2019 (5) TMI 106 - AT - Income Tax

Exemption u/s 54F - investment of capital gain in purchase of a flat - Non deposited the sale consideration in a capital account before the due date of filing of return u/s 139 - Stand of the assessee is that she has made investment in purchase of a new flat and utilised the total capital gain - HELD THAT - In the case of Ashok Kapasiawala 2015 (10) TMI 2045 - ITAT AHMEDABAD also the assessee did not deposit the sale consideration in the bank account before the due date of filing of return. But otherwise purchase of house is within two years stipulated in section 54F(1) of the Act. It is not the case of the assessee that she has purchased beyond the period as contemplated in section 54F(1). The only failure is, she has not deposited the sale consideration in capital account. This condition has not been considered as mandatory by K. RAMACHANDRA RAO 2015 (4) TMI 620 - KARNATAKA HIGH COURT . Thus allow the appeal of the assessee and direct the AO to grant exemption under section 54F to the assessee. - Decided against revenue

Summary

Issues:
Whether exemption under section 54F is available to the assessee on the investment of capital gain in the purchase of a flat.

Analysis:

Issue 1: Exemption under Section 54F
The case involved the question of whether the assessee was entitled to exemption under section 54F of the Income Tax Act. The assessee had sold a share in a property and invested the capital gain in a residential flat within the prescribed time limit. The Assessing Officer (AO) disallowed the claim for exemption as the sale consideration was not deposited in a capital account before the due date of filing the return. The contention was that the benefit of section 54F should be available only if the consideration was deposited before the due date. However, the assessee argued that since the entire capital gain was invested in the new flat, no tax should be levied. The assessee referred to a decision of the ITAT, Ahmedabad, and a judgment of the Karnataka High Court supporting the view that the deposit of consideration in a capital account was not mandatory if the investment was made within the prescribed period. The Tribunal, following the decisions cited, allowed the appeal of the assessee and directed the AO to grant exemption under section 54F.

Conclusion
The Tribunal held that the assessee was entitled to exemption under section 54F as the investment in the new residential flat was made within the prescribed time limit, even though the sale consideration was not deposited in a capital account before the due date. The Tribunal relied on the decision of the Karnataka High Court and the ITAT, Ahmedabad, in similar cases to support its decision. Consequently, the appeal of the assessee was allowed, and the AO was directed to grant the exemption under section 54F.

This detailed analysis of the judgment highlights the key legal arguments, interpretations, and decisions made by the Tribunal in resolving the issue of exemption under section 54F for the assessee.