2019 (1) TMI 158 - HC - Income Tax

Denial of exemption u/s 54 - construction was not completed within a period of three years - Held that - In the instant case, the investment is made in a new property. The construction was not completed within a period of three years as narrated in Section 54 of the Act. The delay was not because of the assessee, but beyond his control, since the construction was put up by the builder. He has invested the amount of ₹ 2,26,82,097. Therefore, the Tribunal rightly held that the said investment is made towards construction of the property. Therefore, it requires to be exempted. Under these circumstances, we do not find any error in arriving at such a conclusion. Therefore, we are of the view that the said substantial question of law would not arise for consideration in this appeal. Accumulated balance upto retirement eligible for exemption u/s 10(12) - Held that - In the instant case, The assessee retired on 1-4-2002. As on that date, the amount accumulated in the Provident Fund was ₹ 37,93,888/-. He did not withdraw the same. He sought to withdraw it on 11-4-2011. The accumulated balance as on that date was ₹ 82,00,783/- which constituted the interest on the amount of ₹ 37,93,588/- as on 1-4-2018 on wards. By relying on the provisions of Section 10(12) the Tribunal held that so far as to the extent of the amount as on the date of retirement is concerned, the assessee is eligible for exemption. Therefore, law has been rightly applied by the Tribunal - we do not find the same constitutes any substantial question of law. What is relied by the Assessing Officer is only the amount as was available on the date of retirement as on 1-4-2002. It is the amount on that date that was held to be eligible for exemption and not the accumulated amount.

Summary

Issues:
1. Determination of income under Section 143(3) of the Income Tax Act, 1961.
2. Allowance of Section 54 deduction for investment in property.
3. Eligibility for exemption under Section 10(12) of the Act.

Analysis:
1. The assessee, a Consultant, declared an income of ?1,18,03,300/- for Assessment Year 2012-13. The assessment under Section 143(3) resulted in determining the income at ?5,16,93,547/- after additions and deletions. The Commissioner of Income Tax (Appeals) partly allowed the appeal by granting relief, deleting certain additions made by the Assessing Officer. However, no finding was rendered on variations in the computation of long term capital gain. The Tribunal partly allowed the appeals filed by both the Revenue and the assessee, leading to the current appeal before the High Court.

2. The substantial question of law raised was whether the assessee is entitled to Section 54 deduction for the amount invested within one year for a flat under construction beyond the assessee's control. The Tribunal relied on a previous judgment where it was held that the purpose of Section 54 is to encourage investment in residential buildings, and the benefit should be extended to investments made within a specified period. In this case, the investment was made in a new property, and the delay in construction was beyond the assessee's control. The Tribunal rightly held that the investment should be exempted under Section 54.

3. Another substantial question of law was raised regarding the eligibility for exemption under Section 10(12) of the Act for an accumulated balance in the Provident Fund. The Tribunal held that the assessee, who retired in 2002, was eligible for exemption up to the amount accumulated at the time of retirement. The accumulated balance as on the retirement date was considered for exemption, not the total accumulated amount. The High Court affirmed the Tribunal's decision, stating that no substantial question of law arose in this regard.

In conclusion, the High Court dismissed the appeal, finding no errors in the Tribunal's conclusions regarding the Section 54 deduction and the exemption under Section 10(12) of the Income Tax Act, 1961.