2017 (8) TMI 23 - AT - Income Tax

Liability for capital gain tax - sale of land - capital asset in terms of section 2(14)(iii) - distance of the land from municipal boundary - Held that - It is notable that the assessee itself vide its reply furnished the computation of capital gains and investments in purchase of various properties and in reconstruction of residential house so as to claim exemption u/s. 54B and 54F of the Act, which itself alludes that the property sold by the assessee was nothing else but a capital asset. On this premise only, there is sharp contradiction between the initial claim of land being beyond 8 kms from Municipal limit and the claim of exemption u/s. 54B and 54F on long term capital gain. Moreover, the certificates obtained by the AO in remand proceedings with respect to the impugned land of assessee unequivocally speak against the assessee and the same have not been rebutted by the assessee. Accordingly, the conclusion of capital asset sold by assessee, as observed by the ld. Authorities below, deserves to be sustained. Whether the deduction u/s. 54B and 54F claimed by the assessee is available with reference to the capital gain invested in purchase of agriculture land subsequent to the due date of filing of return of income - Held that - There is no ambiguity in the relevant provisions of the Act that the assessee was legally obliged to appropriate the amount towards purchase of new asset before due date of filing the return, in absence of which the assessee would not be entitled to claim exemption under the provisions of the Act. The appellant has claimed to have invested ₹ 1,07,21,900/- in purchase of agricultural land on 15.11.2007 and on 22.04.2008, i.e., after the due date of filing the return of income without keeping the same deposited in Capital Gain Account. Therefore, the ld. Authorities below are justified in disallowing the exemption on the investment made beyond the due date of filing the return as the said amount was not appropriated by depositing the same in the capital gain accounts scheme as per provisions of the Act. Similarly, as per provisions of section 54F(1) of the Act, the case of construction of a house, deduction available with reference to the amount invested in 3 years subsequent to the date of sale of the asset. In the instant case, since the amount claimed to be invested in the reconstruction of the house was prior to one year from the date of sale, deduction u/s. 54F of the Act was not available to the assessee, as no amount was claimed to have been invested in reconstruction of house subsequent to the date of sale before the Assessing Officer. - Decided against assessee.

Summary

Issues:
1. Refusal of full exemption under section 2(14) of the IT Act.
2. Disallowance of exemption under sections 54B and 54F.
3. Rejection of exemption claimed under section 54F for house construction.

Issue 1: Refusal of full exemption under section 2(14) of the IT Act:
The appellant appealed against the AO's refusal to allow full exemption under section 2(14) of the IT Act, despite providing a certificate from the Tehsildar certifying the land distance beyond 8 K.M. The AO and CIT(A) rejected the certificate and made a total addition to the income, which the appellant contested. The AO considered the land as a capital asset based on its proximity to the municipal boundary, leading to capital gain tax liability.

Issue 2: Disallowance of exemption under sections 54B and 54F:
The appellant invested in land purchases to claim deductions under sections 54B and 54F. The AO accepted the exemption for investments made before the due date of filing the return but disallowed the remaining investment made after the due date. Similarly, the claimed exemption under section 54F for house reconstruction was disallowed as the investment was made before the stipulated time frame.

Issue 3: Rejection of exemption claimed under section 54F for house construction:
The appellant's claim for exemption under section 54F for house construction was rejected as the investment was made before the required time frame, and no amount was invested post-sale as per the provisions. The CIT(A) affirmed the AO's decision based on legal interpretations and precedents, leading to the dismissal of the appellant's appeal by the Tribunal.

The Tribunal upheld the decisions of the lower authorities, emphasizing the importance of adhering to the statutory timelines and requirements for claiming exemptions under the IT Act. The appellant's failure to meet the specified conditions for exemptions led to the dismissal of the appeal.