2018 (1) TMI 1000 - HC - Income Tax

Eligibility to deduction u/s 54B and u/s. 54F - assessee has not deposited the net sale consideration in the capital gain account - belated investment - beyond the due date specified u/s 139(1) but within the date specified u/s 139(4) - whether specific provisions of Section 54B(2) and 54F(4) which refers to the due date of Section 139(1) and not Section 139(4) - Held that - Admittedly, while considering the prosecution, the provisions are to be very strictly construed whereas in the case of exemption and other benefits, it is to be construed from the statue very liberally. The contention of Mr. Singhi that under Section 139, investment is to be made before the return is filed otherwise it will render the provision nugatory is to be considered in the light that while considering the case, Karnataka High Court in Fathima Bai 2008 (10) TMI 563 - KARNATAKA HIGH COURT) has considered the provisions and interpreted the same. Even the same is accepted by the Punjab and Haryana High Court and Gauhati High Court which has taken the view contrary to Kerala High Court decision. In that view of the matter, three High Courts have taken the view and the tribunal has followed the Karnataka High Court which has followed the earlier Gauhati judgment which has been independently supported by the Punjab Harayana High Court. - Decided in favour of the assessee

Issues Involved:
1. Whether the tribunal was justified in allowing the deduction under Section 54B and Section 54F of the Income Tax Act, 1961, by considering the due date under Section 139(4) instead of Section 139(1).

Detailed Analysis:

1. Tribunal's Justification for Allowing Deductions:
The appellant challenged the tribunal's decision, which allowed the assessee's appeal and modified the orders of the CIT(A) and AO. The central question of law was whether the tribunal was justified in allowing deductions of ?1,60,00,000 under Section 54B and ?52,00,000 under Section 54F, considering the due date under Section 139(4) rather than Section 139(1) of the Income Tax Act.

2. Assessment and Disallowance by AO:
The assessee's case underwent scrutiny, and the assessment was finalized under Section 143(3) on 20.03.2014. The AO disallowed the deductions under Sections 54B and 54F, citing the assessee's failure to deposit the net sale consideration in the capital gain account by the due date of filing the return under Section 139(1).

3. Provisions of Section 54B(2) and Section 54F(4):
Both sections stipulate that the unutilized capital gain must be deposited in the capital gain account before the due date for filing the return, as specified under Section 139(1). The AO found that the assessee did not deposit the amounts of ?1,60,00,000 and ?52,00,000 in the capital gain account before the due date under Section 139(1), thus disallowing the deductions.

4. CIT(A)'s Observations:
The CIT(A) upheld the AO's decision, emphasizing that the due date for filing the return, as per Section 139, refers to Section 139(1) and not Section 139(4). The CIT(A) also dismissed the assessee's contention regarding the expenditure on agricultural land and the construction of a small room, stating it did not qualify for deduction under Section 54F.

5. Tribunal's Decision:
The tribunal allowed the assessee's appeal, relying on various judicial precedents, including the case of Nandlal Sharma vs. ITO, which interpreted Section 139 to include the extended period under Section 139(4). The tribunal concluded that the assessee's investment in the new asset before the extended due date under Section 139(4) qualified for the deductions under Sections 54B and 54F.

6. Judicial Precedents and Interpretation:
The tribunal's decision was supported by several High Court judgments, including those from the Punjab & Haryana High Court and Karnataka High Court, which held that the due date under Section 139 includes the extended period under Section 139(4). These judgments emphasized a liberal interpretation of exemption provisions, favoring the assessee.

7. Supreme Court and High Court Judgments:
The appellant cited judgments from the Supreme Court and Kerala High Court, arguing for a strict interpretation of the due date under Section 139(1). However, the tribunal and other High Courts favored a more liberal interpretation, including the extended period under Section 139(4).

8. Final Judgment:
The court dismissed the appeal, siding with the tribunal's interpretation and the supportive High Court judgments. It was held that the due date for filing the return under Section 139 includes the extended period under Section 139(4), thus allowing the deductions claimed by the assessee under Sections 54B and 54F.

Conclusion:
The appeal was dismissed, and the tribunal's decision was upheld, allowing the deductions under Sections 54B and 54F by considering the due date under Section 139(4). The judgment emphasized a liberal interpretation of exemption provisions, aligning with multiple High Court decisions.

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