2017 (10) TMI 1481 - AT - Income Tax

Denial of exemption u/s.54B - investment beyond the period of due date for filing return of income as specified u/s.139(1) but within the date specified u/s. 139(4) - HELD THAT - The Hon'ble Punjab Haryana High Court in another case CIT Vs. Jagtar Singh Chawla 2013 (4) TMI 499 - PUNJAB AND HARYANA HIGH COURT following the ratio laid down in the case of Rajesh Kumar Jalan 2006 (8) TMI 126 - GAUHATI HIGH COURT allowed assessee s claim of exemption u/s. 54F where the assessee paid substantial amount of sale consideration for residential house within extended period of filing return of income u/s. 139(4) of the Act. The provision of sub section (2) of Section 54, provision of sub section (2) of section 54B and provisions of sub section (4) of Section 54F are perimeteria . The judgments on which the ld. AR has placed reliance are rendered with reference to claim of exemption u/s. 54/54F. Since provisions of sub section (2) of section 54 and 54B and (4) of section 54F are identical, therefore, ratio laid down by the various Hon'ble High Courts would apply to provisions of section 54B (2) as well. Thus, we find merit in ground No. 1 raised by the assessee in appeal and the same is accepted. The assessee is eligible to claim exemption u/s. 54B in respect of investment made towards purchase of agriculture land within the time limit for filing return of income specified under section 139(4). Levy of interest u/s. 234B and 234C - HELD THAT - Since, ground no. 1 raised by the assessee has been allowed and it has been contended that interest u/s. 234B and 234C has been levied in respect of disallowance of exemption u/s. 54B, we deem it appropriate to remit the issue back to the file of Assessing Officer to grant consequential relief to the assessee, in line with the relief granted to the assessee by us.

Summary

Issues Involved:

1. Denial of exemption under Section 54B of the Income Tax Act, 1961.
2. Levy of interest under Sections 234B and 234C of the Income Tax Act, 1961.

Detailed Analysis:

1. Denial of Exemption under Section 54B of the Income Tax Act, 1961:

The primary issue raised by the assessee was the denial of exemption under Section 54B of the Income Tax Act, 1961, for the investment of ? 71,56,000/- made beyond the due date for filing the return of income as specified under Section 139(1) but within the date specified under Section 139(4) of the Act. The assessee had sold three parcels of agricultural land for a total consideration of ? 5.88 Crore, earning a long-term capital gain of ? 5.70 Crore. The assessee invested ? 2.66 Crore towards purchasing new agricultural land and claimed exemption under Section 54B. However, the Assessing Officer disallowed the benefit of exemption for the investment of ? 71,56,000/- made in August 2012, after the due date for filing the return of income under Section 139(1), which was 30.09.2011.

The Commissioner of Income Tax (Appeals) upheld the findings of the Assessing Officer, leading the assessee to file a second appeal before the Tribunal. The assessee contended that the investment was made before the expiry of the time prescribed under Section 139(4) and cited various judicial precedents, including CIT Vs. Rajesh Kumar Jalan (286 ITR 274) and Humayun Suleman Merchant Vs. CCIT (387 ITR 421), to support the claim that the requirement of Section 54 is fulfilled if the investment is made within the time limit prescribed for filing the return under Section 139(4).

The Department, represented by Dr. Vivek Aggarwal, argued that the provisions of Section 54B(2) are clear and that the benefit of exemption is permissible only if the new asset is purchased before the due date for furnishing the return of income under Section 139(1). The Department relied on the decisions of the Bombay High Court in Humayun Suleman Merchant Vs. CCIT and the Kerala High Court in Dr. Xavier J. Pulikkal Vs. DCIT.

The Tribunal considered the submissions and noted that the Hon'ble Gauhati High Court in CIT Vs. Rajesh Kumar Jalan and the Hon'ble Punjab & Haryana High Court in CIT Vs. Ms. Jagriti Aggarwal (339 ITR 610) had held that the requirement of investing the unutilized portion of the capital gain is fulfilled if the investment is made within the time limit prescribed under Section 139(4). The Tribunal observed that the provisions of Section 54B(2) are similar to those of Section 54 and Section 54F(4), and thus, the judicial precedents apply to Section 54B as well. Consequently, the Tribunal found merit in the assessee's claim and allowed the exemption under Section 54B for the investment made within the time limit specified under Section 139(4).

2. Levy of Interest under Sections 234B and 234C of the Income Tax Act, 1961:

The second issue involved the levy of interest under Sections 234B and 234C. The Tribunal noted that the levy of interest under these sections is mandatory and consequential. Since the primary issue of exemption under Section 54B was decided in favor of the assessee, the Tribunal remitted the issue of interest back to the Assessing Officer to grant consequential relief in line with the relief granted on the primary issue.

Conclusion:

The appeal of the assessee was partly allowed, with the Tribunal granting exemption under Section 54B for the investment made within the extended time limit under Section 139(4) and remitting the issue of interest under Sections 234B and 234C back to the Assessing Officer for consequential relief. The order was pronounced on 30th October 2017.