2007 (3) TMI 283 - AT - Income Tax

Eligibility to deduction u/s. 54F - belated investment - HELD THAT - Section 54(2) was substituted by the Finance Act, 1987. The scope and effect of amendments were elaborated vide Circular No. 495. Sections 54(2) and 54F(4) were introduced to dispense with rectification of assessments in case the taxpayer fails to acquire the corresponding new asset. Hence, if the new asset is acquired before the date of filing of the return u/s 139 then the assessee can file such return and there will be no need of rectification. Thus, the interpretation, which has been placed by the learned Gauhati High Court in the case of CIT v. Rajesh Kumar Jalan 2006 (8) TMI 126 - GAUHATI HIGH COURT , is in accordance with the legislation intent of introducing sections 54(2) and 54F(4). It is true that the ITAT, Delhi in the case of Taranbir Singh Sawhney v. Dy. CIT 2005 (9) TMI 508 - ITAT DELHI did not allow the deduction u/s 54F though the new asset was acquired on 1-12-1997 but the amount of capital gain was not deposited in the capital gain account by 30-6-1997 i.e., the due date of filing the return. However, the decision of the learned Gauhati High Court was not available to the learned Delhi Bench. We follow the decision of the Gauhati High Court and hold that the assessee is entitled to exemption u/s 54F of the Income-tax Act. In the result, the appeal of the assessee is allowed.

Summary

Issues:
- Denial of exemption under section 54F of the Income-tax Act
- Interpretation of section 54F(4) regarding utilization of amount for new asset

Denial of Exemption under Section 54F:
The appeal was filed against the denial of exemption of Rs. 2,10,833 under section 54F of the Income-tax Act. The Assessing Officer pointed out that the amount was not invested within the specified time, leading to the denial of the exemption. The CIT(A) upheld this decision, stating that the amount was neither utilized nor invested in the specified securities within the prescribed time, thus disallowing the deduction under section 54F. The CIT(A) emphasized that statutory provisions must be followed as prescribed without circumvention, especially when the language of the statute is clear and unambiguous. The appellant argued that the entire amount was eventually utilized in constructing a new house, but this argument was deemed unacceptable. The Tribunal ultimately confirmed the denial of exemption under section 54F.

Interpretation of Section 54F(4):
The Tribunal analyzed section 54F(4) which requires the assessee to utilize the amount for the purchase or construction of the new asset before the date of furnishing the return of income under section 139. The Tribunal noted that there was no mention of any specific sub-section of section 139, indicating that section 139 should not be interpreted as section 139(1) only. Referring to a judgment by the Gauhati High Court, it was established that section 139 mentioned in the statute includes all sub-sections of section 139. The Tribunal also highlighted that the legislative intent behind introducing sections 54(2) and 54F(4) was to avoid rectification of assessments if the new asset is acquired before filing the return under section 139. Relying on this interpretation and the decision of the Gauhati High Court, the Tribunal allowed the assessee's appeal, granting the exemption of Rs. 2,10,833 under section 54F of the Income-tax Act.

In conclusion, the Tribunal addressed the denial of exemption under section 54F and provided a detailed analysis of the interpretation of section 54F(4) regarding the utilization of the amount for the new asset. The judgment emphasized adherence to statutory provisions and legislative intent while allowing the assessee's appeal and granting the exemption under section 54F.