2019 (7) TMI 1073 - AT - Income Tax

Deduction u/s 54F on purchase of new flat - amount not deposited within time limit u/s. 139(1) but purchase flat before the extended time of filing of return u/s. 139(4) - HELD THAT - According to the provisions of section 54 of the Act, an assessee has an option to claim deduction against long term capital gain on transfer of a residential flat, provided he/she invests within a period of one year before or two years after the date on which the transfer takes place to purchase or within a period of three years after that date to construct, one residential house in India. As per the facts, the assessee has duly acquired a new house property within 2 years from the date of the original transfer of flat and has accordingly rightly claimed deduction us/ 54. The entitlement of exemption u/s 54 relates to the cost of acquisition of a new estate in the nature of a house property for the purpose of his own residence within the specified period. If the assessee fulfils the condition for exemption u/s.54 within the extended time of filing of return u/s. 139(4), the assessee is entitled to exemption u/s.54. Accordingly, the assessee is entitled deduction u/s 54 of the Act for utilization of sale consideration for investment in new residential property within due date as stipulated u/s. 139. As already held that Section 139 cannot be meant only section 139(1), but it means all sub-sections of section 139. Thus, under su-section (4) of section 139 any person who has not furnished a return within the time allowed to him under sub-section (1) of section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. Since the assessee has fulfilled the requirement u/s 54 for exemption of the capital gain, therefore the assessee is entitled for the same. Even before us, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or deviate from the findings recorded by the Ld.CIT(A). Resultantly, this ground raised by the revenue stands dismissed.

Issues Involved:
1. Disallowance of exemption under Section 54F of the Income Tax Act.
2. Interpretation of the due date for depositing unutilized capital gains under Section 54F.
3. Entitlement to exemption under Section 54F based on the timing of investment in a new asset.

Issue-wise Detailed Analysis:

1. Disallowance of exemption under Section 54F of the Income Tax Act:
The primary issue in the appeal was the disallowance of ?82,89,448 claimed by the assessee as an exemption under Section 54F of the Income Tax Act. The Assessing Officer (AO) disallowed the deduction on the grounds that the assessee did not deposit the unutilized capital gains in a specified account by the due date under Section 139(1) of the Act. The AO contended that the time limit for such deposits was different from the time limit for utilizing the capital gains for purchasing or constructing a new asset.

2. Interpretation of the due date for depositing unutilized capital gains under Section 54F:
The AO argued that the due date for depositing unutilized capital gains in a specified account should be interpreted strictly as the due date under Section 139(1). The AO referenced the Supreme Court's judgment in Prakash Nath Khanna & Ors vs CIT, which interpreted "due date" as mentioned in Section 139(1) and 139(4) of the Act. The AO maintained that the legislature's intent was clear in specifying different dates for utilization and deposit under Section 54F.

3. Entitlement to exemption under Section 54F based on the timing of investment in a new asset:
The assessee contended that the investment in the new asset was made within the permissible time frame as provided under Section 139(4) of the Act. The assessee argued that Section 139 should be read as a whole, encompassing all its sub-sections, including 139(4), which allows for an extended period for filing returns. The assessee cited several judicial precedents, including decisions from the ITAT Mumbai and High Courts, which supported the interpretation that the extended period under Section 139(4) should be considered for the purpose of Section 54F.

Tribunal's Findings:
The Tribunal, after considering the submissions and judicial precedents, upheld the CIT(A)'s order, which allowed the exemption under Section 54F. The Tribunal noted that Section 54F is a beneficial provision and should be construed liberally. It agreed with the CIT(A) that Section 139 should be interpreted to include all its sub-sections, thereby allowing the extended period under Section 139(4) for the purpose of depositing unutilized capital gains.

Conclusion:
The Tribunal dismissed the revenue's appeal and the assessee's cross-objection, affirming the CIT(A)'s decision to allow the exemption under Section 54F. The Tribunal concluded that the assessee had fulfilled the conditions for exemption by investing in a new residential property within the extended time frame allowed under Section 139(4) and depositing the unutilized capital gains within the prescribed period.

Order Pronounced:
The order was pronounced in the open court on 5th April 2019, with both the appeal filed by the revenue and the cross-objection filed by the assessee being dismissed with no order as to cost.

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