2012 (7) TMI 555 - AT - Income Tax

Disallowance of claim u/s 54F - that appellant did not deposit the sale consideration, on sale of shares, in capital gains account scheme before due date for furnishing return - Held that - Appellant not having filed his return of income for AY 2008-09 within the time allowed u/s 139(1), is eligible to do so till 31-3-2009 which is the extended time u/s Sec.139(4) and accordingly he filed it on 9-1-2009 - the amount utilized by the assessee for purchase of new residential house before 9.1.2009 qualifies for consideration with reference to which deduction u/s 54F(1) is to be computed. Thus, the CIT(A) was not justified in holding that only the amount which was utilized by the assessee before 31.3.2008 only qualifies for deduction - in favour of assessee.

Summary

Issues:
Appeal against CIT(A)'s order disallowing deduction u/s 54F except for a specific amount.

Analysis:
The sole issue in this appeal is the disallowance of deduction u/s 54F by CIT(A) beyond a specific amount due to non-deposit of sale consideration in the capital gains account scheme before the return due date. The assessee claimed deduction for investing capital gains in a residential flat but failed to meet the due date requirement. The Assessing Officer disallowed the deduction as the sale deed was executed after the return due date, with only partial payment made before. CIT(A) allowed deduction for the amount paid before the due date, leading to the current appeal.

The key contention was the interpretation of Sec. 54F to encourage house ownership. The assessee argued for a broader interpretation, citing the investment in a residential house as the only owned property. The dispute centered on the amount eligible for deduction - the CIT(A) allowed only the amount paid before the due date, while the assessee claimed for a higher amount paid before the extended return filing date.

The Tribunal analyzed the provisions of Sec. 54F(4) which require the amount utilized for the new asset before the return filing date to be considered for deduction. The Tribunal found that the assessee filed the return before the extended due date, making the amount invested before that date eligible for deduction. The Tribunal set aside the lower authorities' orders and directed the AO to verify the amount invested before the return filing date for allowing the deduction under Sec. 54F(1).

Moreover, the Tribunal distinguished the cited Kerala High Court decision, emphasizing the utilization of the investment amount for the new residential property before the return filing date. The Tribunal's decision aligned with the P&H High Court's ruling that section 139 includes section 139(4), supporting the assessee's claim for deduction based on the amount invested before the return filing date.

In conclusion, the Tribunal allowed the assessee's appeal, directing the AO to reevaluate the deduction eligibility based on the amount invested before the return filing date, ensuring a fair opportunity for the assessee in the reassessment process.