2014 (7) TMI 297 - AT - Income Tax

Income from LTCG Claim of exemption u/s 54E and 54F of the Act Held that - In assessee s own case Tribunal has clearly directed the AO to examine the fact whether the amount paid is for acquisition of flat or not as relying upon and to decide the issue in the light of the order of the Tribunal in the case of JAGAN NATH SINGH LODHA. Versus INCOME TAX OFFICER 2004 (6) TMI 309 - ITAT JODHPUR - the facts have been properly verified by CIT(A) on further appeal filed by the assessee against the consequential order passed by the AO - CIT(A) observed that the amount initially advanced of ₹ 27,50,000 towards purchase of flat situated at Lakdikapool, Hyderabad, was returned back to the assessee i.e., an amount of ₹ 27 lakhs was returned and ₹ 50,000 was forfeited towards cancellation charges and the assessee ultimately constructed her house within the period of 3 years from the transfer of original asset and hence had complied with the provisions of section 54F of the Act - the amounts which were ultimately invested within the stipulated time, is to be exempted from tax although the assessee failed to technically deposit the same in the capital gain account - the intention of the Act as well as the intention of the assessee are to be considered in a right perspective thus, the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
1. Disallowance of claim u/s. 54F for long term capital gains.
2. Non-compliance with Capital Gain Deposit Scheme requirements.
3. Eligibility for deduction u/s. 54F based on construction completion timeline.
4. Verification of amount paid for acquisition of flat.

Analysis:
1. The appeal by the Department contested the disallowance of the claim u/s. 54F for long term capital gains by the Assessing Officer (AO). The AO had disallowed the claim citing incomplete construction work on the property and failure to deposit the capital gain amount in the Capital Gain Deposit Scheme. The CIT(A) upheld the AO's decision, leading to the appeal before the ITAT.

2. The ITAT, in its initial order, partially allowed the appeal for statistical purposes. It emphasized taking a liberal view of the provisions of section 54F for the assessment year under consideration. The ITAT directed the AO to examine whether the amount paid by the assessee was for the acquisition of a flat and to decide based on relevant case law.

3. The subsequent proceedings involved the AO denying the deduction u/s. 54F based on the ITAT's direction. The CIT(A) analyzed the evidence regarding the amount paid towards the flat's purchase and subsequent construction of a house by the assessee. The CIT(A) concluded that the assessee's intention was to purchase a flat initially, but due to circumstances, the transaction did not materialize. The CIT(A) held that the assessee ultimately complied with the provisions of section 54F by constructing a house within the stipulated time frame.

4. The CIT(A) relied on a decision by the ITAT Jodhpur Bench in a similar case to support the assessee's entitlement to deduction u/s. 54F. The CIT(A) directed the AO to allow the deduction, which led to the Department appealing the decision. The ITAT, after hearing both parties, upheld the CIT(A)'s order, emphasizing the importance of considering the intention of the assessee and compliance with the statutory provisions. The ITAT dismissed the grounds taken by the Revenue and upheld the order of the CIT(A).

In conclusion, the ITAT dismissed the appeal by the Department, affirming the assessee's entitlement to deduction u/s. 54F based on compliance with the statutory provisions and the intention behind the transactions. The judgment highlighted the significance of examining the facts of each case and applying the relevant legal principles to determine the eligibility for tax benefits.