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2016 (8) TMI 761 - AT - Income TaxDeduction u/s 54F - whether the sales consideration invested in Capital Gain Account within the period allowed u/s 139 (4) should also be considered to be within the period allowed u/s 139(1) of the Act? - Held that - The assessee is entitled for deduction u/s 54F in respect of the sales consideration utilised within the extended time of filing of return of income u/s 139(4) of the Act, for purchase/construction of new residential house and for investment in Capital Gain Account. It appears from the records that the assessee has invested total sum of ₹ 1,50,21,799/- ( i.e. ₹ 43,61,799/- in making payment for the purpose of new residential house and deposit of ₹ 1,06,60,000/-in capital Gain Account ) before filing the return of income u/s 139(4) of the Act, which is more than the sales consideration of ₹ 1,50,00,000/- of original assets and thus the assessee is entitled for deduction u/s 54F of the Act of whole of the Long Term Capital Gain of ₹ 1,43,03,205/- arising from the capital assets transferred during the relevant previous year. Hence the addition of ₹ 1,01,44,025/- made to returned income is deleted. Thus the appeal of the assessee is allowed.
Issues Involved:
1. Restriction of deduction under Section 54F of the Income Tax Act, 1961. 2. Appropriation and utilization of sale consideration for new residential property. 3. Compliance with the due date for filing the return under Section 139(1) and Section 139(4) of the Income Tax Act, 1961. 4. Validity of the claim for cost of improvement. Issue-wise Detailed Analysis: 1. Restriction of Deduction under Section 54F of the Income Tax Act, 1961: The assessee filed an appeal against the order of the CIT(A)-II, Jaipur, which upheld the AO's decision to restrict the deduction under Section 54F to ?41,59,180 against the claimed ?1,43,03,205. The AO observed that the assessee sold a property for ?1.50 crores and claimed a deduction under Section 54F for the purchase of a new property. However, the AO noted that the assessee did not deposit the sale consideration in the capital gain account before the due date for filing the return under Section 139(1). Consequently, the AO restricted the deduction to the amount invested before the due date and disallowed the remaining amount. 2. Appropriation and Utilization of Sale Consideration for New Residential Property: The assessee argued that the entire sale consideration was received through post-dated cheques, which were realized after the due date for filing the return under Section 139(1). The AO allowed a deduction for the amount invested before the due date but disallowed the deduction for the amount deposited in the capital gain account after the due date. The CIT(A) upheld this decision, stating that the due date under Section 139(1) must be adhered to for claiming the deduction. 3. Compliance with the Due Date for Filing the Return under Section 139(1) and Section 139(4): The assessee contended that the due date for filing the return should be considered under Section 139(4), which allows an extended period. The assessee cited several case laws, including CIT vs. Jagriti Agarwal, to support the argument that the due date under Section 139(4) should be considered for claiming the deduction. The Tribunal agreed with this contention, stating that the extended period under Section 139(4) should be considered for the purpose of claiming the deduction under Section 54F. 4. Validity of the Claim for Cost of Improvement: The AO disallowed certain expenses claimed by the assessee for the cost of improvement due to a lack of supporting evidence. The CIT(A) upheld this disallowance. However, the Tribunal did not specifically address this issue in the final decision. Conclusion: The Tribunal concluded that the assessee is entitled to the deduction under Section 54F for the amount deposited in the capital gain account within the extended period allowed under Section 139(4). The Tribunal held that the assessee had invested a total of ?1,50,21,799 (?43,61,799 for the purchase of the new residential house and ?1,06,60,000 in the capital gain account) before filing the return under Section 139(4). Therefore, the assessee is entitled to the full deduction of ?1,43,03,205, and the addition of ?1,01,44,025 made by the AO is deleted. The appeal of the assessee is allowed. Order Pronounced: The appeal of the assessee is allowed, and the order was pronounced in the open court on 04/07/2016.
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