2018 (1) TMI 182 - AT - Income Tax

Allowing the deduction u/s 54F - The sale consideration was received much after due date of filing of return of income which makes impossible for assessee to make the investments on/before due date of filing of return. - Held that - On the issue of impossibility of performance to invest the amount in specified assets within 6 months from date of transfer, the CBDT appreciated such situation and has clarified that the period of 6 months for making investments in specified assets has to be reckoned from the date of the sale of such stock-in-trade when the right to collect sale consideration in such cases arose, which was much after the date of transfer as contemplated for the purpose of taxation. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deduction under Section 54F of the Income Tax Act, 1961.
2. Interpretation of the due date for depositing capital gains for claiming exemption under Section 54F.
3. Applicability of judicial precedents and CBDT circulars.

Issue-wise Detailed Analysis:

1. Deduction under Section 54F of the Income Tax Act, 1961:
The assessee sold land and declared a long-term capital gain, claiming exemptions under Sections 54EC and 54F. The Assessing Officer (AO) allowed the deduction under Section 54EC but restricted the deduction under Section 54F to the amount deposited in the capital gain deposit scheme before the due date of filing the return under Section 139(1). The assessee argued that the additional deposit made before the extended due date under Section 139(4) should also be considered for the deduction.

2. Interpretation of the due date for depositing capital gains for claiming exemption under Section 54F:
The assessee contended that the term "due date" in Section 54F should include the extended period under Section 139(4). The assessee cited various judicial precedents, including the Gauhati High Court's decision in CIT vs. Rajesh Kumar Jalan and the Karnataka High Court's decision in Fathima Bai vs. ITO, which interpreted Section 54(2) (similar to Section 54F(4)) to include the extended due date under Section 139(4). The ITAT Jaipur Bench agreed with this interpretation, noting that the unutilized capital gains should be deposited before the extended due date under Section 139(4).

3. Applicability of judicial precedents and CBDT circulars:
The assessee relied on several judicial precedents and CBDT Circular No. 791, which supported the interpretation that the extended due date under Section 139(4) should be considered for depositing unutilized capital gains. The ITAT Jaipur Bench referred to these precedents and circulars, emphasizing that a literal interpretation leading to an absurd result should be avoided. The tribunal cited the Supreme Court's decision in CIT vs. J.H. Gotla, which advocated for an equitable construction of tax statutes to avoid unjust results.

Conclusion:
The ITAT Jaipur Bench allowed the appeal of the assessee, holding that the deposit made before the extended due date under Section 139(4) should be considered for the deduction under Section 54F. The tribunal emphasized that judicial precedents and CBDT circulars supported this interpretation, and a strict literal construction leading to an unjust result should be avoided. The appeal was allowed in favor of the assessee, granting the claimed deduction under Section 54F.