2016 (1) TMI 1254 - AT - Income Tax

Denial of deduction u/s. 54F - due date of filing of return of income by the assessee u/s. 139(4) or u/s. 139(1) - whether entire amount of capital gains arising out of sale of residential house property invested in acquiring a new residential flat before the due date of filing of return u/s. 139(4) - Held that - The admitted facts are that the assessee sold a residential house property during the FY 2006-07 for a sum of ₹ 50 lacs and purchased an under-construction residential flat in Unitech, Rajarhart, Kolkata by paying booking amount of ₹ 4,19,072/- as application money on 19.08.2006. The assessee earned Long Term Capital Gains on this transaction at ₹ 34,94,896/-. The assessee invested a sum of ₹ 19,35,824/- in purchase of an under-construction residential flat up to 31.07.2007 i.e. the due date of filing of return of income by this assessee. The assessee also invested total sum of ₹ 38,70,276/- in purchase of an under-construction residential flat up to 31.03.2009 i.e. the date of filing of return of income by this assessee u/s 139(4) of the Act. That means the assessee has invested the entire long term capital gain of ₹ 34,94,896/- only up to 31.03.2009 i.e. the due date of filing of return of income by the assessee u/s. 139(4) of the Act and not u/s. 139(1) of the Act. See Fatima Bai Vs. ITO 2008 (10) TMI 563 - KARNATAKA HIGH COURT Assessee having utilized the entire capital gains by purchasing a house property before the extended due date u/s. 139(4) of the Act, the assessee is eligible for exemption u/s. 54 of the Act. - Decided in favour of assessee

Summary

Issues:
- Denial of deduction under section 54F of the Income-tax Act on capital gains invested in a new residential property before the due date of filing the return.

Analysis:
The case involved an appeal by the assessee against the order of the CIT(A) confirming the denial of deduction under section 54F of the Income-tax Act on the entire amount of capital gains invested in acquiring a new residential flat before the due date of filing the return. The assessee had sold a residential house property and invested in an under-construction flat. The Assessing Officer disallowed the deduction on the amount not invested before the due date of filing the return u/s 139(1) of the Act. The key contention was whether the assessee was eligible for the deduction under section 54F for the entire capital gains amount invested before the extended due date u/s 139(4) of the Act.

The Tribunal analyzed the facts and noted that the assessee had invested a substantial amount in the new residential flat before the due date of filing the return. The assessee had also invested the entire long-term capital gain amount before the extended due date u/s 139(4) of the Act. The Tribunal referred to a decision of the Hon'ble Karnataka High Court in a similar case, where it was held that the assessee, despite not filing the return within the extended due date, was eligible for exemption under section 54 of the Act as the capital gains were utilized for purchasing the property before the extended due date u/s 139(4). Drawing parallels with the Karnataka High Court's decision, the Tribunal allowed the claim of the assessee, directing the Assessing Officer accordingly.

Ultimately, the Tribunal allowed the appeal of the assessee, emphasizing that the entire capital gains amount had been invested in the new residential property before the extended due date for filing the return. The decision was based on the interpretation of the law and the precedent set by the Hon'ble Karnataka High Court, ensuring that the assessee was entitled to the deduction under section 54F of the Income-tax Act.