2011 (3) TMI 1738 - AT - Income Tax

Summary

Issues involved: Appeal filed by Revenue regarding deduction u/s 54F of Income-tax Act, 1961.

Summary:
1. The Revenue contested the allowance of deduction u/s 54F to the assessee by CIT(Appeals), claiming non-utilization of proceeds before the return filing due date and failure to deposit in 'Capital Gains Account Scheme'.
2. The assessee reported long term capital gain, later enhanced due to re-assessment. Deductions claimed under Sections 54EC and 54F were partially allowed by Assessing Officer. Assessee argued that the investment in NABARD bonds covered the capital gains requirement, hence Section 54F claim was unnecessary. Assessee constructed a residential house within the stipulated time frame but did not deposit unutilized balance in a 'Capital Gains Account Scheme'.
3. CIT(Appeals) acknowledged the assessee's compliance with the intention of Section 54F, emphasizing the purpose of encouraging residential construction. The assessee's deposit in a Savings Bank account was deemed equivalent to a 'Capital Gains Account Scheme' deposit, as funds were used solely for house construction within the specified period.
4. The Revenue challenged CIT(Appeals) decision, arguing that non-compliance with the deposit provision would render Section 54F unworkable, citing a previous Tribunal decision. The assessee cited another Tribunal decision supporting deduction if the ultimate purpose of Section 54F was fulfilled.
5. The Tribunal noted the factual compliance by the assessee in constructing a house within the specified period and utilizing funds solely for construction, despite not depositing in a 'Capital Gains Account Scheme'. The Tribunal differentiated the present case from previous decisions where no utilization or investment occurred before the return filing due date.
6. The Tribunal upheld CIT(Appeals) decision, emphasizing the substantial compliance by the assessee with Section 54F requirements, despite the absence of a specific account deposit. The appeal filed by the Revenue was dismissed on 25th February, 2011.