2014 (11) TMI 1077 - AT - Income Tax

Claim for exemption u/s. 54 - time limit for making investment - Held that - For claim of deduction under section 54 of the Act, the assessee has to make investment within the due date of filing the return u/s. 139(1) of the I.T. Act which the assessee has failed to do so. Thus, the assessee is not entitled for deduction u/s. 54 of the I.T. Act. - Decided against assessee.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer by rejecting the claim for exemption under section 54.
2. Non-deposit of unutilized capital gains in a Capital Gain Account Scheme before the due date for filing the return of income under section 139(1).

Detailed Analysis:

Issue 1: Deletion of Addition Made by the Assessing Officer by Rejecting the Claim for Exemption under Section 54

The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 15,63,166/- made by the Assessing Officer. The Assessing Officer had allowed only Rs. 1,00,000/- as exempt under section 54, as this amount was paid towards the property purchased before the due date for filing the return of income under section 139(1). The balance amount of Rs. 15,63,166/- was brought to tax as capital gain because the unutilized portion of capital gain was not deposited in a capital gain deposit account before the due date for filing the return of income under section 139(1).

Before the CIT(A), the assessee argued that section 54(2) does not stipulate utilization before the due date for filing the return specified under section 139(1) but simply says within the due date for filing the return of income, which includes section 139(4). The CIT(A) followed various decisions from High Courts and ITATs, concluding that the due date for filing the return should be considered as per section 139(4), which extends the due date for filing the return of income.

Issue 2: Non-deposit of Unutilized Capital Gains in a Capital Gain Account Scheme

The Ld. DR argued that the assessee paid only an advance amount of Rs. 1,00,000/- before the due date for filing the return of income under section 139(1), and the balance consideration was paid by cheque dated 31/11/2008. According to the Ld. DR, section 54(2) requires that the unutilized portion of capital gain be deposited in a capital gain deposit account before the due date for filing the return of income under section 139(1). The Ld. DR relied on the order of the co-ordinate Bench of the Tribunal in the case of ITO vs. Smt. Rosamma Korah.

The Tribunal, after hearing both parties and perusing the record, referred to its previous decision in the case of K.K. Venugopal vs. Dy.CIT, where it was held that the due date mentioned in section 54(2) should be the due date for filing the return of income under section 139(1), not section 139(4). The Tribunal also referred to the Supreme Court judgment in Prakash Nath Khanna & Ors vs. CIT, which clarified that "due date" means the due date as prescribed in section 139(1). The Tribunal concluded that the assessee is not entitled to exemption under section 54 as the investment was not made within the due date for filing the return under section 139(1).

Conclusion:

The Tribunal allowed the appeal filed by the Revenue, stating that to claim deduction under section 54, the assessee must make the investment within the due date of filing the return under section 139(1), which the assessee failed to do. Therefore, the assessee is not entitled to deduction under section 54 of the Income Tax Act.