2018 (12) TMI 1584 - AT - Income Tax

Disallowing the deduction u/s 54F - treating the purchase of new residential flat as a case of construction and not purchase on the ground that the payment was made by the Appellant in installments to the builder for the flat - time limit for purchase and for construction ,for any harmonious understanding of the section - Held that - It is clear that in transacting with M/s DLF universal ltd. for acquiring the flat(s) in question, the assessee has entered into both types of agreement i.e.both purchase and construction and both these are essentially running concomitantly. And the claim for the deduction has been restricted by the assessee to the investment done within the specified periods of one year prior to the date of sale of original assets to the three years from the date of sale of shares. Moreover the claim within the capital gains earned by the assessee. Hence the assessee would be entitled for deduction u/s 54F for the entire amount claimed. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction under section 54F
2. Availability of relief under Section 54F
3. Disallowance of deduction u/s 54F for the amount paid up to the limit for filing of the return
4. Initiation of penalty proceedings under section 271(1)(c) of the Act
5. Charging of interest under section 234B and 234C

Issue 1: Disallowance of deduction under section 54F
The assessee claimed deduction under section 54F for investing in a new residential flat. The Assessing Officer (AO) disallowed a significant portion of the claimed amount, treating the purchase as a case of "construction" rather than "purchase." The AO held that the time limits for purchase and construction were separate, allowing the deduction only within the three years after the sale of the original asset. The CIT(A) upheld this view. However, the Tribunal found the interpretation restrictive and not in line with judicial opinions. The Tribunal noted that in this case, the agreement involved both purchase and construction, running concurrently. Citing relevant case laws, the Tribunal allowed the deduction under section 54F for the entire claimed amount.

Issue 2: Availability of relief under Section 54F
The assessee argued that the time limits prescribed under section 54F should be applicable to both purchase and construction scenarios. The Tribunal agreed, emphasizing that the artificial distinction between purchase and construction should not restrict the benefit of the legislation. By considering the totality of circumstances and the nature of the agreement, the Tribunal allowed the deduction under section 54F for the entire claimed amount, as the assessee had entered into agreements for both purchase and construction simultaneously.

Issue 3: Disallowance of deduction u/s 54F for the amount paid up to the limit for filing of the return
The AO disallowed the claim for investment/expenditure beyond a certain date, linking it to the deposit of capital gains in the Capital Gain Scheme. The CIT(A) upheld this view, rejecting the assessee's argument regarding the due date for filing the return. The Tribunal, however, considered case laws supporting the extension of the due date for filing the return u/s 139, allowing the deduction for the entire extended period. As the main issues were decided in favor of the assessee, this ground did not require further adjudication.

Issue 4: Initiation of penalty proceedings under section 271(1)(c) of the Act
The Tribunal deemed the initiation of penalty proceedings premature at that point and did not delve into this issue.

Issue 5: Charging of interest under section 234B and 234C
The Tribunal considered the charging of interest under sections 234B and 234C as consequential, given the decision on the main issues in favor of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, granting the deduction under section 54F for the entire claimed amount and addressing the other issues accordingly. The judgment emphasized a holistic interpretation of the provisions to ensure the intended benefits of the legislation.