2013 (12) TMI 592 - AT - Income Tax

Exemption u/s 54 The assessee had invested sum of Rs. 23,61,550/- out of withdrawals from its bank account jointly held and utilized the same for acquisition of the residential house in Sector 11, Panchkula - The balance sum of Rs. 20 lakhs was out of the housing loan raised by the assessee from LIC Housing Finance - Held that - The assessee having parked its funds in FDRs with banks, of sale proceeds of the old assets and utilized housing loan for the purchase of new asset, does not disentitle the assessee from the benefit of exemption u/s 54 - Decided in favour of assessee.

Summary

Issues:
- Disallowance of exemption under section 54 of the Income Tax Act
- Addition of cash deposits in the bank account

Disallowance of Exemption under Section 54:
The case involved appeals against the order of CIT(A) regarding the disallowance of exemption under section 54 of the Income Tax Act. The assessees, a husband and wife, sold their share in a property and claimed exemption under section 54 by investing in a new property. The Assessing Officer noted discrepancies in the investments made by the assessees and restricted the exemption accordingly. The CIT(A) upheld this decision. The assessees contended that the provisions of section 54 should be construed liberally. The tribunal analyzed the investments made by the assessees and found that they had invested the required amount in the new property, entitling them to the exemption. The tribunal held that the assessees were entitled to the benefit of exemption under section 54 and deleted the addition made by the authorities.

Addition of Cash Deposits:
The Assessing Officer also added a sum of cash deposits in the bank account to the income of the assessees. The assessees argued that the investments made were in compliance with the provisions of section 54, and therefore, the addition was unjustified. The tribunal, after considering the source of investments and the utilization of funds for the purchase of the new property, held that the assessees had met the requirements of section 54. Consequently, the tribunal found no merit in the addition of cash deposits made by the Assessing Officer and deleted the same. The tribunal allowed the appeals partly, dismissing certain grounds raised by the assessees which were not pressed during the hearing.