2021 (4) TMI 644 - AT - Income Tax

Claim of exemption u/s 54 - assessee failed to comply with section 54 by not depositing the unutilized amount of capital gain in the Capital Gains Deposit Scheme 1988 within the stipulated time of furnishing the return of income-tax u/s 139 - HELD THAT - We have carefully considered the judgment passed in the matter of ITO vs. Nilima Abhijit Tannu 2019 (7) TMI 1073 - ITAT MUMBAI where the same issue has cropped up and it was observed that when the unutilized portion of capital gain on sale of capital asset is required to be deposited before the date of furnishing of return of tax under Section 139 in such a situation Section 139 cannot be meant only Section 139 but it means all sub-Sections of Section 139. Tribunal has been pleased to hold that the assessee has fulfilled condition for deduction u/s 54F within extended time limit of filing of return under Section 139(4) and the claim of the assessee cannot be negated merely he did not deposit amount in the said scheme before the expiry of the time period provided under Section 139(1) of the Act. Thus taking into consideration the entire aspect of the matter the ratio laid down in the matter Bhavnagar University vs. Palitana Sugar Mills (P.) Ltd. 2002 (12) TMI 563 - SUPREME COURT as also in the matter of CIT vs. Shri K. Ramachandra Rao 2015 (4) TMI 620 - KARNATAKA HIGH COURT and that if the intention is not to retain cash but to invest in construction or purchase any property and if such investment period stipulated therein then Section 54F(4) is not attracted. It appears from the records that the assessee has complied with the requirement of the substantive provision of Section 139 and therefore is entitled to the claim of exemption under Section 54F. Hence we find no reason to pass such order by the Revenue in disallowing the exemption as the claimed under Section 54F of the Act by the assessee. Assessee s appeal is allowed.

Summary

Issues:
1. Delay in filing the appeal before the Tribunal.
2. Claim of deduction under Section 54F of the Income Tax Act.
3. Interpretation of Section 54(2) and Section 139 of the Act.
4. Compliance with the conditions under Section 54F(1) for purchasing and constructing residential property.
5. Benefit of exemption under Section 54F in case of unutilized capital gain.

Issue 1: Delay in filing the appeal before the Tribunal:
The appeal filed by the assessee was beyond the time limit, with a delay of 7 days. The Tribunal condoned the delay, considering the facts and the insignificance of the delay causing no perceptible prejudice to the other side.

Issue 2: Claim of deduction under Section 54F of the Income Tax Act:
The assessee sold a property and claimed a long-term capital gain of ?35,07,459, which was utilized to purchase a new property within the time allowed by Section 54F(1). The appellant contended that the provision of Section 54F should be considered liberally in terms of the limitation period, and deduction should be allowed based on the investment in the new asset.

Issue 3: Interpretation of Section 54(2) and Section 139 of the Act:
The Revenue contended that since the unutilized amount of the sale consideration was not deposited in the capital gain account within the time limit prescribed under Section 139, the benefit of the claim of capital gain under Section 54F cannot be extended to the assessee. The Tribunal interpreted that Section 139 includes all subsections and not just Section 139(1) in the context of depositing unutilized capital gain.

Issue 4: Compliance with the conditions under Section 54F(1) for purchasing and constructing residential property:
The Tribunal considered various judgments, including one from the Gauhati High Court, to analyze the compliance with Section 54F. It was observed that the assessee fulfilled the conditions under Section 139 and was entitled to the exemption under Section 54F for investing in the construction or purchase of property within the stipulated time.

Issue 5: Benefit of exemption under Section 54F in case of unutilized capital gain:
The Tribunal referred to judgments from different benches to establish that if the intention is to invest in construction or purchase a property within the stipulated time, Section 54F(4) is not attracted. As the assessee complied with the substantive provision of Section 139, the claim of exemption under Section 54F was allowed, and the order disallowing the exemption was quashed.

This detailed analysis of the judgment addresses the issues of delay in filing the appeal, the claim of deduction under Section 54F, the interpretation of Section 54(2) and Section 139, compliance with conditions under Section 54F(1), and the benefit of exemption under Section 54F in the case of unutilized capital gain.