2020 (10) TMI 1047 - AT - Income Tax

Exemption u/s 54F - No deposit was made by the assessee in the specified bank account as required by the provisions of subsection (4) of section 54F - whether investment as specified was made by the assessee in the construction of house within a period of 3 years from the date of sale of the immovable property - HELD THAT - The Hon ble Karnataka High Court in the case of CIT vs. K. Ramachandra Rao 2015 (4) TMI 620 - KARNATAKA HIGH COURT thus clearly held that if the investment in construction of new house was made by the assessee within the stipulated period of 3 years, then section 54F(4) was not at all attracted and the assessee could not be denied the benefit of exemption u/s 54F merely because he had not deposited the amount in specified bank account as stipulated. At the time of hearing before us, even the ld. DR has not been able to raise any material contention to doubt or dispute this legal position clearly propounded. As contended that the claim of the assessee of having invested the amount of net consideration in the construction of the new house within the stipulated period of 3 years from the date of the transfer of the original assets has not been verified either by the AO or by the ld. CIT(A).- We find merit in this contention raised by the ld. DR and since ld. Counsel for the assessee has also not raised objection for sending the matter back to the Assessing Officer for the limited purpose of such verification - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
Disallowance of assessee's claim for exemption u/s 54F of the Income Tax Act, 1961.

Detailed Analysis:

1. Background: The appeal was filed by the assessee against the order of the ld. CIT(A) regarding the disallowance of the claim for exemption u/s 54F of the Income Tax Act, 1961, related to the sale of jointly owned immovable property.

2. Assessee's Claim: The assessee, an individual, sold the property and claimed exemption u/s 54F after investing in the construction of a house within 3 years from the sale. The long-term capital gain was declared, but the Assessing Officer disallowed the claim as the net consideration was not deposited in the specified bank account by the due date.

3. Appellate Proceedings: The assessee relied on the decision of the Hon’ble Karnataka High Court to support the claim, arguing substantial compliance with the conditions for exemption u/s 54F. However, the ld. CIT(A) dismissed the appeal based on the distinction of facts from the Karnataka High Court judgment.

4. Tribunal's Decision: The Tribunal considered the two questions raised in the Karnataka High Court case and focused on the second question, where it was held that if the investment in construction was made within the stipulated period, section 54F(4) was not attracted. The Tribunal noted that the claim of investment by the assessee had not been verified and directed the Assessing Officer to verify the actual investment made in the construction of the new house within the specified period.

5. Conclusion: The Tribunal allowed the appeal, emphasizing the legal position established by the Karnataka High Court that investment in construction within the prescribed period qualifies for exemption u/s 54F, even if the amount was not deposited in the specified bank account. The matter was remanded to the Assessing Officer for verification of the investment made by the assessee.

This detailed analysis highlights the legal proceedings and the Tribunal's decision regarding the disallowance of the assessee's claim for exemption u/s 54F of the Income Tax Act, 1961, providing a comprehensive understanding of the judgment.