2015 (8) TMI 1019 - AT - Income Tax

Disallowance of exemption u/s. 54 - assessee did not produce any purchase agreement with regard to investment in the residential flat at Thane - Held that - Section 54 of the Act speaks about investment of capital gains arising from transfer of a long term capital asset within a specified time. As per s/s. 2 to Sec.54 if such proceeds / capital gains, if not invested /utilized for purchase of new asset, within specific time then such proceeds will have to be deposited in a specified bank account and has to be utilized in any scheme which the Central Govt. notifies and proof of such shall be accompanied with the return. There is no requirement in the Act that necessarily the assessee has to produce the agreement more specifically when the letter of allotment along with proof of payment/investment was duly produced before the concerned authorities. See Smt. Jyothi K. Mehta case 2011 (1) TMI 551 - KARNATAKA HIGH COURT To our mind to attract Sec.54 and Sec.54EC of the Act what is material is the investment of sale consideration in acquiring the new property or investment of the amount in bonds set out in sec.54EC is to be seen and once the sale consideration is invested in any of these manner the assessee would be entitled to the benefit conferred under this provision - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of exemption u/s. 54 of the Act
2. Levy of interest u/s. 234B of the Act

Disallowance of exemption u/s. 54 of the Act:
The appellant challenged the disallowance of exemption u/s. 54 of the Act amounting to Rs. 23,77,683 by the First Appellate authority. The appellant contended that the sale proceeds were invested in purchasing a residential flat at Thane, justifying the claim for exemption u/s. 54. The appellant submitted that the allotment letter and proof of payment were provided at the assessment and First Appellate Stage. The Departmental Representative argued that the appellant failed to produce a purchase agreement for the investment, leading to the denial of the claimed exemption. The Tribunal noted that while the assessing officer denied the exemption due to the absence of a purchase agreement, the allotment letter and payment evidence were indeed submitted. The Tribunal referenced various judicial precedents to emphasize that the investment of sale proceeds in acquiring a new property or in specified bonds is crucial for claiming benefits under Sec. 54. Considering the facts, legal provisions, and case laws cited, the Tribunal allowed the appellant's ground for exemption u/s. 54.

Levy of interest u/s. 234B of the Act:
The next issue involved the levy of interest u/s. 234B of the Act, which the appellant strongly contested. However, since the Tribunal ruled in favor of the appellant regarding the exemption u/s. 54, it deemed the levy of interest u/s. 234B as consequential. Consequently, the Tribunal allowed the appeal of the assessee, leading to the pronouncement of the order in the open court in the presence of representatives from both sides on the specified date.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai addressed the issues of disallowance of exemption u/s. 54 of the Act and the levy of interest u/s. 234B. The detailed analysis highlighted the arguments presented by both parties, the Tribunal's assessment based on legal provisions and precedents, and the final decision in favor of the appellant on the grounds of exemption u/s. 54, leading to the consequential nature of the interest levy under u/s. 234B.