TMI Blog2018 (11) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... on of LTCG u/s 54F - use of ground floor as commercial purpose and other three floor for residential purpose - The question that arises for our consideration is as to whether the CIT(A) has rightly apportioned assessee’s deduction to 25% is to 75%; floor-wise or not - Held that:- Our instant adjudication supports the CIT(A)’s action to this effect as he has rightly proceeded on an assumption that section 54F is a deduction provision to the liberally construed. This is not the Revenue’s case that the 3 floors of the building in question are not used for residential purposes. We therefore affirm the CIT(A)’s findings under challenge restricting the assessee’s deduction claim to the extent residential portion of the building only by treating the same to be “a residential house” as per the true legislative intent u/s 54F - Decided against revenue. - ITA No.1420/Kol/2016 - - - Dated:- 27-7-2018 - Shri J.Sudhakar Reddy, Accountant Member And Shri S.S.Godara, Judicial Member For the Appellant : Shri Saurabh Kumar, Addl. CIT-SR-DR For the Respondent : Shri Miraj D Shah, AR ORDER PER S.S.Godara, Judicial Member:- This Revenue s appeal for assessment year 2012-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly deducted as per law (f) The payments to the agents were made by account payee cheque the gents whose commissions the AO disallowed as not for the purpose of business were as follows: Sl.No. Name of commission agents PAN Gross commission 1 Pradip Jiswal ACXPJ 1983G 5,00,000 2 Ragav Trust Rahul Trust AAATR 3121P AAATR 4724Q 5,00,000 5,00,000 4 5 Urmila Devi Jiswal Reema Jaiswal AGHPJ 0842Q AJNPJ 7607C 2,30,000 2,20,000 6 7 Kiran Jaiswal Ashok Kr Jaiswal AKYPJ 5714C ACWPJ 3917D 1,25,000 3,00,000 8 9 Jayant Jaiswal Seema Jaiswal AKYPJ 5737F AILPJ 3705A 1,25,000 3,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,60,000 4,50,000 Refused having utilized your services 4 Rajiv Bhatia 8,50,170.00 4,25,000 Not referred by anyone 5 Suresh Kasi 5,95,833.34 3,50,000 Not referred by anyone, specifically denies knowing the person to whom commissions has been paid 6 Deepti Verma 7,33,480.00 3,50,000 Refused having utilished your services 7 Vinod Zutshi 6,49,425.00 3,00,000 Not referred by anyone 8 Nagendra ED 2,86,500.00 85,000 Not referred by anyone 9 Ankhi Das 10,18,155.00 5,50,000 Refused having utilized your services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assignment and take a new job. Only if this information is available then the assessee is able to move further. This information is available only with the persons who has direct knowledge that a particular candidate is interested in leaving his/her existing job or such information is available indirectly i.e. a close associate of the proposed candidate reveals such information about the interest of the candidate to change his job. This is the most important and vital information in the business of the assessee. This role of sharing information about the candidate being available for change of job is the key in this business. The assessee had claimed to have made payments for these services to the said agents or persons giving leads. Unless the person to whom the payment was made was not examined no adverse inferences could be drawn. The AO in this case failed to make any inquires with the commission gents. Thus the AO failed to make any inquiries with the commission agents. Thus the AO failed to understand the entire business process and the AO also failed to correctly investigate the matter. U9nelss the agents were not examined by the AO it was not possible for him to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO failed to carry out any relevant enquiry in this respect. I find that in the preceding year i.e. assessment year, the assessee was engaged in the same business and also taken services from the parties and paid commission to them and no disallowance was made by the AO. I also find that in AY 2013-2014 the assessee case was assessed u/s.143(B) of the IT Act 1961 by the same office and the commission expenses paid were duly accepted in scrutiny assessment and no disallowance were made. I therefore hold that the commission expenses were incurred for the business of the assessee. The Hon'ble Supreme Court has held in the case of Sasoon David Co. Pvt. Ltd. vs. CIT, 118 ITR 261 that it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. It was also held by the Bombay High Court in CIT vs Sigma Paints Ltd 188 ITR 6 that payment of commission is an allowable expenditure if the same is incurred wholly and exclusively for the purpose of business carried on by the assessee. Hon'ble Gujarat High Court in the case of Swastik Textiles Co. Pvt. Ltd. 150 ITR 55 upheld the contention of the assessee about allowability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the corresponding TDS credit or not is respective tax records. Coupled with this, we find that the Assessing Officer has also not carried out the necessary verification on assessee s ultimate customers/clients who have appointed the highly qualified personnel through the assessee. The Revenue further fails to rebut the fact that similar commission payments have already been accepted as allowable in latter assessment years (supra). We therefore take into account all these facts and circumstances to uphold the CIT(A) s findings deleting the impugned disallowance under challenge. The Revenue s instant former substantive ground fails accordingly. 4. This leaves us with Revenue s latter grievance seeking to revive Assessing Officer s action disallowing u/s 54F deduction claimed of ₹56,52,242/- as reversed to the extent of ₹42,39,181/- in CIT(A) s order under challenged as follows:- 4.6 Ground No.3 4: Both these grounds are interrelated and hence they are taken up for disposal together. This ground is against the rejection of the claim u/s. 54F of the Income Tax Act for ₹ 56,52,242/ The brief facts of the case is that the assessee sold a land at Hasur Sar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d lift room etc and the cost for the second floor was to be estimated at 15% lower than the average cost. The AO thus held that even if the deduction was to be allowed the deduction should be ₹ 14,98,481 instead of ₹ 56,52,242. 4.9 I have perused the assessment order and considered the written submission and oral submissions made by the Authorised Representative of the appellant. I find that the building was sanctioned as residential and commercial building however on physical verification of the building by the ITO t Bangalore no commercial activities were found to be conducted on the said building. The building comprised of ground plus three stories and also had common service area including basement, stilt floor, terrace and lift. The area of the each floor was 154.32 sq/. mts. And the total area of the building was 715.36 sq. mts. 4.10 I find that the provisions of Section 54F of the IT Act 1961 is a benefit giving section and the same should be constructed liberally. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Apex Court in the case of Bajaj Tempo Ltd. 196 ITR 188 (SC). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992 Supp (1) SCC 21] to which reference has been made earlier.) 22. In G.P. Ceramics (P) Ltd. v. CTT (2009) 2 SCC 90], this Court has held: (SCC pp. 101-102, para 29) 29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries [(2005) 1 SCC 657] ( SCC para 26 ); ITSCO Ltd. v. State of Jharkhand [(2005) 4 SCC 272] (SCC para 42- 45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108]; Novopan India Ltd v. CCE Customs [1994 Supp (3) SCC 606]; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala [(2007) 2 SCC 725] and Reiz Electrocontrols (P) Ltd. v. CCE. [(2006) 6 SCC 213] 4.11. In this case the deduction u/s. 54F it is required that the investment should be made in a residential house. In this case it is seen that the appellant had made an investment in the residential house. The said house was sanctioned to be both residential and commercial. Therefore in my opinion the appellant satisfied the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set followed by re-investment of the consequential capital gains is new asset which happens to be both residential as well as commercial. The Revenue s endeavour is to disallow the entire deduction component qua the re-investment of assessee s capital gains made in the new building comprising of four floors. We make it clear that taxpayer is very fair in declaring the ground floor of his new house as used for commercial purpose as against the remaining three upper floors taken as a residential unit. The question that arises for our consideration is as to whether the CIT(A) has rightly apportioned assessee s deduction to 25% is to 75%; floor-wise or not. Our instant adjudication supports the CIT(A) s action to this effect as he has rightly proceeded on an assumption that section 54F is a deduction provision to the liberally construed. This is not the Revenue s case that the 3 floors of the building in question are not used for residential purposes. We therefore affirm the CIT(A) s findings under challenge restricting the assessee s deduction claim to the extent residential portion of the building only by treating the same to be a residential house as per the true legislative i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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