2021 (6) TMI 623 - AT - Income Tax

Disallowance u/s 54F - assessee did not deposit unutilized amount in capital gain accounts scheme as required u/s 54F - HELD THAT - As relying on SHRI RAMAIAH DORAIRAJ VERSUS INCOME TAX OFFICER, WARD 4 (2) (2) , BANGALORE. 2020 (12) TMI 597 - ITAT BANGALORE , VENKATA DILIP KUMAR 2019 (11) TMI 416 - MADRAS HIGH COURT we direct the A.O. to allow the claim of the assessee after verifying the details of investment made in the purchase of new flat by the assessee, i.e., whether the investment has been made within the period prescribed u/s 54F - Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Disallowance made under section 54F of the Income-tax Act, 1961.
2. Interpretation of provisions of section 54F of the Act.
3. Compliance with conditions laid down under section 54F(1) or 54F(4) of the Act.

Detailed Analysis:
1. The appellant challenged the order passed by the Ld. CIT(A) regarding the partial confirmation of disallowance made under section 54F of the Income-tax Act, 1961. The appellant sold an ancestral property resulting in long term capital gain and invested in a new residential apartment. However, the AO restricted the deduction under section 54F as the unutilized amount was not deposited in the Capital gains account scheme. The Ld. CIT(A) partially confirmed this disallowance, interpreting section 54F strictly, citing the decision of the Hon'ble Supreme Court in a relevant case.

2. The appellant contended that the investment was made within the prescribed period, challenging the strict interpretation of section 54F. The Ld. A.R. relied on previous decisions emphasizing the importance of investing the sale consideration in a new property within the stipulated time frame, rather than focusing on depositing in a separate account. The Ld. DR, however, argued that non-compliance with the conditions of section 54F would disentitle the appellant from exemption under the Act.

3. The Tribunal examined the issue and referred to a similar case where the assessee had fully utilized the net sale consideration for the new property but failed to deposit in the Capital Gains Scheme Account. Citing a decision of the Hon'ble Karnataka High Court, the Tribunal held that the end utilization of the sale consideration should be the focus for exemption under section 54F. Following liberal interpretation principles, the Tribunal directed the AO to allow the claim after verifying the investment details made by the assessee within the prescribed period.

In conclusion, the Tribunal allowed the appeal, emphasizing the beneficial and liberal interpretation of section 54F of the Income-tax Act, 1961, focusing on the actual investment made by the assessee in the new property within the specified time frame.