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2016 (12) TMI 559 - AT - Income TaxDisallowance of deduction claimed under Section 54 - utilization of capital gain - Held that - When the assessee advanced a sum of ₹ 83,00,000/- as on 31.07.2011, before the due date for filing of return of income, for a purchase of residential flat to M/s Total Environment Building Systems Pvt. Ltd., this would amount to utilization of capital gain. In the case before us, the admitted capital gain is ₹ 64,84,686/- and what was advanced by the assessee for purchasing the flat is ₹ 83,00,000/-. In view of the above, this Tribunal is of the considered opinion that the assessee, in fact, utilised the capital gain for purchasing the flat before 31.07.2011. Hence, the assessee is entitled for exemption under Section 54 of the Act. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee by placing reliance on the judgment of Apex Court in Fibre Boards (P) Ltd. (2015 (8) TMI 482 - SUPREME COURT ).- Decided in favour of assessee
Issues:
Disallowance of deduction claimed under Section 54 of the Income-tax Act, 1961. Analysis: The Revenue appealed against the Commissioner of Income Tax (Appeals) decision regarding the disallowance of a deduction claimed by the assessee under Section 54 of the Act. The dispute revolved around the assessee's sale of a residential flat and the subsequent claim for exemption under Section 54. The Revenue argued that the assessee failed to deposit the capital gain in the Capital Gains Account as required by law. The assessee contended that the advance payment made to the builder for purchasing a flat constituted utilization of the capital gain. The main question was whether this advance payment qualified as utilization under Section 54(2) of the Act. The Tribunal examined the provisions of Section 54 of the Act, emphasizing the requirement for appropriation or utilization of the capital gain for the purchase or construction of a residential house. Citing the judgment in Fibre Boards (P) Ltd. v. CIT, the Tribunal concluded that the advance payment for the flat constituted utilization of the capital gain. The Tribunal noted that Section 54(2) mandated the deposit of unutilized capital gain in the Capital Gains Account before the due date for filing the return of income. In this case, the assessee had made an advance payment before the due date, satisfying the requirement for utilization. The Tribunal upheld the CIT(Appeals) decision and dismissed the Revenue's appeal, confirming the assessee's entitlement to exemption under Section 54 of the Act. In conclusion, the Tribunal's detailed analysis focused on the interpretation of Section 54 of the Act and the applicability of the advance payment towards the purchase of a residential flat as utilization of the capital gain. By aligning with the judgment in Fibre Boards (P) Ltd. v. CIT, the Tribunal affirmed the assessee's eligibility for exemption under Section 54. The decision highlighted the importance of timely utilization or deposit of capital gains as stipulated by the Act, ultimately upholding the assessee's claim in this case.
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