M VIJAYA KUMAR AND SMT M VIJAYALAKSHMI Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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K.K. Gupta, Accountant Member -
(1.) THESE two appeals by the husband and wife team are agitating the action of the learned Commissioner of Income Tax (Appeals) in confirming the computation of long term capital gains as framed by the Assessing Officer and also agitate the action of the learned CIT(A) in confirming the disallowance of interest incurred as cost of acquisition of shares for the purpose of computing short term capital gains. Common grounds have been raised by both the assessees are being disposed off by this common order for the sake of convenience.
(2.) The brief facts as brought on record are that Sri Vijayakumar and his spouse Smt. Vijayalakshmi have invested in shares and derived income from capital gain on sale of shares. During the financial year Sri Vijayakumar and Smt. Vijayalakshmi earned long term capital gain of Rs. 21.52 lakh and Rs. 21.62 lakh and short term capital gain of Rs. 9.18 lakh and claimed expenses of Rs. 65,651 and Rs. 1.10 lakh respectively. Out of long term capital gains of shares, they bought a property, land and building in joint name for Rs. 51.49 lakhs, Sri Vijayakumar contributed Rs. 17.75 lakh and Smt. Vijayalakshmi Rs. 36.61 lakhs. They demolished the building and started constructing a new building investing Rs. 2.85 lakh and Rs. 18.45 lakh towards construction, respectively. According to the Assessing Officer, the claim of deduction Under Section 54 was not acceptable as the deduction allowable was to be restricted to the purchase of a residential house or construction of a residential house and deduction was allowable with reference to the net consideration. It was stated that money derived from long term capital gain has been utilized for purchase of residential house. It was also stated that the assessee invested in purchase of a house property, even though a very old house provision of the act do not provide for age of the building. When the assessee invested long term sale proceeds in a residential property so the application of Section 54F ends and deduction has to be restricted to cost of purchase of residential property. The claim under Section 54F for the amount spent on construction was not accepted by the Assessing Officer. According to the Assessing Officer Section 54F was applicable on net consideration and amount invested on new asset there from.
Regarding short term capital gain, the assessees claimed expenses and interest. As per Section 48(i), deduction of expenditure was allowed only for incurring wholly and exclusively in connection with such transfer. The other expenditure are allowable under the head income from other sources i.e. dividend income. As the dividend income was exempted Sri Vijayakumar had claimed Rs. 54,235 interest paid in acquiring shares which was not allowed. In the case of Smt. Vijayalakshmi Rs. 1.10 lakh each was claimed as expenses and interest on both long term and short term capital gains. As dividend income was exempt, Assessing Officer disallowed Rs. 2.21 lakhs as not connected with transfer of capital asset.
(3.) AGGRIEVED the assessee appealed before the learned CIT(A) who confirmed the action of the Assessing Officer on both the issues.;
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