2017 (12) TMI 1656 - AT - Income Tax

Exemption u/s 54 - non adherence to mandate of Sec.54F(4) - entire amount of capital gain was not utilized for the purchase of residential flat till the time of filing of return u/s 139(1) - Held that - It is an undisputed fact that assessee has earned long term capital gains on sale of flat which was sold on 30.03.2009 and the entire amount of capital gain is at ₹ 1,26,41,650/- was not utilized for the purchase of residential flat till the time of filing of return u/s 139(1) i.e., upto 29.07.2009. The new flat was purchased by the assessee on 26.04.2010 i.e., after one year from the date of transfer of original flat. It is also an undisputed fact that the capital gain earned on sale of flat was not deposited in the specified bank account till the time of purchase of new flat. On the issue of deposit of unutilized capital gains in specified bank account, we find that in the case of Humayun Suleman Merchant (2016 (9) TMI 70 - BOMBAY HIGH COURT) has held that the mandate of Sec.54F(4) of the Act is clear that the amount which has not been utilized either in purchase / construction of house before filing return of income has to be deposited in the account duly notified by Central Government for claiming exemption. We are therefore of the view that in the present case, AO was justified in denying the claim of deduction u/s 54 of the Act. It is a settled law that the decisions of High Courts are binding on the Sub-ordinate Courts, Authorities and the Tribunals situated within its jurisdictional territory. - Decided against assessee.

Summary

Issues:
- Controversy over allowing exemption u/s 54 of the Income Tax Act.
- Interpretation of the provisions of Sec. 54 regarding the timeline for investment and deposit of capital gains.
- Applicability of the decision in Humayun Suleman Merchant Vs. CCIT by the Bombay High Court on the present case.

Analysis:
1. The appeal by the Revenue challenged the order of the Commissioner of Income Tax (A) for the assessment year 2009-10. The dispute primarily revolved around the exemption u/s 54 of the Income Tax Act, as highlighted in the grounds raised by the Revenue.

2. The Assessing Officer (AO) observed that the assessee had sold a property and claimed exemption u/s 54 by investing in a residential property after the stipulated timeline. The AO contended that the assessee failed to deposit the unutilized capital gains in the specified account before the due date of filing the return of income u/s 139(1) of the Act, thus denying the deduction u/s 54.

3. The Commissioner of Income Tax (Appeals) had granted relief to the assessee based on decisions of other High Courts. However, the Revenue argued that the Bombay High Court's decision in Humayun Suleman Merchant case was applicable, favoring the Revenue's stance.

4. The ITAT Pune, after considering the arguments, upheld the AO's decision based on the Bombay High Court's ruling in Humayun Suleman Merchant case. The Tribunal emphasized the binding nature of High Court decisions on subordinate authorities within its jurisdiction, supporting the denial of the deduction u/s 54 in the present case.

5. As the assessee failed to comply with the provisions of Sec. 54 regarding the timeline for investment and deposit of capital gains, the ITAT Pune set aside the order of the CIT(A) and upheld the AO's decision, allowing the grounds raised by the Revenue.

6. The judgment concluded by allowing the appeal of the Revenue, emphasizing the importance of adhering to statutory provisions and judicial precedents in tax matters. The decision was pronounced on 20th December 2017.