2024 (10) TMI 1560 - AT - Income Tax

Deduction u/s 54F - bringing the amount of Rs. 1 crore, i.e. the amount withdrawn by the assessee from his CGAS account in the succeeding year to tax during the year under consideration - net consideration received by the assessee on transfer of its capital asset, which is not appropriated by him towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place HELD THAT - A perusal of Section 54F reveals that though the assessee is entitled to withdraw the unutilized amount in accordance with the CGAS, 1988, but the same would be liable to be assessed in his hand u/s. 45 of the Act during the previous year, in which the period of three years from the date of the transfer of the original asset expires. Although the AR had tried to impress upon us that as the withdrawals made from the CGAS account, 1988 had been carried out by the assessee with the approval of the A.O, and thus, had rightly been offered for tax in the respective years of withdrawals but we are unable to concur with the same. The amount parked by the assessee in the CGAS account, which had not been utilized for the purchase or construction of the new residential house within the prescribed period, has to be brought to tax in the previous year, in which the period of three years from the date of the transfer of the original asset expires. As in the present case before us, the assessee had transferred the capital asset i.e the unlisted shares and securities of HDIPL and had, inter alia, claimed exemption u/s. 54F that was deposited by him in Capital Gain Account Scheme, 1988, therefore, the period of three years from the date of transfer of the aforesaid original asset expires on 29.07.2018, i.e. during the period relevant to A.Y.2019-20. Accordingly, as per the mandate of the 1st proviso to Section 54F(4) of the Act, the amount that was not utilized by the assessee for the specified purpose, for which, the same was deposited in CGAS, 1988, i.e. for the purchase or construction of a residential house can only be brought to tax in Assessment Year 2019-20. As per our aforesaid deliberations the amount of Rs. 1 crore (supra), i.e. the unutilized amount lying in the assessee s CGAS account, 1988 that was withdrawn by him in the immediately succeeding year, i.e. A.Y.2019-20, as per the mandate of the 1st proviso to Section 54F(4) of the Act could have only be brought to tax in the said latter year. We, thus, are unable to concur with the view taken by the lower authorities who had brought the amount of Rs. 1 crore (supra) to tax as LTCG in the hands of the assessee u/s. 45 of the Act during the year under consideration. Decided in favour of assessee.

Summary

Issues Involved:

1. Determination of assessed income versus returned income.
2. Addition of Rs. 1 crore under Section 54F(4) of the Income-tax Act.
3. Alleged double addition of Rs. 1 crore due to withdrawal from the Capital Gain Account Scheme.

Detailed Analysis:

1. Determination of Assessed Income Versus Returned Income:

The assessee filed a return of income for the assessment year 2018-19 declaring an income of Rs. 2,31,69,120/-. The Assessing Officer (A.O) determined the assessed income at Rs. 3,31,69,120/-. The discrepancy arose due to the A.O's reworking of the Long Term Capital Gain (LTCG) by adding Rs. 1 crore, which was withdrawn from the Capital Gain Account Scheme (CGAS) in the succeeding year but taxed in the year under consideration. The A.O believed the withdrawals indicated an attempt to defer tax liability on LTCG, thus leading to the increased assessed income.

2. Addition of Rs. 1 Crore Under Section 54F(4) of the Income-tax Act:

The core issue was whether the Rs. 1 crore withdrawn from the CGAS in the succeeding year (A.Y. 2019-20) should be taxed in the assessment year 2018-19. The A.O added Rs. 1 crore to the income for A.Y. 2018-19, arguing that the unutilized amount should be taxed when the three-year period from the transfer of the original asset expires, as per Section 54F(4). The CIT(Appeals) upheld this addition, stating that the entire unutilized amount should be taxed in A.Y. 2018-19, not in A.Y. 2019-20, aligning with the legislative intent and provisions of the Act.

3. Alleged Double Addition of Rs. 1 Crore Due to Withdrawal from the Capital Gain Account Scheme:

The assessee contended that the addition of Rs. 1 crore resulted in double taxation since the amount was already taxed in A.Y. 2019-20. The CIT(Appeals) dismissed this claim, arguing that the correct assessment year for taxing the unutilized amount was A.Y. 2018-19, as per Section 54F(4). The Tribunal, however, disagreed with the lower authorities, noting that the amount should be taxed in the year the three-year period expires, which is A.Y. 2019-20, according to the "1st proviso" to Section 54F(4). Thus, the Tribunal vacated the addition of Rs. 1 crore to the income for A.Y. 2018-19.

Conclusion:

The Tribunal allowed the appeal, determining that the Rs. 1 crore withdrawn from the CGAS should be taxed in A.Y. 2019-20, not A.Y. 2018-19, as per the statutory provisions. The grounds of appeal regarding the addition under Section 54F(4) were allowed, while other general grounds were dismissed as not pressed. The Tribunal's decision emphasized adherence to the specific provisions of the Income-tax Act, particularly the timing of taxing unutilized amounts in CGAS.