2011 (11) TMI 97 - AT - Income Tax

Deduction under 54F - Assessee sold plot - invested the net consideration in purchase of flat - Held that - When entire amount of net consideration was not utilized by the assessee for purchase or construction of new house before furnishing the date of return of income but the same had been deposited before the due date of furnishing the return in Capital Gains Account Scheme and proof of such deposit was also enclosed and thus the amount so deposited is also eligible for exemption and this deposit is in accordance with Section 54F. Further assessee was not having option to purchase or construct house as he owned one residential flat on the date of transfer of asset and had acquired new asset on 19th February cannot in any way limit the scope of exemption under 54F - The amount deposited by the assessee in Capital Gains Scheme is also a deemed cost of new asset. In case of non-utilization of such deposit the amount will be taxable as per proviso to sub-section (4) of Section 54F. - Decided against the revenue.

Summary

Issues:
- Exemption under Section 54F for depositing surplus unappropriated fund into Capital Gain Scheme.
- Eligibility for exemption under Section 54F when the assessee already owns two residential properties.

Analysis:
1. The appeal was filed by the revenue against the CIT (A) order for Assessment Year 2005-06. The revenue contended that the assessee was not entitled to exemption under Section 54F for depositing surplus unappropriated funds into the Capital Gain Scheme. The Assessing Officer restricted the claim based on the interpretation of Section 54F, considering the assessee had already purchased a residential flat. The CIT (A) allowed the claim of the assessee, leading to the revenue's appeal.

2. The Assessing Officer calculated an addition of Rs. 20,45,004 after reducing the claim of exemptions made by the assessee. The CIT (A) relied on statutory language to grant relief to the assessee. The revenue, represented by the learned DR, argued that the assessee was not eligible for further exemption under Section 54F after purchasing a flat. Conversely, the learned AR supported the CIT (A)'s decision based on the language of Section 54F.

3. Section 54F was thoroughly examined to determine the assessee's eligibility for exemption. Sub-section (4) of Section 54F defines the deemed cost of new assets and the consequences of non-utilization of deposited amounts. The deemed cost of the new asset includes the amount utilized for purchase or construction along with the amount deposited as per the requirements. The judgment clarified that the deposited amount in the Capital Gains Scheme is considered a deemed cost of the new asset, and non-utilization would result in taxation as per the proviso.

4. The Tribunal found no infirmity in the CIT (A) order, upholding the necessary relief granted to the assessee. The appeal filed by the revenue was dismissed, affirming the decision based on the interpretation of Section 54F.

5. In conclusion, the Tribunal's detailed analysis of Section 54F and the specific circumstances of the case led to the dismissal of the revenue's appeal. The judgment highlighted the importance of complying with the provisions of Section 54F for claiming exemptions related to the sale of assets and the purchase or construction of new residential properties.