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2022 (7) TMI 894 - AT - Income TaxDenial of exemption u/s 54 - A.O. held that the assessee has not made any investment in residential property for claiming exemption u/s 54 - HELD THAT - The assessee has made advances to the developer, which has culminated in a purchase of a new residential house, sourced by the developer to fulfill his obligation of providing a residential house, which is also evidenced by the recitals in the sale deed, wherein he has affirmed the receipt of the advance and also paid for the new asset. The reliance placed by the assessee on the decision in the case of Sambandam Uday Kumar 2012 (3) TMI 80 - KARNATAKA HIGH COURT of the Jurisdictional High Court, is also relevant to facts of instant case. The Hon ble jurisdictional High Court had held that amounts paid within the period of three years, would be eligible to the claim of deduction u/s 54 though the house was not registered within the period of three years or two years, considering the fact that the payment for the new asset was paid off within the specified time. It is also pretend to place reliance on the judgment in CIT Vs. Shakuntala Devi 2016 (10) TMI 60 - KARNATAKA HIGH COURT , which has held that the investment in property if made within the time specified, the registration of the property though entered into beyond the period of three years. the assessee would be eligible for the claim of deduction u/s 54. As utilisation of the capital gains within the time specified would entitle the assessee to the claim of deduction under section 54 of the Act, notwithstanding the fact that the new asset was registered beyond the period specified under the I.T.Act, which according to the assessee was beyond her control and was to be liberally construed. It is held by various Hon ble Courts that application of beneficial provisions must be liberal to accommodate the rules laid down broadly to verify compliance and must not be interpreted literally, unlike charging sections which are to be construed strictly. In support of this proposition, we place reliance on the judgments of Bajaj Tempo Ltd. 1992 (4) TMI 4 - SUPREME COURT and CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. 1992 (4) TMI 3 - SUPREME COURT As observed by us that the bonafides of the assessee cannot be doubted, since the assessee has made deposits into the capital gains scheme immediately and thereupon made payments to the developer to acquire the new house property. The assessee was also prevented by reasonable cause since the funds had already been utilized and was forced to acquire an asset due to the reason beyond her control. The section 54 being benevolent in nature, it should be liberal in interpreting the provisions of section 54 considering the fact that the new house was eventually acquired, out of the same capital gains utilized, which has been brought on record and not in dispute. For the aforesaid reasoning, we hold that the assessee is entitled to the claim of deduction and direct the A.O. to allow the claim u/s 54 to the said extent. Since we have held that the assessee is entitled to exemption u/s 54 of the I.T.Act in the peculiar set of facts, we do not deem it appropriate to adjudicate other grounds raised by the assessee in this appeal.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Denial of exemption under Section 54 of the Income Tax Act, 1961. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed with a delay of 44 days. The assessee submitted a petition for condonation of delay, accompanied by an affidavit explaining the reasons for the delay. Upon reviewing the affidavit, the Tribunal found sufficient cause for the delay, which could not be attributed to the assessee. Consequently, the delay was condoned, and the appeal was admitted for consideration on its merits. 2. Denial of Exemption Under Section 54 of the Income Tax Act, 1961: a. Facts of the Case: The assessee, a doctor by profession, filed a return of income for the assessment year 2015-2016, declaring a total income of Rs. 2,10,030 and claimed an exemption of Rs. 1,26,00,000 under Section 54 for the investment in a residential house. However, during scrutiny, it was found that the assessee had paid Rs. 1,26,00,000 to an individual for the purchase of agricultural land, not a residential house, evidenced by an unregistered agreement. No registered document for a residential property was produced. Thus, the Assessing Officer (A.O.) disallowed the exemption claim. b. First Appellate Authority's Findings: The assessee appealed to the CIT(A), arguing that the investment was intended for a residential house, which the builder failed to deliver due to conversion issues. Later, an alternative residential property was offered and accepted by the assessee, with a purchase deed dated 22.03.2018. The CIT(A) dismissed the appeal, noting that the assessee herself requested the A.O. to disregard the agricultural land agreement and that the additional evidence of the new house purchase was irrelevant to the grounds of appeal. c. Tribunal's Analysis: The Tribunal examined whether the assessee was entitled to the exemption under Section 54 despite the new house being registered beyond the stipulated period. The Tribunal noted that the assessee had deposited the sale proceeds in a capital gains account scheme and made an advance payment to the developer within the stipulated time. The developer later used these funds to purchase a residential property, which was eventually registered in the assessee's name. The Tribunal emphasized that the capital gains were utilized within the specified period, even though the registration of the new house was delayed. d. Legal Precedents: The Tribunal referred to the Supreme Court's decision in Fibreboards (P) Ltd. v. CIT, which held that utilization of capital gains within the specified period suffices for claiming exemption, and the actual acquisition can occur later. The Tribunal also cited the Karnataka High Court's decisions in Sambandam Uday Kumar and Shakuntala Devi, supporting the view that investment within the specified period is crucial, not necessarily the registration. e. Conclusion: The Tribunal concluded that the assessee's utilization of capital gains within the specified period, evidenced by the advance payment to the developer, fulfilled the conditions for exemption under Section 54. The Tribunal directed the A.O. to allow the exemption claim of Rs. 1,26,00,000. Consequently, the appeal was partly allowed. Order Pronounced: The appeal filed by the assessee was partly allowed, and the order was pronounced on July 19, 2022.
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