2015 (10) TMI 1426 - AT - Income Tax

Rejection of claim of deduction u/s. 54F - assessee failed to deposit the net consideration in the capital gain account scheme - Held that - The undisputed fact is that the assessee has purchased a new house property before filing the return u/s. 139(4) of the Act. It is also an undisputed fact that this transaction has not been disputed by the AO. As from a reading of Sec. 54F(4), it is clear that only Sec. 139 have been mentioned therein in the context that the unutilized portion of the capital gains on the sale of property used for residence should be deposited before the date of furnishing the return of income u/s. 139 of the Act. At this point, it can be said that Sec. 139 cannot mean only Sec. 139(1) but it means all sub-sections of Sec. 139. Under Sub-Sec. 4 of Sec. 139, any person who has not furnished a return within the time allowed to him, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. There is no dispute that the return of the assessee was filed u/s. 139(4) of the Act. There is also no dispute that the assessee has otherwise complied with the provisions of Sec. 54F of the Act i.e. invested the entire consideration in the purchase of house property. The Revenue authorities have taken a hyper technical issue which in our considered opinion cannot be accepted as it would deny the benefit of a beneficial provision of the assessee. We, therefore, set aside the order of the Ld. CIT(A) and direct the AO to allow the deduction u/s. 54F of the Act to the assessee. - Decided in favour of assessee.

Summary

Issues:
Claim of deduction u/s. 54 of the Act regarding the sale of property for purchase of new house.

Analysis:
The appellant contested the rejection of the claim of deduction u/s. 54 by both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO questioned the utilization of the sale proceeds for the purchase of a new house, specifically focusing on the deposit of the capital gain in the capital gains scheme account. The appellant explained that the sale proceeds were invested in deposits with a bank and subsequently used for the new property. The AO, however, cited Sec. 54F(4) of the Act and concluded that the conditions were not met, leading to the denial of the deduction. The appellant then appealed to the CIT(A) but faced another setback.

The appellant's representative argued before the Appellate Tribunal that there was a debate on the timing of depositing the amount, emphasizing that the return was filed under Sec. 139(4) of the Act. The contention was that the entire sale consideration was utilized for the new property before filing the return, making the appellant eligible for the deduction u/s. 54F. On the contrary, the Departmental Representative supported the lower authorities' decisions, stressing the mandatory compliance with statutory provisions.

After considering the submissions, the Tribunal noted that the appellant indeed purchased the new property before filing the return u/s. 139(4) and that this transaction was not disputed by the AO. The crux of the dispute revolved around the failure to deposit the net consideration in the capital gain account scheme before the due date of filing the return. The Tribunal interpreted Sec. 54F(4) to include all subsections of Sec. 139, not just Sec. 139(1), allowing flexibility in filing returns under different subsections. It deemed the Revenue authorities' stance hyper-technical and ruled in favor of the appellant, directing the AO to grant the deduction u/s. 54F.

In conclusion, the Tribunal allowed the appeal, overturning the decisions of the lower authorities and granting the appellant the deduction u/s. 54F of the Act.