2024 (10) TMI 1564 - AT - Income Tax

Rejection of deduction u/s 54F - assessee has purchased a new house property beyond the period of two years from the date of sale - HELD THAT - Tax authorities are not right in taking into consideration the events that took place in the subsequent years. Accordingly, we are of the view that they are not justified in rejecting the deduction claimed by the assessee u/s 54F of the Act. With regard to the events that took place subsequently, i.e., purchase of land, the Ld.AR disputed the assertion of the AO that the said land consisted of residential building. He submitted that the same was watchman out house, which cannot be considered to be a house. He further submitted that the assessee has started construction of the building thereon subsequently. In any case, in our view, all these facts need to be examined only in the subsequent years and not during the year under consideration. Accordingly, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to allow deduction u/s. 54F of the Act claimed by the assessee. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Rejection of claim under section 54F of the Income Tax Act, 1961.

Analysis:
The judgment pertains to an appeal challenging the rejection of a claim under section 54F of the Income Tax Act, 1961. The assessee sold unlisted securities and earned Long Term Capital Gain during the relevant assessment year. The assessee claimed deduction under section 54F by depositing the sale proceeds in a Capital Gains Deposit Account within the due date for filing the return of income. However, the Assessing Officer (AO) rejected the claim as the new property was purchased beyond the stipulated period of two years from the date of sale. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appeal before the Tribunal.

The assessee contended that the deduction under section 54F should be allowed as per the provisions of the Act. The assessee had deposited the entire sale consideration in the Capital Gains Deposit Scheme before the due date for filing the return of income. The assessee argued that the unutilized portion of the deposit amount would be charged as income in a subsequent year, as per the Act. The assessee emphasized that the CIT(A) should have directed the AO to allow the deduction claimed under section 54F.

The Tribunal analyzed section 54F(4) of the Act, which mandates the deposit of the net consideration towards the purchase of a new asset before the due date for filing the return of income. The Tribunal noted that the assessee had complied with this requirement by depositing the sale consideration in the Capital Gains account scheme. The Tribunal emphasized that the tax authorities erred in considering events from subsequent years to reject the deduction claimed by the assessee. The Tribunal held that the deduction under section 54F should be allowed, setting aside the CIT(A)'s order.

In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the AO to permit the deduction claimed under section 54F of the Act. The judgment highlights the importance of adhering to statutory provisions and timelines for claiming deductions under the Income Tax Act, ensuring a fair and just application of tax laws.