2018 (8) TMI 1720 - AT - Income Tax

Benefits of deduction u/s 54 restricting to the extent of investment in new assets only upto the due date of filing of Return u/s 139(1) and not granting relief which was invested subsequently - Held that - Keeping in view the fact the assessee has not deposited the amount in notified bank account maintained under capital gain bank account scheme as provided u/s 54 before the due date of furnishing of return of income deduction of 1. 76 lakh on account of investment made in said residential flat being constructed by DLF at Bangalore cannot be allowed to the assessee u/s 54 of the 1961 Act as the said payment of 1. 76 lacs was made on 01-10-2013 while return of income was filed by the assessee on 31. 07. 2011. So far as investments of 6. 00 lakh made on 09. 09. 2010 is concerned the same is to be allowed by AO in accordance with law after verification of the records and the matter need to be set aside and restored to the file of the AO for necessary verifications of the claim of the assessee for deduction u/s 54 wrt this payment of 6 lacs - matter is set aside and restored to the file of the AO for necessary verification and adjudication as indicated above. - Decided partly in favour of assessee for the statistical purposes

Summary

Issues:
1. Interpretation of deduction under section 54 of the Income-tax Act, 1961.
2. Validity of investment in new residential flat for claiming deduction u/s 54.
3. Requirement of registered documents for availing deduction u/s 54.
4. Disallowance of deduction for investments made post filing of return of income.
5. Verification and authentication of deduction claim before the tribunal.

Issue 1: Interpretation of deduction under section 54 of the Income-tax Act, 1961:
The appeal before the Income-Tax Appellate Tribunal (ITAT) concerned the interpretation of deduction under section 54 of the Income-tax Act, 1961. The assessee claimed deduction u/s 54 for the investment made in a new residential flat at Bangalore after selling a property in Thane. The Assessing Officer (AO) disallowed the deduction, leading to an appeal by the assessee.

Issue 2: Validity of investment in new residential flat for claiming deduction u/s 54:
The main contention revolved around the validity of the investment made by the assessee in the new residential flat for claiming deduction u/s 54. The AO argued that the provisional allotment letter held by the assessee was unregistered, and no formal agreement or legal documents were produced to establish ownership. However, the Commissioner of Income Tax (Appeals) (CIT(A)) allowed the deduction, emphasizing that the provision does not mandate registered documents and that the investment made by the assessee was sufficient compliance with section 54.

Issue 3: Requirement of registered documents for availing deduction u/s 54:
The debate also touched upon the requirement of registered documents for availing deduction u/s 54. The CIT(A) referenced a decision by the ITAT, Mumbai, and the Bombay High Court to support the view that the absence of registered documents does not preclude the allowance of deduction u/s 54. This interpretation was crucial in determining the eligibility of the assessee for the deduction.

Issue 4: Disallowance of deduction for investments made post filing of return of income:
Another aspect of the case involved the disallowance of deduction for investments made post filing of the return of income. The tribunal deliberated on the claim made by the assessee for investments made after the filing of the return and the subsequent disallowance by the CIT(A). The decision hinged on the timing of the investments vis-à-vis the filing of the income tax return.

Issue 5: Verification and authentication of deduction claim before the tribunal:
Lastly, the tribunal addressed the need for verification and authentication of the deduction claim before the tribunal. It was emphasized that if a deduction claim was not raised before the lower authorities but was presented for the first time before the tribunal, proper verification and authentication by the AO were necessary before allowing the claim. The tribunal directed the matter to be set aside and restored to the AO for necessary verifications and adjudication, ensuring due process and adherence to legal requirements.

In conclusion, the ITAT partially allowed the appeal, setting aside the matter for further verification and adjudication by the AO in accordance with the legal principles and requirements, ensuring a fair and thorough assessment of the deduction claim under section 54 of the Income-tax Act, 1961.