2020 (8) TMI 312 - AT - Income Tax

LTCG - Benefit of deduction u/s 54 - entitled for the benefit of deduction in respect of the disputed sum, when she has utilized such sum towards purchase of the new house on 26-8-2016 and thus complied with the provisions of section 54(1), even though the said sum was not deposited in the capital gains account scheme as required under section 54(2) - HELD THAT - For seeking benefit of deduction under section 54 of the Act, the assessee should have substantially complied with section 54(1). In this case, the assessee should have purchased the residential house within two years from 19-10-2015, ie the date of transfer. She has utilized such sum towards purchase of the new house on 26-8-2016 itself. As explained the reasons for not-depositing the amount in Capital Gains Accounts Scheme which is also not disputed. Since the assessee has substantially complied with section 54(1), therefore, a mere non-compliance of a procedural requirement under section 54(2) itself cannot stand in the way of the assessee in getting the benefit under section 54. Therefore, we do not find any reason to interfere with the order of the learned CIT (A). The Grounds raised in the appeal of the Revenue stand dismissed.

Summary

Issues:
Whether the assessee is entitled to deduction under section 54 for the amount utilized towards a new house, despite not depositing the amount in Capital Gains Accounts Scheme (CGAS) within the due date for filing the return under section 139(1) of the Income Tax Act.

Analysis:
The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) concerning the deduction claimed by the assessee under section 54 for the amount utilized towards purchasing a new house. The assessee had claimed the deduction for an amount utilized for a new house purchased after the due date for filing the return under section 139(1). The Assessing Officer disallowed the deduction as the amount was not deposited in CGAS within the due date. However, the CIT(A) allowed the deduction after considering the assessee's explanation and relevant case laws. The CIT(A) held that the assessee became eligible for the deduction under section 54 as the new property was purchased before the due date of filing the return under section 139(4).

The Revenue contended that the CIT(A) erred in allowing the deduction under section 54, citing other tribunal decisions. On the contrary, the assessee supported the CIT(A)'s order, referencing relevant case laws. The Tribunal analyzed the issue of whether the assessee was entitled to the deduction under section 54 despite not depositing the amount in CGAS within the due date for filing the return under section 139(1). The Tribunal referred to the decision of the jurisdictional High Court and other case laws to establish that substantial compliance with section 54(1) is crucial for claiming the deduction. The Tribunal concluded that since the assessee substantially complied with section 54(1) by purchasing the new house within the stipulated time and providing valid reasons for not depositing the amount in CGAS, the procedural lapse under section 54(2) should not hinder the assessee from claiming the deduction under section 54.

Based on the analysis, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal and allowing the assessee's cross objections. The Tribunal found no reason to interfere with the decision as the assessee had substantially complied with the requirements of section 54(1) for claiming the deduction under section 54. The order was pronounced on 20th July 2020 in Chennai.