2017 (5) TMI 289 - AT - Income Tax

Claim of deduction under section 54F - Held that - The assessee has not deposited within the due date for filing of return of income. In fact, the assessee filed the return on February 6, 2013 within the time provided under section 139(4) of the Act. The return was not filed within the time provided under section 139(1) of the Act. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the entire claim of deduction under section 54F of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh and find out whether the assessee has invested the money in construction of property after getting approval of Panchayat Union Disallowance of amount invested in REC Bonds - Held that - Admittedly, the property was sold on January 10, 2011 and the assessee deposited a sum of ₹ 50 lakhs on March 31, 2011 and another sum of ₹ 20 lakhs on June 30, 2011 in REC Bonds. REC Bond, admittedly, is a capital gain bond. Since the deposit was made within the due date for filing of the return of income, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Summary

Issues:
1. Disallowance of investment in REC Bonds by the Assessing Officer.
2. Eligibility for deduction under section 54F of the Income-tax Act, 1961.
3. Compliance with the time frame for investment in REC Bonds.

Issue 1: Disallowance of investment in REC Bonds by the Assessing Officer

The appellant, who inherited a property and sold it, invested in REC Bonds but faced disallowance by the Assessing Officer for not depositing within the time frame under section 139(1) of the Act. The appellant argued that the investment was justified as they had initiated construction of a residential house and obtained approval from the Panchayat Union before the due date for filing the return. The Departmental representative contended that without depositing in the capital gains account, the appellant was not eligible for deduction under section 54F. The Tribunal set aside the previous orders, remitting the issue back to the Assessing Officer for reconsideration.

Issue 2: Eligibility for deduction under section 54F of the Income-tax Act, 1961

The dispute revolved around the appellant's claim for deduction under section 54F. The appellant invested in REC Bonds within the due date for filing the return of income, aiming to avail exemption under section 54F. The Departmental representative argued that the investment was not made within six months from the transfer date, justifying the disallowance. The Tribunal upheld the Commissioner of Income-tax (Appeals)' decision, confirming the appellant's eligibility for deduction under section 54F due to timely investment in REC Bonds.

Issue 3: Compliance with the time frame for investment in REC Bonds

Regarding the compliance with the time frame for investment in REC Bonds, the Tribunal analyzed the dates of property sale and REC Bonds investments. The appellant invested in REC Bonds within the due date for filing the return of income, aligning with the legislative provision for investing capital gains. The Tribunal concluded that the Commissioner of Income-tax (Appeals) rightly allowed the appellant's claim, confirming the eligibility for deduction under section 54F. Consequently, the Tribunal dismissed the Revenue's appeal and allowed the appellant's appeal for statistical purposes.

This judgment by the Appellate Tribunal ITAT CHENNAI addressed the issues of disallowance of investment in REC Bonds, eligibility for deduction under section 54F of the Income-tax Act, 1961, and compliance with the time frame for investment. The Tribunal provided a detailed analysis of the arguments presented by both parties, ultimately remitting one issue back to the Assessing Officer for reconsideration while confirming the appellant's eligibility for deduction under section 54F based on timely investment in REC Bonds.