehemently and wrongly disallowed the exemption without considering the merits of the case. 14. The CIT-A considering the submissions of the assessee confirmed the order of the AO by observing that the assessee could have arrange funds from some other sources to make the investment within prescribed time. Relevant portion is reproduced herein below: 4.2 It is undisputed, that the appellant has not made any investment in eligible bonds within the pr .....

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nsideration. In the appellant s case, on the other hand, no investment has been made at all. It is true that cash out of sale receipt has been seized by the department but the appellant could have arranged funds from some other source to make investment within the prescribed time, if he wanted to avail the exemption. The provisions of section 54EC are quite categorical and no exemption can be granted in absence of actual investment. Considering this, the disallowance of exemption of ₹ 40 l .....

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n the account of government and it should be treated as investments made in specified bonds required to be invested under the scheme of National Highway Authority. The ld. AR argued that the finding of the AO is incorrect and the finding of the CIT-A is perverse and referred to para 4.2 of the CIT-A s order. The ld.AR also argued that the CIT-A was wrong in observing that the assessee could have arranged from other sources to make investment within prescribed time and as such finding of the CIT- .....

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being in the Government account and it should be treated invested in bonds, which is not tenable at all in the facts and circumstances of the present case. He relied on the orders of the AO & CIT-A. He urged to dismiss grounds 2 and 3 raised by the assessee. 17. Heard rival submissions and perused the material on record. It is an admitted fact that the amount in question to the extent of ₹ 49,00,000/- was seized by the IT Authority. The facts in respect of sale of land, search & se .....

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mption of ₹ 40,00,000/- for want of proper evidence showing the capital gains were invested in specified bonds i.e provided by the Government of India, National Highway Authority Bonds (NHAI). The deduction u/s. 54EC of the Act is permissible if the amount representing the long term capital gain is invested in specified bonds within prescribed time. In the present case, the assessee had admitted that he had not made any investments in specified bonds notified u/s. 54EC of the Act. The asse .....

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