2021 (1) TMI 204 - AT - Income Tax

Deduction u/s 54F - CIT- A restricted claim of deduction and held as regards the payment of registration charges paid amounting the assessee has not produced any proof - CIT(A) held that unutilized amount which was not deposited in the capital gains account would not be entitled to exemption u/s 54F - HELD THAT - In the light of the judgments of CIT v. Sri.K.Ramachandra Rao 2015 (4) TMI 620 - KARNATAKA HIGH COURT and Sambandam Udaykumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT it is clear that the assessee would be entitled to exemption u/s 54F of the I.T.Act with regard to utilization of sale proceeds for the purpose of construction of a residential property within a period of three years from the date of sale of old asset. In the instant case there is no clarity as regards the date of utilization of the amounts apart from ₹ 1,75,83,000. It is also not clear when the assessee had incurred the expenditure of ₹ 10 lakh for registration of the property. The matter needs to be examined by the Assessing Officer. The assessee shall be entitled to exemption u/s 54F of the I.T.Act with regard to utilization of the sale proceeds which are within three years from the date of sale of original asset, in the light of the dictum laid down by the above judicial pronouncements - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
Restriction of deduction u/s 54F of the I.T. Act and addition of excess amount to total income.

Analysis:
The appeal concerned the restriction of deduction u/s 54F of the I.T. Act and the addition of an excess amount to the total income. The assessee had sold 3000 equity shares for ?2,40,00,000 during the relevant assessment year, declaring long-term capital gains of ?2,05,39,185. The assessee claimed exemptions u/s 54EC and 54F of the I.T. Act amounting to ?50,00,000 and ?1,55,39,185, respectively. However, the Assessing Officer (A.O.) recalculated the exemption u/s 54F at ?1,43,80,289 due to discrepancies in the amount invested in a new property. The CIT(A) upheld the A.O.'s decision, stating that unutilized amounts not deposited in the capital gains account are not eligible for exemption u/s 54F.

The CIT(A) emphasized that only the amount actually invested in the new asset qualifies for exemption u/s 54F, citing relevant provisions of the law. The appellant's reliance on a previous court decision was deemed inapplicable as the sale consideration had not been fully utilized for the new asset. The appellant argued before the Tribunal, providing proof of payment for registration charges and additional construction expenses. The Tribunal noted discrepancies in the utilization of sale proceeds and directed the matter to be reexamined by the A.O. based on judicial precedents, allowing the assessee exemption u/s 54F for amounts utilized within three years from the sale of the original asset.

In light of the judicial pronouncements and lack of clarity regarding the utilization timeline of sale proceeds, the Tribunal allowed the appeal for statistical purposes. The decision highlighted the importance of meeting the conditions stipulated under section 54F of the I.T. Act for claiming deductions related to the sale of assets and subsequent investments in new properties.