2014 (12) TMI 208 - AT - Income Tax

Rejection of claim of exemption u/s 54 Purchase of new residential property against payment in installments - A.O. noted that the assessee has made payment of ₹ 5,07,825/- only within two years from the date of transfer of property for acquisition which cannot be treated as substantial portion of ₹ 35,72,240/- - assessee submitted that he has paid substantial amount to the builder before the completion of period of 3 years from the date of sale of original asset i.e. before 24-10-2010 and the flat was in his possession at the time of hearing. - Recently delivered judgment by SC relied upon by assessee - Held that - the assessee has claimed the deduction u/s.54F of the I.T. Act whereas the Assessing Officer has proceeded with the provisions of section 54 of the I.T Act. The assessee has received an amount being her share in the joint property sold on 25-10-2007 - assessee kept the money in her savings account and did not deposit the money in the specified capital gain account scheme within the stipulated time AO was of the view that since it has not paid substantial amount within a period of 2 years from the date of transfer of property for acquisition of the residential flat nor deposited the money in the specified capital gain account with any specified bank and the money was deposited in her saving bank account which was upheld by the CIT(A) assessee entered into an agreement for purchase of flat on 14-10-2009 - the details of payment made towards the purchase flat are already given Assessee relied upon the decision delivered by SC in Sh. Sanjeev Lal Etc. Versus Commissioner of Income Tax & Another 2014 (7) TMI 99 - SUPREME COURT - However, it is a very recent decision and was neither available before the AO nor before the CIT(A) - Revenue authorities had no opportunity to go through the ratio laid down in the said case, vis-a-vis the facts of the case of the assessee thus, the matter is remitted back to the AO with a direction to decide the issue in the light of the decision of the SC Decided in favour of assessee.

Issues Involved:
1. Eligibility for deduction under Section 54F of the Income Tax Act, 1961.
2. Compliance with provisions of Section 54F regarding the utilization of capital gains.
3. Validity of the denial of deduction based on the timing and manner of investment.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 54F:
The primary issue in this case is whether the assessee is eligible for deduction under Section 54F of the Income Tax Act, 1961. The assessee claimed a deduction of Rs. 30,73,912/- under Section 54F, which was disallowed by the Assessing Officer (A.O.). The A.O. noted that the assessee, as one of the co-parceners, sold a piece of land and received Rs. 53,12,500/- as her share. The assessee computed long-term capital gain at Rs. 45,71,405/- and claimed to have invested Rs. 35,72,240/- in a new flat, seeking deduction under Section 54F. However, the A.O. observed that the payments made towards the new flat were not within the stipulated time frame and did not comply with the provisions of Section 54F.

2. Compliance with Provisions of Section 54F:
The A.O. noted that the sale transaction occurred in October 2007, and the payments made to the builder were spread over several years, with only Rs. 5,07,825/- paid within two years from the date of transfer. The A.O. also highlighted that the assessee failed to open a separate capital gains account and instead kept the amount in a regular savings account, utilizing it for short-term fixed deposits. Consequently, the A.O. disallowed the deduction, stating that the assessee did not comply with the provisions of Section 54F.

3. Validity of the Denial of Deduction:
The CIT(A) upheld the A.O.'s decision, emphasizing that the assessee did not open a capital gains saving account and made substantial payments to the builder only after the stipulated period. The CIT(A) also noted that the agreement with the builder was made almost two years after the sale of the original asset, indicating a lack of immediate intention to purchase or construct a residential property. The CIT(A) relied on the decision of the Ahmedabad Bench of the Tribunal in the case of Thakorlal Harkisandas Intwala Vs. ITO to support the disallowance.

Arguments by the Assessee:
The assessee argued that the intention to purchase a new property was evident from the beginning, as demonstrated by the opening of a new savings account for the deposit of sale proceeds. The assessee claimed that substantial payments were made to the builder before the completion of three years from the date of sale, and possession of the flat was obtained within the stipulated period. The assessee relied on various judicial precedents and CBDT circulars to argue that the denial of deduction was unjustified.

Tribunal's Decision:
The Tribunal considered the rival arguments and noted that the recent decision of the Hon'ble Supreme Court in the case of Sanjeev Lal Vs. CIT was relevant to the issue. Since this decision was not available to the Revenue authorities during the assessment and appellate proceedings, the Tribunal deemed it appropriate to restore the issue to the file of the A.O. The A.O. was directed to decide the issue in light of the Supreme Court's decision and in accordance with the law, after providing the assessee with an opportunity to be heard.

Conclusion:
The Tribunal allowed the appeal filed by the assessee for statistical purposes, directing the A.O. to re-evaluate the claim for deduction under Section 54F in light of the recent Supreme Court ruling. The Tribunal emphasized the need for a thorough examination of the facts and compliance with the relevant legal provisions.

Pronouncement:
The judgment was pronounced in the open court on 08-08-2014.

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