2018 (11) TMI 860 - AT - Income Tax

Claim of exemption u/s 54 - purchase of the new asset within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of 3 years from the date on which the transfer took place - utilization of the LTCG before the date of furnishing the return of income u/s 139 - Held that - Subsection (2) of Sec. 54 contemplates two situations viz. (a) a case where the assessee had appropriated the amount of LTCG towards acquisition of the new asset within a period of one year before the date on which the transfer of the original asset took place or for the purchase or construction of the new asset before the date of furnishing the return of income under Sec.139; and (b) a case where the assessee had not appropriated the amount of the capital gain before the date of furnishing the return of income u/s.139, there he shall be eligible to claim exemption u/s 54 towards purchase of the new asset within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of 3 years from the date on which the transfer took place, subject to a rider that the assessee should have deposited the amount of capital gain in a CGAS account with a specified bank by not later than the due date applicable in his case for furnishing the return of income under sub-section (1) of Sec.139. We find that the case before us clearly falls within the sweep of the aforementioned first limb of sub-section (2) of Sec.54. As the assessee in the case before us had appropriated the amount of the LTCG towards purchase of the new residential property viz. Flat A-203, Crown @ Hiranandani, Thane on 22.04.2014 i.e before the date contemplated under Sec.139(4), thus by having utilized the LTCG before the date of furnishing the return of income under Sec. 139, his claim of exemption under Sec. 54 is found to be in order. - decided against revenue.

Summary

Issues:
1. Allowance of deduction claimed under section 54 of the Income Tax Act.
2. Consideration of the date of filing return for depositing capital gains in long term capital gains scheme.
3. Appeal against the order of CIT(A) to be vacated and that of the Assessing Officer to be restored.

Analysis:

Issue 1: Allowance of deduction claimed under section 54
The appeal was filed by the revenue against the order passed by CIT(A) regarding the allowance of deduction claimed under section 54 of the Income Tax Act. The assessee had shown a Long Term Capital Gain (LTCG) in respect of two properties and claimed exemption under section 54. The Assessing Officer (A.O) was of the view that the assessee had not complied with the conditions of section 54 as the entire capital gain was not invested before the due date of filing the return of income. However, CIT(A) allowed the appeal of the assessee, stating that if the LTCG was utilized before the due date of filing the return of income, the claim of exemption under section 54 would still be valid.

Issue 2: Consideration of the date of filing return for depositing capital gains
The A.O contended that the assessee failed to deposit the LTCG amount in the Capital Gain Account Scheme (CGAS) by the due date of filing the return of income as per section 139(1), thus disallowing the exemption claim under section 54. However, CIT(A) disagreed with this view, stating that the due date of filing the return of income as per section 139(4) was applicable in this case. The CIT(A) observed that the assessee had utilized the LTCG for the purchase of a new property within the specified period, which was considered valid for claiming exemption under section 54.

Issue 3: Appeal against the order of CIT(A)
The revenue appealed against the order of CIT(A) before the Appellate Tribunal. Despite the absence of the assessee during the hearing, the Tribunal proceeded with the appeal. The Tribunal analyzed the provisions of section 54(2) and emphasized that the assessee's utilization of LTCG before the due date of filing the return of income under section 139 was crucial for claiming exemption. The Tribunal upheld the view taken by CIT(A) and dismissed the appeal of the revenue, citing precedents from the High Court and Tribunal decisions supporting the assessee's position.

In conclusion, the Appellate Tribunal upheld the decision of CIT(A) regarding the allowance of deduction claimed under section 54 of the Income Tax Act, emphasizing the importance of utilizing LTCG before the due date of filing the return of income for claiming exemption. The judgment highlighted the significance of compliance with statutory provisions and previous legal interpretations in tax matters.