2018 (1) TMI 508 - AT - Income Tax

Claim of exemption u/s 54F - amount invested up to the time available u/s 139(4) - Held that - The case of Sri Ajeet Kumar Jaiswal Vs. ITO (2017 (10) TMI 1143 - ITAT HYDERABAD) this Tribunal was considering the case of an assessee who had deposited the capital gains into term deposit account and not the capital gains account as required u/s 54(2) of the Act and since the funds were not utilized for any other purpose but for construction of a new asset, this Tribunal had held that the assessee was eligible for deduction u/s 54F of the Act in the said case even though the amount was not deposited into the capital gains account. However, in the case before us, the assessee has not deposited any amount in to any bank account, leave alone the capital gains account. Therefore, in our opinion, the assessee is eligible for deduction u/s 54F of the IT Act only on the amount which is invested up to the time available u/s 139(4) to file the return of income. In the case before us, the assessee has filed the return of income on 14-02-2013, therefore, the assessee is eligible for deduction u/s 54F of the Act for the amount invested by him till such date. In the case of Humayun Suleman Merchant Vs CCIT (2016 (9) TMI 70 - BOMBAY HIGH COURT) held that the assessee is eligible for deduction u/s 54F of the IT Act on the amounts spent for construction of a house till the date of filing of the return of income. Hence, the A.O is directed to allow the deduction u/s 54F of the Act accordingly.

Issues:
1. Application of Sec 50C of the Act on property sale consideration.
2. Claim of deduction u/s 54 of the Act.
3. Dispute over restricting the claim of exemption u/s 54F.
4. Interpretation of Sec. 54F(4) regarding depositing unutilized net consideration.
5. Eligibility for deduction u/s 54F based on investment timing.

Analysis:
1. The case involved a reassessment where the assessee declared income and capital gains from property sale for A.Y 2012-13. The Assessing Officer (A.O) applied Sec 50C of the Act due to discrepancies between reported sale price and SRO values of properties. The assessee's justification for lower sale price was rejected, leading to adoption of SRO values as sale consideration.

2. Subsequently, the A.O examined the assessee's claim of deduction u/s 54 of the Act. The assessee claimed deduction u/s 54 but had only expended a portion of the sale proceeds by the due date for filing the return. The A.O disallowed the remaining amount not deposited in the capital gains scheme account.

3. The assessee appealed to the CIT(A) challenging the restriction on exemption u/s 54F to a specific amount. The appeal was based on investing the entire capital gain in a new house within the stipulated period. The assessee cited relevant court decisions and tribunal rulings to support the claim.

4. The Tribunal analyzed Sec. 54F(4) requirements regarding depositing unutilized net consideration, emphasizing the need for compliance before the due date for filing the return. Citing court decisions, the Tribunal held that the assessee's failure to deposit the unutilized amount into any bank account, including the capital gains account, impacted the deduction eligibility.

5. Considering the investment timing, the Tribunal ruled that the assessee is eligible for deduction u/s 54F based on the amount invested up to the date of filing the return of income. Court precedents and the interpretation of Sec. 139(4) of the Act supported this decision, aligning with the principle that deduction u/s 54F can be allowed for investments made until the return filing date.

In conclusion, the Tribunal partially allowed the assessee's appeal, directing the A.O to permit the deduction u/s 54F based on the investment made by the assessee until the date of filing the return of income. The judgment highlighted the importance of timely compliance with statutory provisions for claiming deductions under the Income Tax Act.

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