2018 (1) TMI 1106 - AT - Income Tax

Exemption deduction u/s.54F - amount paid for booking of flat - Held that - As decided in case of Shri Satosh P. Malhotra 2018 (1) TMI 1065 - ITAT MUMBAI amount invested in property as well as kept in bank account even though not in the capital gain tax account should be allowed as exemption deduction u/s.54F. Merely not keeping the amount in capital gain tax and keeping the same in the bank account and utilizing the same within the statuary period will not disentitle the assessee for claim of deduction u/s.54F. In the instant case before us, as found that assessee has already paid ₹ 11.43 lakhs for booking of the flat and the remaining payment was made when the builder has got clearance from the competent authority. No reason to disallow ₹ 11.43 lakhs paid by assessee towards booking of flat. Accordingly, AO is directed to allow the same as exempt u/s.54F. - Decided in favour of assessee.

Summary

Issues:
Appeal against order of CIT(A) for A.Y. 2011-12 disallowing exemption u/s.54 for capital gains claimed by the assessee.

Analysis:
1. The assessee filed a return showing total income of &8377; 8,57,020, with long-term capital gains of &8377; 32,52,854. The AO disallowed the exemption u/s.54 as the assessee paid &8377; 14 lakhs for a flat but did not execute an agreement for sale, leading to the right over the property remaining with the builder. This disallowed deduction was confirmed by CIT(A).

2. The ITAT Mumbai analyzed the case and noted that the assessee had invested &8377; 14 lakhs in an under-construction property at Matoshree Towers. Due to circumstances beyond control, the remaining amount of &8377; 22,65,274 was paid to the builder after a delay. The ITAT referred to a Co-ordinate Bench decision where it was held that technical violations should not deny the benefit of exemption u/s.54.

3. Referring to Sec.54 provisions, the ITAT emphasized that the purpose is to encourage investment in a new residential house within the specified period. The ITAT held that the assessee's investment in property and keeping the remaining amount in a bank account, though not in the capital gain tax account, should still be allowed as an exemption deduction u/s.54F.

4. Citing Supreme Court decisions, the ITAT emphasized a liberal and purposive interpretation of tax laws to grant relief to the assessee. It concluded that the AO's action of declining the exemption u/s.54 was not meritorious, and upheld the assessee's claim for exemption.

5. Ultimately, the ITAT allowed the appeal in part, directing the AO to permit the &8377; 11.43 lakhs paid by the assessee towards the property booking as exempt u/s.54F. The judgment highlighted the importance of fulfilling the primary requirements of Sec.54 and interpreting the provisions liberally to achieve the legislative intent.

In conclusion, the ITAT Mumbai ruled in favor of the assessee, allowing the partial appeal and directing the AO to permit the exemption claimed under Sec.54F for the amount invested in the property, even though not deposited in the capital gain tax account, based on a liberal interpretation of the tax laws and the legislative intent behind the provisions.