2013 (11) TMI 167 - AT - Income Tax

Deduction u/s 54(2) Due Date of Filing Return u/s 139(1) - Belated filing of return Return Whether the CIT(A) erred in directing the Assessing Officer to allow claim of deduction u/s 54 of the Act even though the assessee had not invested the entire capital gain within the due date of filing of return of income u/s 139(1) of the Act as mentioned in section 54 of the Act - Held that - The amount of the capital gain utilised for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, means the date as prescribed not only u/s.139(1) but also u/s .139(4) of the Act - Thus, in the instant case, as the assessee invested (paid) the entire amount before filing the return of income (which may be u/s 139(4) of the Act), the assessee was eligible for deduction u/s .54 of the Act - The assessee was eligible for deduction u/s 54 of the Act - The Assessing Officer was directed to compute the taxable long term capital gains by allowing deduction but restricted to the amount of long term capital gains u/s 54 of the Act. Following CIT v. Ms. Jagriti Aggarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT and Mrs. Esther Christopher Mascarenhas v. ITO 2010 (12) TMI 217 - ITAT, MUMBAI - due date for furnishing return of income as per section 139( 1) was subject to extended period provided under sub-section (4) of section 139 and, if a person had not furnished return of previous year within time allowed under sub-section (1), assessee could file return under sub-section (4) before expiry of one year from end of relevant assessment year - section 54 deduction could not be denied to assessee on this count. The date of filing the return u/s.139 of the Act has wide scope - The return can be filed u/s.139(1) or u/s.139(4) of the Act - Both the returns i.e. either filed u/s.139(1) or u/s.139(4) of the Act were legally valid and accepted returns - There was no difference between these two returns (except for charging interest u/s 234B and allowing certain deductions or carrying forward of losses) Decided against Revenue.

Summary

Issues Involved:
1. Whether the CIT(A) erred in directing the Assessing Officer to allow the claim of deduction u/s 54 even though the assessee had not invested the entire capital gain within the due date for filing the return of income u/s 139(1) of the IT Act.

Detailed Analysis:

1. CIT(A)'s Direction to Allow Deduction u/s 54:
The primary issue in this appeal is whether the CIT(A) was correct in directing the Assessing Officer to allow the deduction under section 54 of the Income Tax Act, 1961, despite the assessee not investing the entire capital gain within the due date for filing the return of income under section 139(1).

The Revenue's argument was that the assessee had only utilized Rs. 46,92,810/- out of the total capital gains of Rs. 86,92,810/- before the due date of filing the return of income under section 139(1), and the balance of Rs. 40 lakhs was invested after this due date. The Assessing Officer disallowed the deduction for the Rs. 40 lakhs as it was not deposited in the specified schemes before the due date.

2. CIT(A)'s Reliance on Judicial Pronouncements:
The CIT(A) allowed the deduction by relying on the decisions of the Hon'ble Punjab & Haryana High Court in the case of CIT vs Ms. Jagriti Aggarwal [2011] 339 ITR 610 (P&H) and the Mumbai ITAT in Mrs. Esther Christopher Mascarenhas vs ITO [2011] (9 taxmann.com 99). These decisions held that the term "due date" for the purpose of section 54 includes the extended date for filing the return under section 139(4).

3. Legal Provisions and Interpretation:
Section 54(2) specifies that the amount not utilized for purchasing or constructing a new asset before the date of furnishing the return of income under section 139 should be deposited in specified modes before the due date under section 139(1). However, the CIT(A) interpreted that the date of filing the return under section 139 includes both section 139(1) and section 139(4), and therefore, the investment made before the actual filing date under section 139(4) is valid for deduction.

4. Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, noting that the CIT(A) correctly followed the judicial precedents which interpreted the "due date" for section 54 purposes to include the extended date under section 139(4). The Tribunal found no specific error in the CIT(A)'s order and dismissed the Revenue's appeal, confirming that the assessee is eligible for the deduction of Rs. 40 lakhs under section 54.

Conclusion:
The appeal of the Revenue was dismissed, and the CIT(A)'s order allowing the deduction under section 54 was upheld. The Tribunal confirmed that the term "due date" for the purpose of section 54 includes the extended date for filing the return under section 139(4), and the investment made before this date is eligible for deduction.