2022 (8) TMI 1082 - AT - Income Tax

Denying exemption u/s. 54F - assessee failed to invest the capital gains towards purchase of a new flat before due date of filing of return of income u/s. 139 or further, failed to deposit the capital gains in the capital gain account - HELD THAT - Admittedly the due date for filing of return of income u/s.139(1) is 31-07-2014 and the time limit available for assessee for filing of return of income u/s. 139(4) is 31-03-2015. Admittedly, there is no dispute that the assessee made investment in purchasing a new flat on 06-02-2015 and it is evident from the assessment order that the assessee filed e-return of income on 27-02-2015 which is u/s. 139(4) - As note that subsection (4) of section 54F is also clear that the net consideration which is not utilized for the purpose or construction of a new asset before due date of furnishing return of income u/s 139 the assessee has to mandatorily deposit before furnishing such return of income. It is clear from the record that the assessee made investment on 06-02-2015 i.e. before furnishing the return of income u/s. 139(4) of the Act on 27-02- 2015. The assessee cannot be held to be ineligible for claiming exemption u/s. 54F on the reason that the investments are not made before due date for filing of return of income u/s.139(1) - order of CIT(A) is not justified and it is set aside. We hold that the assessee made investments from capital gains arising out of transfer of original capital asset towards purchase of a new asset within specified period before filing of return of income u/s. 139(4). The order of CIT(A) is not justified and it is set aside - assessee made investments from capital gains arising out of transfer of original capital asset towards purchase of a new asset within specified period before filing of return of income u/s. 139(4) of the Act. Thus, the grounds raised by the assessee are allowed.

Summary

Issues:
1. Denial of exemption u/s. 54F of the Income Tax Act by the Commissioner of Income Tax (Appeals) and its confirmation by the Assessing Officer.

Analysis:

Issue 1: Denial of exemption u/s. 54F
The appellant contested the denial of exemption u/s. 54F by the Commissioner of Income Tax (Appeals) (CIT(A)) and the Assessing Officer (AO). The appellant argued that the provisions of section 54F should be liberally construed, emphasizing that the investment in a new flat was made within the stipulated time frame as per section 54F(1) of the Act. The appellant referred to the judgment of the Hon'ble High Court of Karnataka to support the contention that the provisions of section 54F should not be strictly interpreted. The appellant highlighted that the investment was made within one year from the sale of the capital asset, as required by the law. Additionally, the appellant cited a judgment of the Kolkata Tribunal to support the claim for exemption u/s. 54F. On the contrary, the Departmental Representative (DR) referred to a decision of the Hon'ble High Court of Bombay, arguing that there was no ambiguity in the provisions of section 54F and no need for a liberal interpretation. The DR contended that the appellant did not deposit the capital gains before the due date of filing the return of income, as required by the law.

Analysis of Judgment:
The Tribunal noted that the appellant, along with his brother, sold a shop and invested the entire sale consideration in a new flat within the stipulated period under section 54F(1) of the Act. The AO contended that the capital gains should have been deposited in the specified account before the due date for filing the return of income u/s. 139(1) of the Act. However, the Tribunal observed that the appellant filed the e-return of income within the extended period u/s. 139(4) of the Act, after making the investment. The Tribunal held that as per section 54F(4), the net consideration not utilized for the new asset must be deposited before filing the return of income. Since the appellant made the investment before filing the return of income u/s. 139(4) of the Act, the denial of exemption u/s. 54F by the CIT(A) was deemed unjustified. The Tribunal allowed the appeal, stating that the appellant's investments from the capital gains towards the new asset were made within the specified period before filing the return of income u/s. 139(4) of the Act.

Conclusion:
The Tribunal allowed the appeal of the assessee, overturning the decision of the CIT(A) and holding that the denial of exemption u/s. 54F was not justified. The judgment emphasized the importance of complying with the statutory provisions while interpreting tax laws and the timing of investments for claiming exemptions.