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2016 (9) TMI 70 - HC - Income TaxEligibility of exemption u/s 54F(4)- Held that - The return of income is admittedly filed on 4th November, 1996. In terms of Section 54F(4) of the Act as interpreted by the Gauhati High Court in Rajesh Kumar Jalan (2006 (8) TMI 126 - GAUHATI High Court ) the amounts subject to capital gain on sale of the capital asset for purpose of exemption, has to be utilized before the date of filing of return of income. In this case 4th November, 1996 is the date of filing the return of Income. It is not disputed that on 4th November, 1996 when the return of income was filed, the entire amount which was subject to capital gain tax had not been utilized for the purpose of construction of new house nor were the unutilized amounts deposited in the notified Bank Accounts in terms of Section 54F(4) of the Act before filing the return of income. It is also to be noted that in line with the interpretation of Gauhati High Court on Section 54F(4) of the Act, the Assessing Officer had taken into account all amounts utilized for construction of a house before filing the return of income on 4th November, 1996 for extending the benefit of exemption under Section 54F of the Act. Therefore, in the present facts, the decision of the Gauhati High Court in Rajesh Kumar Jalan (supra) would not apply so as to hold that the appellant had complied with the Section 54F(4) of the Act. - Decided against assessee
Issues Involved:
1. Applicability of Section 54F(4) of the Income Tax Act, 1961. 2. Computation of deduction under Section 54F of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Applicability of Section 54F(4) of the Income Tax Act, 1961: - The appellant did not make specific submissions regarding the applicability of Section 54F(4). Both parties agreed that Section 54F(4) applies to the facts of the case, with the only issue being its appropriate interpretation. - The court affirmed the applicability of Section 54F(4) to the present facts, ruling in favor of the respondent-revenue and against the appellant-assessee. 2. Computation of Deduction under Section 54F of the Income Tax Act, 1961: - Facts: The appellant sold a plot of land for ?85,33,250 on 29th April 1995 and entered into an agreement to purchase a flat for ?69,60,000 on 16th July 1996. Before the due date for filing the return (31st October 1996), the appellant paid ?20,00,000 in installments. The return was filed on 4th November 1996, and the Assessing Officer allowed a proportionate exemption of ?31.55 lakhs out of ?35 lakhs paid till the filing of the return. The remaining balance was taxed under 'Capital Gains' due to non-deposit in a specified bank account as per Section 54F(4). - Appellant's Arguments: - The issue is covered by previous court decisions and CBDT Circulars, which support a liberal interpretation of Section 54F(4). - The term "appropriation" should be interpreted to mean setting apart funds for the purchase, even if not paid, thus extending the benefit of Section 54F. - Alternatively, the appellant argued that the entire amount was paid before the last date for filing the return, satisfying Section 54F(4). - Respondent's Arguments: - The appellant did not utilize the entire net consideration for purchasing the flat nor deposited the unutilized amount in a specified bank account, thus not satisfying Section 54F(4). - Previous decisions and Circulars cited by the appellant do not apply as they were not in the context of Section 54F(4). - The term "appropriation" applies only to cases where the flat was purchased before the capital asset's sale. - Court's Analysis: - Section 54F(4) mandates depositing unutilized amounts in a specified bank account before the due date for filing the return under Section 139(1). The appellant did not comply with this requirement. - Previous court decisions and CBDT Circulars cited by the appellant do not alter the statutory mandate of Section 54F(4). - The Karnataka High Court's decision in K. Ramchandra Rao was not followed as it was rendered sub-silentio and did not address the specific requirement of depositing unutilized amounts. - The Gauhati High Court's decision in Rajesh Kumar Jalan was distinguished as the appellant did not utilize the entire amount before filing the return on 4th November 1996. - The court emphasized strict interpretation of fiscal statutes, rejecting the appellant's plea for a liberal/beneficial construction. - Conclusion: The court ruled that the appellant did not comply with Section 54F(4) as the unutilized amount was not deposited in a specified bank account before the due date. Thus, the Tribunal's decision was upheld, and the appeal was dismissed. Judgment: - The appeal was dismissed, and both substantial questions of law were answered in favor of the respondent-revenue and against the appellant-assessee. No order as to costs.
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