2018 (6) TMI 1740 - AT - Income Tax

Disallowance of the deduction u/s 54 against the Long Term Capital Gain - Whether assessee has acquired the new asset being residential house before the due date of filing the return of income U/s 139(4) and acquiring the new asset within the stipulated period of 2 year /3 years from the date of transfer of the existing asset? - as argued appellant had invested the Long Term Capital Gain in purchase of residential house property on 23.09.2012 (within the stipulated time of 3 years from the date of transfer. - HELD THAT - There is no dispute that the provisions of section 54 (2) of the Act stipulates the time period for making the investment in acquiring the new asset. In case the assessee has not made the investment in the new asset before the date of filing of return of income then the amount of capital gains is required to be deposited in capital gain accounts scheme on the date of filing of return U/s 139 and not later than due date of filing of return U/s 139(1). Sub-section (2) stipulates that in case the assessee has not acquired new asset before the date of the filing of return of income U/s 139 of the Act then the amount of capital gain is required to be deposited in the capital gain account scheme before the date of filing of return and latest by the due date of filing of return U/s 139(1). Following the decision of Hon ble Punjab and Haryana High Court in case of CIT vs. Ms. Jagrity Agarwal 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT , decision of Hon ble Gauhati High Court in case of CIT vs. Rajesh Kumar Jalan 2006 (8) TMI 126 - GAUHATI HIGH COURT as well as the decision of the Coordinate Bench of this Tribunal in case of Virendra Singh vs. ITO 2016 (3) TMI 823 - ITAT JAIPUR , we hold that when the assessee has acquired the new asset being residential house before the due date of filing the return of income U/s 139(4) of the Act then the substantial condition of acquiring the new asset within the stipulated period of 2 year /3 years from the date of transfer of the existing asset has been complied with and accordingly, the assessee is eligible for deduction U/s 54 - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Whether the assessee is eligible for deduction under Section 54 of the Income Tax Act despite not depositing the capital gains in a capital gain account scheme before the due date of filing the return under Section 139(1).

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 54:
The primary issue revolves around the assessee's eligibility for deduction under Section 54 of the Income Tax Act. The assessee claimed a deduction of ?12,69,950 on account of investment made in the purchase of a new residential house property. The Assessing Officer (AO) denied this claim on the grounds that the assessee did not invest the capital gain in the new asset before the due date of filing the return under Section 139(1) nor deposited the amount in the capital gain scheme account.

2. Assessee's Argument:
The assessee argued that he purchased the new house on 23.09.2012, within the stipulated time period of three years from the date of transfer (14.03.2012) and within the time period for filing the return under Section 139(4). The assessee contended that the non-deposit of the amount in the capital gain accounts scheme should not disqualify him from the benefit under Section 54.

3. Revenue's Argument:
The Revenue, represented by the Departmental Representative (DR), maintained that as per Section 54(2), the time period for acquiring the new asset or depositing the capital gain in the scheme is specifically up to the due date of filing the return under Section 139(1). The DR argued that the language of Section 54(2) is clear and unambiguous, and extending the time period beyond what is stipulated in the provision is not warranted.

4. Tribunal's Analysis:
The Tribunal examined the provisions of Section 54(2), which stipulates that if the capital gains are not utilized for the purchase or construction of the new asset before the date of filing the return, the amount must be deposited in a capital gain account scheme by the due date under Section 139(1). However, the Tribunal also considered judicial precedents, including decisions from the Punjab & Haryana High Court and the Gauhati High Court, which interpreted that the due date for filing the return under Section 139(1) could be extended to the date under Section 139(4).

5. Judicial Precedents:
- CIT vs. Ms. Jagrity Agarwal (Punjab & Haryana High Court): The court held that Section 139(4) is a proviso to Section 139(1), and the extended period under Section 139(4) should be considered for the purpose of Section 54.
- CIT vs. Rajesh Kumar Jalan (Gauhati High Court): The court held that Section 139 includes all sub-sections, and thus, the extended period under Section 139(4) is applicable for the purpose of availing benefits under Section 54.

6. Tribunal's Conclusion:
Following the judicial precedents, the Tribunal concluded that if the assessee has acquired the new asset before the due date of filing the return under Section 139(4), the substantial condition of acquiring the new asset within the stipulated period is met. Therefore, the assessee is eligible for the deduction under Section 54. The Tribunal allowed the appeal and deleted the addition made by the AO.

Outcome:
The appeal of the assessee was allowed, and the order pronounced in the open court on 20/06/2018 confirmed the eligibility for deduction under Section 54 based on the extended period under Section 139(4).