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2012 (12) TMI 1054 - AT - Income TaxEntitled to deduction u/s 54F - capital gain earned on sale of a property - Held that - Time limit for the purpose of making investment in Capital Gains Account scheme may also be taken as the time limit prescribed u/s 139(4) of the Act. The assessment year under consideration being assessment year 2005-06 the limitation would expire on 31.3.2007. The compliance of the provisions of sec. 54F (4) should be examined accordingly. Both the tax authorities have stated that the agreement for construction was signed on 04.07.2007. The assessee has filed a copy of the Construction agreement before us and the same is found to have been executed on 22-03-2006. Thus there is an apparent contradiction between the observations made by the tax authorities and the document produced before us. In clause (1) of the agreement filed before us (page 3) it is stated that the developers agree to deliver the Schedule B Apartment (flat bearing no. B-1- 2086) by the end of August 2006 (subject to clause (13)). If this fact is true it is confusing as to how the tax authorities have mentioned the date of construction agreement as 04.7.2007. Both the parties did not offer any explanation about this contradiction. The assessee did not furnish a copy of conveyance deed dated 04.07.2007 also before us and hence we did not have the benefit of examining the same. This factual aspect requires verification even though it appears that it may not have any effect on the eligibility of deduction u/s 54F in view of the view expressed by us in the preceding paragraph. However the Tribunal being a fact finding authority cannot allow the confusion to continue as it is. The facts prevailing in the instant case require examination at the end of AO. Accordingly we set aside the order of Ld CIT(A) and restore the matter to the file of the AO with the direction to examine the matter afresh and decide the issue in the light of discussions made supra. The assessee is free to file any other document/explanation in support of its claim u/s 54F of the Act.
Issues Involved:
1. Eligibility for deduction under Section 54F of the Income Tax Act. 2. Compliance with conditions stipulated in Section 54F, including the timing of investment and deposit in the Capital Gains Account Scheme. Issue-Wise Detailed Analysis: 1. Eligibility for Deduction under Section 54F: The primary issue in this appeal is whether the assessee is entitled to a deduction under Section 54F of the Income Tax Act from the capital gain earned on the sale of a property. The assessee sold a piece of land on 15.04.2004 and claimed a deduction under Section 54F on the capital gain, asserting that the entire sale consideration was invested in the purchase/construction of a house property. The conditions under Section 54F require that the property be purchased within one year before or two years after the date of transfer or be constructed within three years from the date of transfer. The Assessing Officer (AO) found that the assessee did not meet these conditions because: (a) The conveyance of the undivided share of land and the construction agreement were executed beyond three years from the sale date. (b) The assessee did not deposit the sale proceeds in a "Capital Gains Account Scheme" as required by sub-section (4) of Section 54F. 2. Compliance with Conditions Stipulated in Section 54F: Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee contended that booking a flat should be considered as "construction" and cited circulars and case laws to support this view. The assessee argued that the entire sale consideration was invested within the permitted time, and the provisions of the Transfer of Property Act and Registration Act should not apply to determine ownership. The assessee also argued that the extended time limit under Section 139(4) should be considered for making investments in the Capital Gains Account Scheme. The CIT(A) accepted that purchasing a flat from a builder falls under "construction" and thus the time limit for investment is three years. However, the CIT(A) did not accept that the new house was constructed within three years, noting that there was no document of transfer or evidence of possession within the prescribed period. Consequently, the CIT(A) upheld the AO's decision, stating that the assessee failed to meet both the conditions of Section 54F and did not deposit the sale proceeds in the Capital Gains Account Scheme in time. Appellate Tribunal's Findings: The Tribunal examined whether the time limit for making deposits under the Capital Gains Account Scheme should be the one prescribed under sub-section (1) or sub-section (4) of Section 139. The Tribunal referred to the case of CIT Vs. Ms. Jagriti Aggarwal, where it was held that the time limit under sub-section (4) of Section 139 could also be considered. Thus, the Tribunal concluded that the time limit for making investments could extend to 31.03.2007. Regarding the eligibility for deduction under Section 54F, the Tribunal noted that the assessee had made substantial payments to the builder within the three-year period. The Tribunal also referred to various case laws and a CBDT circular, which indicated that possession is a formality and should not be a determining factor for eligibility under Section 54F. However, the Tribunal identified contradictions in the factual aspects, such as the date of the construction agreement and the lack of examination of the account statement by the tax authorities. Therefore, the Tribunal deemed it necessary to verify these facts and directed the AO to re-examine the matter, allowing the assessee to provide additional documents or explanations. Conclusion: The Tribunal set aside the order of the CIT(A) and remanded the case to the AO for fresh examination, directing the AO to consider the discussions made and allow the assessee to support its claim under Section 54F. The appeal was treated as allowed for statistical purposes.
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