2012 (4) TMI 401 - AT - Income Tax

Rejection of claim of exemption under section 54 assessee submitted that non compliance with the provisions of section 54 within the time prescribed was for reasons beyond her control as the money which was blocked by her by paying advances to procure the property was not realized within the time - Held that - Payment of advance and return of the same are all matters of normal commercial agreements and cannot act as supervening impossibilities - two out of the three persons to whom advances were made are assessee s own sons to whom she handed over the money who enjoyed it for long time - these events do not lead to supervening impossibilities to constructed the residential property beyond three years of the prescribed time limit against assessee.

Summary

Issues:
1. Denial of deduction under section 54 of the Income-tax Act, 1961.

Analysis:
The case involved an appeal related to the assessment year 1995-96 against the order of the Commissioner of Income-tax(Appeals)-XII at Chennai. The assessee claimed exemption under section 54 after selling a property in Chennai for Rs. 95 lakhs. The assessing authority rejected the claim, determining the income at Rs. 81,60,000. The Income-tax Appellate Tribunal remitted the file back to the Assessing Officer to reconsider the disallowance under section 54 and the setting off of short-term capital loss arising from the sale of shares.

In the subsequent assessment, the deduction under section 54 was denied again, along with holding the short-term capital loss as speculative. The Commissioner of Income-tax(Appeals) allowed the issue of short-term capital loss but confirmed the disallowance of deduction under section 54. The appeal before the tribunal focused on challenging the denial of deduction under section 54.

The assessee's argument was based on the claim that she had given advances towards purchasing a property to construct a residential house, but the construction was completed only in 2001-02, beyond the prescribed time limit. The assessee contended that she was prevented from depositing the sale proceeds in a capital gains account due to the advances made for property purchase, which were not realized in time.

The tribunal considered the assessee's plea but found it unsustainable in law. It noted that the advances made were not returned in time, and the property was neither acquired nor constructed within the stipulated period. The tribunal highlighted that the assessee's reliance on supervening impossibilities was unfounded, especially given that two out of the three parties to whom advances were made were her own sons. The tribunal concluded that the contentions of the assessee did not hold legal merit, leading to the dismissal of the appeal.

In summary, the tribunal dismissed the appeal filed by the assessee, upholding the denial of deduction under section 54 of the Income-tax Act, 1961.