2018 (5) TMI 2119 - AT - Income Tax

Exemption u/s 54 - AO found that the assessee had not deposited the sale proceeds of the properties sold in the Capital Gains Accounts Scheme (CGAS) - assessee submitted that the main intention of law is to grant exemption of the capital gains arising out of sale of a house property to the extent of amount invested in the new residential property - HELD THAT - As relying on Rajesh Kumar Jalan 2006 (8) TMI 126 - GAUHATI HIGH COURT and Kishore H. Galaiya 2012 (9) TMI 40 - ITAT, MUMBAI Under sub-section (4) of section 139 of the Income-tax Act any person who has not furnished a return within the time allowed to him under sub-section (1) of section 142 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 year whichever is earlier - since the assessee had invested the whole amount which was within the extended period of filing the return of income u/s 139(4) therefore, the assessee was entitled to claim exemption u/s 54(F). The assessee had thus utilized the amount which was more than capital gain earned towards construction of new residential house within extended period u/s 139 (4) and therefore the there was no default in not depositing the amount under the capital gain account scheme. Therefore, the claim made by assessee cannot be denied - Decided in favour of assessee.

Summary

Issues Involved:
- Interpretation of section 54(2) of the Income Tax Act regarding the requirement for depositing capital gains in a notified capital gain account scheme.
- Determining the applicability of the due date for filing the return of income under section 139(1) or section 139(4) for claiming exemption under section 54.
- Assessing the validity of the assessee's claim for exemption under section 54 based on the timing of investment in a new property and compliance with the provisions of the Act.

Issue 1: Interpretation of section 54(2) regarding capital gain deposit:
The appeal filed by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the assessee's claim for exemption under section 54 of the Income Tax Act for the assessment year 2012-13. The Revenue contended that the assessee failed to deposit the capital gains in the Capital Gains Accounts Scheme (CGAS) within the stipulated time frame as required by section 54(2). The Assessing Officer disallowed the claim of the assessee amounting to ?1,46,20,735 under section 54. However, the assessee argued that the investment in the new residential property was made within the extended due date under section 139(4), even though the CGAS deposit was not completed on time.

Issue 2: Due date for filing return under section 139(1) or 139(4):
The dispute centered on whether the due date for filing the return of income under section 139(1) or section 139(4) should be considered for determining the eligibility of the assessee for exemption under section 54. The Revenue insisted that the deposit in CGAS must be made by the due date applicable for filing the return under section 139(1). In contrast, the assessee argued that the investment in the new property was made within the extended due date under section 139(4), allowing for the exemption under section 54.

Issue 3: Validity of the assessee's claim for exemption under section 54:
The Commissioner of Income Tax (Appeals) upheld the assessee's claim for exemption under section 54, emphasizing that the investment in the new property was made before the belated return was filed under section 139(4). The Commissioner relied on various judicial precedents and interpretations to support the decision, including the requirement that the due date for filing the return of income under section 139(1) was subject to the extended period provided under section 139(4). The Tribunal, following the decisions in similar cases, affirmed the order of the Commissioner and dismissed the appeal filed by the Revenue, thereby upholding the assessee's claim for exemption under section 54.

This detailed analysis of the legal judgment highlights the key issues involved, the arguments presented by both parties, and the final decision rendered by the Tribunal based on the interpretation of relevant provisions and precedents in tax law.