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2022 (9) TMI 81 - AT - Income TaxExemption of capital gains earned u/s 54F - delay in investment - purchase of flat in housing society as per MOU - delay in investment was for reasons beyond his control - Denial of claim on the premise of the investment of net consideration received in purchase of new residential house not having been made within the time period stipulated under section 54F - HELD THAT - As we find that as per the facts before us, the delay in investment is of a very short period of five months that too for reasons beyond the control of the assessee, the intention of the assessee being all along to buy the new asset within the stipulated period. Therefore denial of exemption for this reason makes it a denial purely for technical reasons without considering the overall facts and circumstances of the case demonstrating the true spirit of the transaction. Assessee has sold his property on 1.12.2011 and he was required to purchase a new residential house for claiming exemption under section 54F of the Act by 31.11.2013. The conveyance deed for purchase of new property has been executed five months later i.e. on 3.5.2014. It is not disputed that after depositing the sale consideration in his capital gain account scheme in May 2012, by June, 2013 the assessee had finalized the property for purchase and entered into an agreement to purchase the same also, which transaction was finally executed on 3.5.2014. This establishes his true intention of investing in the new property all along. MOU for purchase of property clearly mentions that the occupants of the building in which a flat was purchased by the assessee had agreed to form and register a cooperative housing society which was still pending as on date of entering the MOU. That it was only in December, 2014, that the society was formed, and the Vendor was allotted share certificates, thus making his title to the property clear. And immediately thereafter, within three months of the formation of the society, the assessee got possession of his property and the entire consideration was also paid. These facts are not disputed by the Revenue. There is no iota of doubt that the delay in registration of the new property was for reasons beyond his control. We are in complete agreement with the assessee that the denial of exemption u/s 54 F in the present case is for a mere technical default in not getting the new property registered in his name within the stipulated time period of two years, as specified under section 54F of the Act, the consequent delay being minor delay of 5 months that too for reasons beyond the control of the assessee. The intention of the assessee all along was to invest in the new property well within the stipulated time and the delay was for reasons beyond his control and was too immaterial. Thus we hold that the assessee is entitled in law to claim exemption of capital gains amounting to Rs.1,08,69,338/- under section 54F of the Act and direct the AO to allow the claim of the assessee.
Issues Involved:
Denial of claim of exemption of long-term capital gain under section 54F of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Denial of Exemption Claim under Section 54F: The primary issue in the appeal was the denial of the claim of exemption of long-term capital gain amounting to Rs. 1,08,69,338/- by the Revenue. The Revenue held that the assessee failed to comply with the conditions of section 54F, specifically the requirement to invest in a new residential house within two years from the date of sale of the original asset. The assessee argued that the delay in investment was due to reasons beyond their control and was only for a short period of five months. 2. Timeline of Events: The assessee provided a detailed timeline of events: - 01.12.2011: Sale of land for Rs. 1,52,04,000/-. - 29.03.2012: Deposit of sale consideration in a capital gain account. - 15.06.2013: Execution of Memorandum of Understanding (MOU) for the purchase of a residential flat. - 01.02.2014: Registration of society and allotment of share certificate to the vendor. - 02.04.2014: Further payments made from the capital gain account. - 03.05.2014: Execution of Conveyance Deed for the purchase of the residential flat. 3. Compliance with Section 54F: The assessee argued that the entire net consideration was deposited in the capital gain account scheme before the due date of filing the return of income, which was 31.07.2012. The deposit was made on 29.03.2012, and even as per the Revenue's claim, it was deposited on 17.05.2012, both dates being before the due date. 4. Intention to Invest: The assessee demonstrated the intention to invest the net consideration in a new residential house by parking the entire consideration in the capital gain account scheme and entering into an MOU for the purchase of the property within a year and a half of the sale. The MOU clearly bound both parties to the transaction. 5. Delay Beyond Assessee's Control: The delay in purchasing the new property was attributed to the registration of the society in which the residential house was situated, which was beyond the assessee's control. The society was registered on 01.02.2014, and the entire sale consideration was paid on 02.04.2014, with the conveyance deed executed on 03.05.2014. 6. Legal Provisions and Interpretation: The Tribunal referred to the provisions of section 54F, which allows exemption if the net consideration is invested in a residential house within two years or deposited in a capital gain account scheme before the due date of filing the return. The Tribunal noted that the assessee had complied with these conditions by depositing the amount in the capital gain account scheme before the due date. 7. Precedents and Judicial Pronouncements: The Tribunal considered the judgment of the Hon'ble Apex Court in the case of Shri Sanjeev Lal Vs. CIT and the decision of the ITAT, Ahmedabad Bench in the case of Vinod Ugardas Patel vs. Asst. CIT. These cases supported the assessee's claim that the delay was for reasons beyond their control and should not result in the denial of exemption. 8. Revenue's Argument: The Revenue argued that the deposit in the capital gain scheme was made on 17.05.2012 and that the MOU for a meager amount of Rs. 10,000/- could not be treated as a transfer of assets. The Revenue relied on the decision of the Hon'ble Bombay High Court in the case of Rasiklal M. Parikh Vs. ACIT. 9. Tribunal's Conclusion: The Tribunal concluded that the assessee had fulfilled the conditions for claiming exemption by depositing the amount in the capital gain account scheme before the due date of filing the return. The delay in registering the new property was for reasons beyond the assessee's control, and the intention to invest was clear. The Tribunal held that the denial of exemption was for a mere technical default and directed the AO to allow the claim of the assessee. Final Judgment: The Tribunal allowed the appeal of the assessee, granting the exemption of long-term capital gain under section 54F of the Act, amounting to Rs. 1,08,69,338/-. The order was pronounced on 31st August 2022 at Ahmedabad.
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