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2021 (2) TMI 580 - AT - Income TaxLTCG - exemption u/s 54 - Non deposit of the sale consideration in capital gain scheme account prior to due date of filing of return under section 139(1) - Whether booking of flat is to be considered as a case of construction for the purpose of section 54? - AO Rejected the claim of the deduction as amount of capital gain has neither been invested in purchase or construction of residential house within the stipulated period, nor deposited in capital gain scheme account within limit provided section 139(1) and booking of flat is not purchase of flat because as per agreement to sale, construction of the flat was to be carried out and it was not completed till completion of assessment. HELD THAT - As payment have been cleared from the bank account of the assessee before the due date of the filing of return under section 139(4) of the Act which was 31/03/2013 in the case of the assessee. As the investment in property has been made prior to due date of filing of return of income under section 139 (4) of the Act i.e 31/03/2013, therefore Respectfully following the decision of SHRI JAGTAR SINGH CHAWLA 2013 (4) TMI 499 - PUNJAB AND HARYANA HIGH COURT , we are of the opinion that the assessee cannot be denied deduction on the ground that amount of sale consideration has not been invested in capital gain account scheme before the due date of the filing of return under section 139(1) of the Act. Eligibility of deduction 54 of the Act for booking of flat with private builders - The assessee has made entire payment within the period of three years from the date of the transfer of original asset, and therefore, the amount has to be treated as invested in purchase/construction. The provisions of section 54 nowhere prescribe construction of the house should be completed. The prime requirement is investment in new residential house within the prescribed period. Thus, respectfully following the Tribunal in the case of Ramprakash Miyav Bazaz 2014 (6) TMI 40 - ITAT JAIPUR we are of the opinion that the assessee has complied the provision of section 54 of the Act in substance and therefore Ld. CIT(A) is not justified in confirming rejection of deduction under section 54 of the Act. We set aside the finding of the Learned CIT(A) on the issue in dispute and direct the Assessing Officer to allow the deduction claim under section 54 of the Act. The grounds of the appeal of the assessee are accordingly allowed.
Issues Involved:
1. Disallowance of exemption under Section 54 of the Income Tax Act, 1961. 2. Applicability of CBDT Circulars No. 471 and 672 to the assessee's case. 3. Eligibility for exemption under Section 54 when investment is made before the filing of return under Section 139(4). 4. Denial of exemption under Section 54 due to non-receipt of possession and non-execution of the sale deed. 5. Alleged contradiction in the appellant's claim of payment made to the builder. 6. Interpretation of the beneficial provisions of Section 54. Detailed Analysis: 1. Disallowance of Exemption under Section 54: The assessee, a co-owner of a property, claimed exemption under Section 54 for capital gains arising from the sale of a property. The Assessing Officer (AO) disallowed the exemption on the grounds that the amount of capital gain was not invested in the purchase or construction of a residential house within the stipulated period, nor was it deposited in the capital gain scheme account within the limit provided under Section 139(1). The CIT(A) upheld this disallowance. 2. Applicability of CBDT Circulars No. 471 and 672: The assessee argued that booking a flat should be considered as construction under Section 54, citing CBDT Circulars No. 471 and 672. However, the AO and CIT(A) rejected this claim, stating that these circulars apply only to allotments under self-financing schemes of government bodies like the Delhi Development Authority (DDA) and similar institutions, not to private builders. 3. Eligibility for Exemption Under Section 54 When Investment is Made Before Filing Return Under Section 139(4): The assessee filed the return on 31/10/2012, within the extended period allowed under Section 139(4). The Tribunal noted that various judicial precedents, including those from the Punjab & Haryana High Court and the Rajasthan High Court, have held that the term "Section 139" includes all its subsections. Thus, investments made before the due date for filing returns under Section 139(4) qualify for exemption under Section 54. 4. Denial of Exemption Under Section 54 Due to Non-Receipt of Possession and Non-Execution of Sale Deed: The CIT(A) concurred with the AO's finding that the exemption could not be granted as the assessee had not received possession of the flat, nor had the sale deed been executed. The Tribunal, however, held that the primary requirement under Section 54 is the investment in the new residential house within the prescribed period, not the completion of construction or receipt of possession. 5. Alleged Contradiction in the Appellant's Claim of Payment Made to the Builder: The CIT(A) found contradictions in the appellant's claim of having paid ?89,50,000 to the builder. The Tribunal reviewed the evidence and found that all payments were made before the due date for filing the return under Section 139(4), thereby validating the appellant's claim. 6. Interpretation of the Beneficial Provisions of Section 54: The CIT(A) interpreted Section 54 narrowly, denying the exemption on technical grounds. The Tribunal emphasized that Section 54 is a beneficial provision aimed at promoting investment in residential properties. It held that the intent of the legislature was not to deny exemption if the primary conditions of investment within the prescribed period were met. Conclusion: The Tribunal set aside the findings of the CIT(A) and directed the AO to allow the deduction claimed under Section 54. The appeal of the assessee was allowed, emphasizing the broader and beneficial interpretation of Section 54 to include investments made within the extended period for filing returns under Section 139(4) and recognizing the booking of flats with private builders as equivalent to construction for the purpose of claiming exemption.
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