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2022 (4) TMI 678 - AT - Income TaxDeduction u/s 54 - assessee has failed to deposit the net sale consideration before the due date of filing of return of income under section 139(1) - Whether deduction u/s 54 is to be allowed even if the investment in Capital Gain scheme is made within the due date prescribed u/s 139(4)? - HELD THAT - No support to the contention of the learned A.R. that the expression furnishing the return of income under sub-section (1) of section 139 under section 54(2) of the Act should be construed to even include due date of filing return of income under section 139(4) of the Act. We are further of the view that such a construction, as proposed by the learned A.R., will render the time limit provided for filing return of income under section 139(1) of the Act completely otiose and will also be contrary to intention of the statute. Thus, we are of the view that the benefit under section 54 of the Act is not available to the assessee due to failure to deposit the amount of capital gain, which was not utilized for the purpose of purchase of new residential house, in account under Capital Gains Scheme on/or before the due date of filing of return of income under section 139(1) of the Act. As per assessee has utilized the amount for the purchase of new asset and paid the amount vide cheque dated 13.02.2015 and the amount has been utilised for the purchase of new asset prior to the due date of filing return of income under section 139(4) - It is pertinent to note that for claiming any benefit under section 54 of the Act, it is first of all required under sub section (1) that capital gains arising from transfer of long term capital asset should be utilized for the purpose of purchase of new residential house within a period of either one year before or two years after the date of transfer of earlier asset or the same has been utilized for construction of residential house within a period of three years from the date of such transfer. In the present case, it is relevant to note that the assessee sold the earlier house property on 31.01.2013, thus, the time period for utilization of the capital gains arising from such transfer was available till 31.01.2015, in case of purchase of new residential house and till 31.01.2016, in case of construction of the new residential house, under section 54(1) of the Act. It is an undisputed fact that in the present case, the assessee has not utilized the amount for the purpose of construction of the residential house and the initial amount of ₹ 50,00,000 and subsequent payment of ₹ 24,25,000 was made in respect of purchase of new residential house. Thus, in view of the above, the assessee was required to utilize the capital gains till 31.01.2015 i.e., within the period of two years from the date on which the earlier asset was sold, for the purpose of claiming benefit under section 54 of the Act. However, in the present case, though the first payment of ₹ 50,00,000 was made within a period of two years and thus not in dispute, the second payment of ₹ 24,25,000 was made vide cheque dated 13.02.2015, i.e. beyond the period of two years as per section 54(1) of the Act, for the purchase of new residential house. Thus, even if the provisions of section 54(2) of the Act are liberally construed, in view of judicial precedences relied upon by the learned A.R. in the present case, the assessee does not satisfy the conditions of section 54(1) of the Act in respect of amount of ₹ 24,25,000 utilized for the purpose of purchase of new asset beyond the period of two years from date of transfer of original asset. Thus, in view of the above, we do not find any merit even in the alternative claim made by the assessee under section 54 of the Act. Consequently, the order passed by the CIT(A) is upheld. The grounds raised by the assessee are dismissed.
Issues Involved:
1. Assessment of income discrepancy. 2. Adherence to Section 54 of the Income Tax Act regarding the investment in Capital Gain Scheme within the prescribed due date. 3. Compliance with the guidelines of the Bombay High Court concerning the investment in the Capital Gain Scheme. Issue-wise Detailed Analysis: 1. Assessment of Income Discrepancy: The assessee contested the assessment of income at ?41,59,952 instead of the returned income of ?17,41,067. The discrepancy arose from the treatment of Long Term Capital Gains (LTCG) from the sale of a house property. The Assessing Officer (AO) noted that the assessee sold a house property for ?95,00,000, resulting in LTCG of ?74,18,885. The assessee invested ?50,00,000 in a new residential property and deposited ?24,25,000 in the Capital Gains Scheme. However, the AO observed that the deposit was made after the due date for filing the return under Section 139(1) of the Act, leading to the disallowance of the exemption claim under Section 54 for the amount deposited late. 2. Adherence to Section 54 of the Income Tax Act: The core issue was whether the assessee's deposit in the Capital Gains Scheme after the due date for filing the return under Section 139(1) but before the due date under Section 139(4) could still qualify for exemption under Section 54. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the deposit must be made before the due date specified under Section 139(1) to avail of the exemption. The Tribunal analyzed Section 54, which mandates that unutilized capital gains must be deposited in a specified account before the due date for filing the return under Section 139(1). The Tribunal referred to various precedents where a liberal interpretation allowed the inclusion of the due date under Section 139(4). However, it concluded that such an interpretation would render the specific time limit under Section 139(1) meaningless and contrary to the legislative intent. 3. Compliance with Bombay High Court Guidelines: The assessee argued that they had complied with the guidelines of the Bombay High Court in the case of Mrs. Hila J B Wadia, where the court allowed the deduction under Section 54 even if the investment was made within the extended due date under Section 139(4). The Tribunal acknowledged the precedents but emphasized that the specific wording of Section 54(2) required the deposit to be made before the due date under Section 139(1). The Tribunal noted that the cheque was deposited on 31.07.2013, but the amount was credited only on 13.08.2013, beyond the due date of 31.07.2013 (or 05.08.2013 as extended by CBDT). Conclusion: The Tribunal upheld the AO's and CIT(A)'s decision, emphasizing that the benefit under Section 54 was not available due to the failure to deposit the capital gains in the specified account before the due date under Section 139(1). The Tribunal dismissed the appeal, reiterating that the legislative intent and specific provisions must be adhered to, and a liberal interpretation in this context would undermine the statutory framework. Order Pronouncement: The appeal by the assessee was dismissed, and the order was pronounced in the open court on 12/04/2022.
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