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2016 (3) TMI 823 - AT - Income TaxDeduction u/s 54B and 54F - Entitlement to claim whether the return has actually been filed under section 139(1) or under section 139(4)? - Held that - A combined reading of section 54B(2) read with the proviso clearly provides that the amount of the capital gain which is not utilized by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139(1) should be deposited with a bank/institution in a specified scheme irrespective of whether the return has actually been filed under section 139(1) or under section 139(4) of the Act. The legislative intention behind the introduction of subsection 2 to section 54B was therefore to obviate the need for rectification of assessment orders where the assessee fails to purchase the assets within prescribed time limit of 2 years. It was therefore provided that where the assessee deposits the funds in the specified capital gains scheme, the funds so deposited in the specified capital gains scheme were taken into consideration for allowing the deduction and were deemed to be the cost of new asset. The said deposit will therefore act as a safeguard to the Revenue that claim of deduction has been lawfully allowed in absence of actual purchase of the new asset. It is further provided that subsequently where the assessee doesn t utilize the funds so deposited with the prescribed time limit of two years, the amount not so utilized shall be charged under section 45 as income of the previous year in which the period of two years from the date of transfer of the original asset expires. In other words, the requirements of section 54B(2) are therefore to supplement, support and aid in administration of deduction under section 54B(1) of the Act. Secondly, it is to be further noted that section 54B(2) provides that for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of new asset together with the amount so deposited shall be deemed to be the cost of the new asset. Under section 54B(1) of the Act, it is for the assessee to claim the deduction and it is only when the assessee makes a claim of said deduction, the Revenue is well within its jurisdiction to examine whether the assessee has satisfied the necessary conditions for claiming such deduction. Under subsection 1 to section 54B, it requires the purchase of the new asset and under subsection 2 to section 54B, it is provided that even if the assessee has not purchased the new asset but has deposited the funds in the capital gains account scheme, such deposit shall be considered as deemed cost. In a situation where assessee has neither claimed nor deposited the unutilised capital gains consideration in the capital gains account scheme, where is the question of allowing the deduction at first place. Accordingly, where an appellant satisfies the first condition prescribed under section 54B(1) and at the same time, neither claim nor comply with the second condition as prescribed under section 54B(2) of the Act, the appellant would be eligible for deduction under section 54B of the Act. The provisions of section 54F(2) are pari-materia with the provisions of section 54B(2) of the Act. Hence, the above discussion would hold equally good for the purposes of claim of deduction under section 54F of the Act. The AO is accordingly directed to allow deduction to the appellant under section 54B as well as under section 54F of the Act after verifying the satisfaction of necessary condition by the appellant as prescribed under section 54B(1) and 54F(1) of the Act respectively. - Decided in favour of assessee Disallowance u/s 48 - Held that - Where the capital gains have been brought to tax, it would be just and proper that the assessee is granted its claim of deduction under section 48 of the Act. The AO is accordingly directed to allow the claim of deduction after necessary verification. - Decided in favour of assessee.
Issues Involved
1. Deduction under Section 54B of the Income Tax Act, 1961. 2. Addition under Section 50C by adopting the DLC rate. 3. Deduction under Section 54F of the Income Tax Act, 1961. 4. Deduction under Section 48 of the Income Tax Act, 1961. Issue-Wise Analysis 1. Deduction under Section 54B of the Income Tax Act, 1961 Facts and Arguments: - The assessees claimed deductions under Section 54B for the purchase of new agricultural land. - The Assessing Officer (AO) disallowed the claims, citing non-compliance with the requirement to deposit the sales consideration in a capital gain account scheme and failure to purchase the agricultural land before the due date of filing the original return. - The assessees contended that the law does not mandate the investment in new assets before the due date of furnishing the return of income and that they complied by purchasing the agricultural land within two years from the date of transfer. Findings: - The CIT(A) upheld the AO's decision, emphasizing the mandatory nature of depositing the sales consideration in a capital gain account scheme before the due date under Section 139(1). - The Tribunal examined the legislative intent behind Section 54B(2), noting that it aims to regulate the interim usage of funds until the purchase of the new asset. - The Tribunal concluded that the provisions of Section 54B(2) do not dilute the initial condition of utilizing the capital gains within two years. The requirement to deposit the funds in a specified scheme applies equally to returns filed under Section 139(1) and Section 139(4). Decision: - The Tribunal directed the AO to allow the deduction under Section 54B after verifying compliance with the conditions prescribed under Section 54B(1). 2. Addition under Section 50C by Adopting the DLC Rate Facts and Arguments: - The assessees challenged the addition made under Section 50C by adopting the DLC rate, arguing that it was unjustified and arbitrary. Findings: - This ground was not pressed by the assessees during the hearing. Decision: - The Tribunal dismissed this ground as not pressed. 3. Deduction under Section 54F of the Income Tax Act, 1961 Facts and Arguments: - One of the assessees also claimed a deduction under Section 54F for the purchase of a house property. - The AO disallowed the claim for similar reasons as under Section 54B, citing non-compliance with the capital gain account scheme and the due date for filing the original return. Findings: - The Tribunal applied the same reasoning as in the case of Section 54B, noting that the provisions of Section 54F(2) are pari materia with Section 54B(2). - The Tribunal concluded that the assessees are entitled to the deduction under Section 54F, provided they comply with the conditions prescribed under Section 54F(1). Decision: - The Tribunal directed the AO to allow the deduction under Section 54F after verifying compliance with the necessary conditions. 4. Deduction under Section 48 of the Income Tax Act, 1961 Facts and Arguments: - The assessees claimed a deduction under Section 48 for the cost of improvement and expenses incurred on the sale of land. - The AO disallowed the claim, treating the revised return as void-ab-initio since it was not filed within the due date. Findings: - The CIT(A) upheld the AO's decision, stating that the revised return was not filed within the time provided under Section 139(5). - The Tribunal noted that the original return did claim the deduction under Section 48 and that there is no requirement for the return to be filed in time to claim the deduction. Decision: - The Tribunal directed the AO to allow the deduction under Section 48 after necessary verification. Conclusion The Tribunal allowed the appeals in part, directing the AO to grant deductions under Sections 54B, 54F, and 48 after verifying compliance with the respective conditions. The ground regarding the addition under Section 50C was dismissed as not pressed.
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