S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim s. 54F relief (Sardarmal Kothari 302 ITR 286 (Mad) followed)

Jurisdiction under Section 263 can be exercised whenever it is found that the order of assessment was erroneous and prejudicial to the interest of the Revenue. Not holding such inquiry as is normal and not applying mind to relevant material would make the assessment ‘erroneous’ warranting exercise of revisional jurisdiction. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being ‘erroneous’. Non application of mind and omission to follow natural justice is in same category. Daga Entrade 327 ITR 467 (Gau) lays down the correct law and is not in conflict with Rajendra Singh 1979 STC 10 (Gau)

In Allied Motors 224 ITR 677 & Alom Extrusions 319 ITR 306, the Supreme Court held that the amendments to the aforesaid provision (s. 43B) have retrospective application. Also, in R.B. Jodha Mal Kuthiala 82 ITR 570 (SC), the Supreme Court held that a provision which was inserted the remedy to make a provision workable requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence the appeal is dismissed.

S. 36(2)(i) provides that a deduction on account of a bad debt can be allowed only where such debt or part thereof has been taken into account in computing the income of the assessee. The debt comprised of the value of the shares transacted and the brokerage payable by the client. The brokerage as well as the value of the shares constituted a part of the debt due to the assessee since both arose out of the same transaction. The fact that the liability to pay brokerage arose at a point in time anterior to the liability to pay the value of the shares transacted makes no material difference to the position. As the brokerage from the transaction of the purchase of shares had been taxed in the hands of the assessee as business income, the debt or part thereof has been taken into account in computing the income of the assessee and the requirements of s. 36(1)(vii) r.w.s. 36(2) were satisfied. (Issue regarding the value of the shares which remain in the hands of the assessee which has to be adjusted against the amount receivable from the client left open) (CIT vs. T. Veerabhadra Rao 155 ITR 152 (SC) CIT vs. Bonanza Portfolio Ltd 320 ITR 178 (Del) followed)

Though paragraph 11 of Instruction No. 3/2011 provides that the revised tax limits will apply only to fresh appeals, the same has to be held to be applicable to pending appeals as well because (i) the Department has not kept in mind the object with which such Instructions have been issued from time to time; (ii) the object of s. 268A which empowers the CBDT to issue such instructions & under the National Litigation Policy, the Government has to be an “efficient & responsible” litigant and not a “compulsive” litigant and appeals should not be pursued in low-tax matters, (iii) a beneficial circular has to be applied retrospectively (iv) extending the benefit of the Instruction to pending matters will be only in the nature of a one-time settlement akin to the KVSS & VDIS, (v) by experience it is seen that tax is levied by defeating Parliament’s intention to grant incentives to trade and industry & where the Tribunal has come to the rescue of the assessees, appeals are filed mechanically & compulsively with the approach of “let the Court decide” & to “save their skin”; (vi) there would be an anomaly in confining the Instruction to fresh appeals because if the Tribunal has decided a case expeditiously, such matters will be denied the benefit of the bar on filing appeals while if there is no disposal by the Tribunal owing to pendency etc, the benefit accrues to the assessee. The benefit to which the assessee is entitled cannot depend on the date of the decision over which neither the assessee nor revenue has any control; (vii) the Instruction would be discriminatory, if held to be prospective only. It can be saved from the vice of discrimination by holding it as retrospective.