2021 (1) TMI 907 - AT - Income Tax

LTCG - Disallowance of the claim of deduction u/s. 54F - construction of another residential house - non-furnishing of completion certificate from municipal authorities - assessee has failed to comply with the condition mandated under the provisions of Section 54F(4) for availing the benefit of deduction u/s. 54F(1), i.e., depositing of unutilized amount in the Capital Gains Accounts Scheme, on or before the due date of filing the Return of Income u/s. 139(1) of the Act - HELD THAT - AO erred in coming to the conclusion that building construction was not completed before May, 2017 only on the basis of non-furnishing of completion certificate from municipal authorities. No doubt, completion certificate is one evidence for having completed construction of building, but it is not material evidence to draw adverse inference against assessee, when assessee has placed all other evidences which indicate completion of construction of building. The learned CIT(A) after considering relevant facts has rightly held that construction of building was completed within three years from the date of transfer of original asset and hence, we are inclined to uphold the findings of learned CIT(A) and reject grounds taken by the Revenue. Investment of balance sale consideration in capital gain account deposit scheme on or before due date for furnishing of return of income - The law is very clear as per which if an assessee invests full consideration from sale of original asset for purchasing or constructing another residential house, then assessee is entitled for 100% exemption from capital gain tax. In case, where assessee has invested part sale consideration for purchase or construction of another residential house, then proportionate deduction is allowed commensurate with investment made in new asset. In this case, on perusal of details filed by assessee, we find that assessee has made investment of ₹ 1,20,00,000/- in capital gain account deposit scheme on or before due date of furnishing of return of income and said deposit account has been utilized for construction of building within three years from the date of transfer of original asset. Assessing Officer has erred in rejecting the claim of assessee on the ground that assessee ought to have invested balance consideration in capital gain account deposit scheme, more particularly, when assessee has claimed that she has paid tax on remaining sale consideration in accordance with law. Facts with regard to amount of exemption claimed u/s. 54F of the Act and the amount of capital gain which was subjected to tax was not forthcoming from the orders of lower authorities. The assessee claims that it has claimed exemption u/s. 54F for ₹ 3,72,81,393/- and for balance capital gain she has paid tax, whereas Assessing Officer held that assessee has claimed exemption of ₹ 3,70,75,929/-. For the limited purpose of ascertaining facts with regard to computation of capital gain from sale of shares and amount of sale consideration invested in purchase/construction of new asset and amount of capital gain included in return and payment of taxes, we set aside the issue to file of Assessing Officer and direct him to verify facts in light of claim of assessee that she had paid tax for balance amount of capital gains - Appeal filed by Revenue is treated as allowed for statistical purposes.

Issues Involved:
1. Whether the assessee complied with the conditions mandated under Section 54F of the Income Tax Act for claiming exemption.
2. Whether the construction of the new residential house was completed within the stipulated time.
3. Whether the assessee invested the unutilized amount in the Capital Gains Accounts Scheme as required.
4. The validity of the additional evidences submitted by the assessee.
5. The correctness of the Assessing Officer's conclusions regarding the completion of construction and investment in the Capital Gains Accounts Scheme.

Issue-wise Detailed Analysis:

1. Compliance with Section 54F Conditions:
The Revenue argued that the assessee failed to comply with the conditions under Section 54F(4) for availing the benefit of deduction under Section 54F(1), specifically the requirement to deposit the unutilized amount in the Capital Gains Accounts Scheme by the due date of filing the return of income under Section 139(1). The assessee contended that she had invested a substantial amount in the construction of a new residential house and provided evidence of such investments, including bills and vouchers.

2. Completion of Construction within Stipulated Time:
The Assessing Officer concluded that the construction was not completed within three years from the date of transfer of the original asset, citing the lack of a completion certificate and necessary utilities like electricity and water connection. However, the CIT(A) found that the assessee had provided sufficient evidence, including tax paid receipts and an electricity sanction letter, indicating that the construction was completed before the due date. The Tribunal upheld the CIT(A)'s findings, noting that the completion certificate is not the sole evidence of completion and that other substantial evidence provided by the assessee was sufficient to prove the completion of construction.

3. Investment in Capital Gains Accounts Scheme:
The Assessing Officer noted that the assessee did not deposit the entire unutilized amount in the Capital Gains Accounts Scheme, which led to the disallowance of the exemption claim. The CIT(A) and the Tribunal observed that the law does not mandate the investment of the full sale consideration in the Capital Gains Accounts Scheme for claiming exemption. The Tribunal emphasized that proportionate exemption is allowed if part of the sale consideration is utilized for constructing a new residential house.

4. Validity of Additional Evidences:
The CIT(A) considered additional evidences submitted by the assessee, such as bills and vouchers for construction expenses and a sanction letter from the electricity board. These were forwarded to the Assessing Officer for comments, who reiterated his earlier observations. The CIT(A) found the additional evidences credible and supportive of the assessee's claim.

5. Assessing Officer's Conclusions:
The Tribunal found that the Assessing Officer erred in concluding that the construction was not completed based solely on the absence of a completion certificate. The Tribunal noted that the assessee had provided ample evidence of construction activity and expenses incurred before the stipulated date. Additionally, the Tribunal directed the Assessing Officer to verify the facts regarding the computation of capital gains and the amount of tax paid on the balance capital gains, and to delete the additions if the assessee had indeed paid the required tax.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to allow the exemption under Section 54F, finding that the assessee had complied with the conditions for exemption, completed the construction within the stipulated time, and provided sufficient evidence of the construction expenses. The Tribunal directed the Assessing Officer to verify the computation of capital gains and the tax paid on the balance amount, and to delete the additions if the assessee's claims were found to be accurate. The appeal filed by the Revenue was treated as allowed for statistical purposes.

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