2021 (11) TMI 1009 - AT - Income Tax

Deduction u/s. 54F - As per AO assessee has not appropriated the amount of long term capital gains for the purpose of purchase of residential house before the due date of filing of return of income u/s. 139(1) - main contention of the ld. DR is that the assessee did not utilize the amount of capital gains in purchasing a residential house nor deposited in any capital gain account - HELD THAT - Admittedly, the assessee had not filed return of income u/s. 139 of the Act which is available up to 31-07-2012 but the assessee filed return of income on 02- 09-2013 which is well within the time available u/s. 139(4). The entire sale proceeds in acquisition of new residential house prior to filing of return of income u/s. 139(4) of the Act which was not disputed by the ld. DR. The ld. AR also placed on record various decisions in the case laws compilation and submitted that the benefit of section 54F of the Act is allowable when the assessee acquired the new asset before filing of return of income u/s. 139(4) of the Act. It is noted as per the case laws as submitted by the ld. AR, which held that the requirement of utilization of capital gain amounts before the date of furnishing of return of income u/s. 139 of the Act, which include all sub-section 139 of the Act including sub-section (4) If, the capital gain amount is utilized before the due date of filing of return of income u/s. 139 of the Act i.e. 31-03-2014 u/s. 139(4) of the Act. Therefore, it is clear that section 139 includes all sub-sections but not confined to sub-section (1) of section 139 of the Act alone. It is evident that the assessee invested amount of capital gains before the time available u/s. 139(4) of the Act and therefore, in our opinion the assessee is entitled to claim deduction u/s. 54F - Appeal of assessee is allowed.

Summary

Issues:
Whether denial of deduction u/s. 54F of the Act by CIT(A) is justified.

Analysis:
The appeal pertains to the denial of deduction u/s. 54F of the Act by the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The primary issue for consideration was whether the assessee complied with the provisions of section 54F regarding the investment of sale proceeds in a residential house before the due date of filing the return of income u/s. 139(1) of the Act. The assessee sold a property for ?1,00,65,000 on 04-08-2011, out of which ?50,00,000 was paid to the original landlord for the release of tenancy rights. The assessee claimed a deduction u/s. 54F at ?50,65,000. The Assessing Officer (AO) contended that the amount of capital gains was not invested before the due date of filing the return of income, thus denying the deduction. The CIT(A) upheld this denial stating that the funds had to be deposited in an account before the due date.

In the subsequent analysis, it was noted that the assessee made the investment in a residential house on 18-04-2013 and filed the return of income u/s. 139(4) on 02-09-2013. The Departmental Representative (DR) argued that the assessee did not invest the sale proceeds before the due date of filing the return u/s. 139(1). However, the assessee contended that the investment was made before the due date as per section 139(4) of the Act. The DR further argued that the capital gains were not utilized for purchasing a residential house or deposited in a capital gain account. The assessee, on the other hand, stated that the entire sale proceeds were utilized in acquiring a new residential house before filing the return u/s. 139(4), which was not disputed by the DR.

The Tribunal, after considering the arguments and case laws presented by both parties, held that the assessee invested the capital gains amount before the time available u/s. 139(4) of the Act. It was emphasized that section 139 encompasses all subsections, not just limited to subsection (1). Therefore, the Tribunal concluded that the assessee was entitled to claim the deduction u/s. 54F of the Act. The order of the CIT(A) denying the deduction was set aside, and the ground raised by the assessee was allowed. Consequently, the appeal of the assessee was allowed.

In conclusion, the judgment clarifies the interpretation of the provisions of section 54F of the Income Tax Act regarding the timeline for investment of capital gains in a residential house. The decision emphasizes the importance of complying with the due dates specified under different subsections of section 139 for claiming deductions under the Act.