2018 (3) TMI 293 - AT - Income Tax

Deduction claimed u/s 54 - payment was made within the stipulated period and the construction could not be completed by the developer of the flat - eligibility criteria - Held that - Section 54(2) of the Act clearly says that in case the capital gain, which is not appropriated by the assessee towards purchase of new asset or which is not utilized in purchase of residential house or construction of residential house, then it shall be deposited in a specific account. In this case, it is not the case of Revenue that capital gain was not appropriated or it was not utilised. The fact is that the entire capital gain was paid to the developer of the flat. In other words, the assessee has utilised the entire capital gain by way of making payment to the developer of the flat. Section 54(2) does not say that in case the assessee could not get the possession of the property, he is not entitled for exemption under Section 54 of the Act. The requirement of Section 54 of the Act is that the capital gain shall be utilised or appropriated as specified in Section 54(2) of the Act. The assessee has complied with the conditions stipulated in Section 54(2) of the Act, therefore, the CIT(Appeals) has rightly allowed the appeal of the assessee. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against revenue

Summary

Issues:
- Condonation of delay in filing the appeal by the Revenue.
- Eligibility of the assessee for deduction under Section 54 of the Income-tax Act, 1961.

Condonation of Delay:
The Revenue filed an appeal with a delay of 2 days, seeking condonation. The Tribunal found sufficient cause for the delay and granted the condonation, allowing the appeal to be admitted.

Eligibility for Deduction under Section 54:
The main issue was the deduction claimed by the assessee under Section 54 of the Act. The Departmental Representative argued that the new flat's construction was incomplete, making the assessee ineligible for the deduction. Despite the absence of the assessee during the hearing, the Tribunal proceeded to consider the matter on merit.

Upon review, it was found that the entire sale consideration was reinvested in a new flat within the specified period. The question arose whether the assessee, who made the payment within the stipulated period but faced construction delays, was still eligible for deduction under Section 54.

The Tribunal analyzed Section 54 of the Act, emphasizing that if the capital gain is utilized or appropriated as per the provisions, the assessee is entitled to exemption. In this case, the entire capital gain was paid to the flat developer, meeting the requirements of Section 54(2). The possession of the property was not a condition for eligibility under Section 54.

Ultimately, the Tribunal upheld the decision of the lower authority, confirming that the assessee had fulfilled the conditions of Section 54(2) and was rightfully granted the deduction. Consequently, the appeal filed by the Revenue was dismissed.

This detailed analysis highlights the Tribunal's interpretation of the law and the specific provisions of Section 54 of the Income-tax Act, 1961, in determining the eligibility of the assessee for the claimed deduction.