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TMI Blog2019 (6) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... )/Pn/ 44/2013-14) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds : "1. On the facts and circumstances of the case and provisions of law the learned CIT(Appeals) erred in not allowing the claim of deduction u/s 54F of Rs. 1,42,16,833/- in respect of the investment made in construction of new residential bungalow/deposit in Capital Gains Accounts Scheme. As the appellant has complied with the prescribed conditions the deduction claimed u/s 54F may kindly be allowed. 2. The learned CIT(Appeals) erred in facts and circumstances of the case and in law in disallowing Rs. 245063 out of depreciation by holding that the amount of Rs. 701250 incurred on civil work foundation of the windmill installed was in the nature of building and hence eligible for depreciation the rate of @10% applicable to buildings (5% for the year under appeal as windmill is used for less than 180 days) instead of the rate of 80% claimed( 40% for the year under appeal as windmill is used for less than 180 days) as the civil works are a part of the windmill. It be held that the civil costs of Rs. 701250 incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than one house property on the date of transfer of any capital asset, he cannot claim deduction u/s 54F on the capital gain on the transfer of capital asset. The assessee was therefore asked to justify its claim of deduction. Assessee made submissions which were not found acceptable to the AO. AO noted that assessee had four other house properties other than the self-occupied bunglow at Prabhat Road as on the date of transfer. Before AO the submission of the assessee was that the house properties were acquired for investment purpose and the purpose of its acquisition is to sale it and earn income. The contentions of the assessee was not found acceptable to AO. AO also noticed that assessee was not engaged in construction of sale of flats and had not purchased or sold any property other than the properties which were purchased so far and the flats were shown in Investment schedule and not under stock-in-trade in his Balance- Sheet. AO therefore held that the claim of assessee for deduction u/s 54F of the Act to be not acceptable. He accordingly denied the claim of deduction u/s 54F of Rs. 1,42,16,833/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been filed before the Deputy Engineer, Building Construction Department, PMC Divisional Office situated at Ghole Patil Road, Pune intimating that the old building at Prabhat Road was demolished and the plans for new building would be submitted in due course. In addition, the appellant filed a letter dated 10.04.2009 stated to have been issued by Maniyar Enterprises for demolition of old structure, shifting of debris etc. by the said party. Besides, the appellant also filed a copy of possession receipt dated nil wherein it is mentioned that the existing tenant Mr. Ajit Kumar Paradkar has handed over the vacant possession of the bungalow on 01.05.2009. In order to find out the veracity of the letter purported to have been filed before the PMC authorities on 25.05.2009, enquiries were made by the Inspector of this Office with the Building Construction Department of PMC, which revealed that the letter dated 25.05.2009 is not on record of the department concerned of the PMC. It could also be noticed that there was no inward number and date stamp of the PMC on the said letter. Further, the appellant has not furnished any reply or approval of the PMC if any, issued in response to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demolition could not have taken place in May 2009 when there was no permission of the PMC as on that date for demolition of the building. Similarly, the other evidence in the name of Maniyar Enterprises filed by the appellant also does not inspire any confidence as no corroborative evidence like photographs with date and time recorded on the photos taken if any at the time of demolition, details of transportation charges/labour charges paid for demolition and shifting of debris either by the appellant or by Maniyar Enterprises etc. was filed by the appellant. Further, from the property tax details available on the website of PMC, it is noticed that even the property tax in respect of the said property was paid as applicable to residential houses and not for open plots even for the year 2009 and 2010. The relevant extract of property tax details is attached to the order as Annexure-C for ready reference. Thus, in the absence of any corroborative evidence filed by the appellant in support of the demolition of old building in May 2009 and coupled with the fact that the plan submitted in June 2010 for the new building clearly indicates that the old building is 'to be demolis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivalent value on the assets side, which include the said three flats and advances. Thus, some of the individual assets of the appellant were sliced out from the total assets of the appellant for the first time in the F.Y 2008-09 and shown separately as a property division. These assets we're not acquired out of the profits of the said division nor there was any business activity carried on by the said division in the preceding year and in this year. Further, it is to be mentioned here that if the appellant was carrying on business of property development regularly in the last two years as claimed, the sale of original assets i.e. subject lands is also an adventure in the nature of trade and the profits and gains from sale of lands, which was shown under the head 'Capital Gains', have to be offered as business profits of the appellant. But the appellant has not offered the profits from transfer of subject lands as business profits. All these facts clearly demonstrate that the three flats in question were held as individual assets of the appellant and subsequently as an afterthought a property division was created and the three flats were transferred by book entries and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on the date of transfer, he is not eligible for deduction under sec. 54F. 4.4.4 To sum up, the appellant owns more than one residential house as on the date of transfer of the original assets which renders the appellant ineligible for deduction under sec. 54F from capital gains arising from sale of lands during the year. Accordingly, the Assessing Officer is justified on facts and in law in disallowing the deduction of Rs. 1,42,16,833/- claimed by the appellant u/s 54F and the addition made on this ground does not call for any interference and the same is upheld. Ground of appeal No.1 fails." Aggrieved by the order of Ld.CIT(A), assessee is now before us. 4. Before us, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A). He submitted that assessee had purchased a Bunglow at Prabhat Road, Pune in the year 2008. It was submitted that the bunglow that was purchased was in a dilapidated condition and the bunglow was entirely demolished in May 2009. On 25.05.2009 the bunglow was totally demolished and reduced to a open plot and on that day he was holding only one residential self occupied property at Siddhatek Apartments after the demolition of said bunglow. He furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat under Sec.44 of the Maharashtra Regional Town Planning Act (MR & TP) read with Development Control Rules of PMC, a person is required to make an application in writing for permission to demolish the bunglow or to obtain commencement certificate for development work from the authorities. He has noted that no evidence has been filed by the assessee to demonstrate that assessee had received approval from the PMC authorities for demolition prior to 25.05.2009. He has further noted that assessee has produced application that was filed by the assessee only in November 2009 requesting for permission for development of plot and in the building plan submitted before PMC authorities, the existing building, which was claimed to have been demolished in May, 2009 was shown as "to be demolished". He therefore concluded that "to be demolished" proved beyond doubt that the existing bunglow was not demolished till June / July - 2010. He also noticed that the property tax in respect of the said property was paid as applicable for residential house and not for open plot even for the year 2009 and 2010. Ld.CIT(A) therefore did not accept the claim of the assessee that the existing construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to claim of depreciation on the civil foundation work. It is Revenue's case that the rate of depreciation applicable to the foundation cost incurred for installation of windmill is 10%. On the other hand, it is assessee's case that depreciation is allowable at 80% being the rate applicable to windmill. We find that the identical issue has been decided by the Hon'ble Bombay High Court in the case of CIT Vs. Cooper Foundary Pvt. Ltd (supra) in assessee's favour wherein it had upheld the order of Tribunal granting depreciation @ 80% on the foundation cost incurred for installation of windmill. Before us, Revenue has not placed any contrary binding decision in its support. We therefore relying on the aforesaid decision of Hon'ble Bombay High Court hold that on the cost incurred for installation of windmill, the depreciation is to be allowed at the rate which is applicable to windmill. We direct accordingly and thus, the ground of the assessee is allowed. 11. Ground No.3 is with respect to addition on account of deemed rental income. 11.1. During the course of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out, no business activity was carried on by the socalled property division of the appellant during the year and in the earlier year and therefore, it cannot be said that the flats were used by the appellant for the purposes of any business or profession carried on by him or they constitute stock-in-trade of the business of the appellant. Thus, the appellant owned more than one house during the year and the AO is therefore justified in holding that provisions of Sec.23(4)(b) of the IT Act are applicable and then adopting deemed annual letting value for three flats at Rs. 3,60,000/- and for Prabhat Road building at Rs. 1,44,000/-. However, in case of flat at Kingston tower, the claim of the appellant is that as on 31.03.2010, only advance was paid and possession of the flat was not received. However, the appellant has not furnished any evidence like copy of agreement or conveyance deed or possession certificate from the builder concerned to show that possession of the flat was not received as on 31.03.2010. Therefore, I am of the opinion that this is a fit case for issue of directions to the AO for verification on this issue. The AO is accordingly directed to verify the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by assessee for not disallowing any expenses u/s 14A of the Act. He, therefore, following the methodology prescribed under Rule 8D worked out disallowance u/s 14A of the Act at Rs. 1,16,146/- and disallowed it. Ld.CIT(A) upheld the order of AO. Aggrieved by the order of Ld.CIT(A), assessee is now before us. 14.2. Before us, Ld.A.R. submitted that no expenses have been incurred by assessee to earn exempt income and therefore no disallowance u/s 14A of the Act is called for. Ld. D.R. on the other hand, supported the order of lower authorities. 15. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to disallowance u/s 14A of the Act. We find that while upholding the disallowance, Ld.CIT(A) has noted that proper satisfaction was recorded by AO before disallowing expenses. He has further noted that substantial investments were made by the assessee and therefore the contention of the assessee that no expenses have been incurred for earning exempt income cannot be accepted. He has also noted that disallowance has been made for administrative expenses under Rule 8D(2)(iii) of the I.T. Rules. Before us, no fallac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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