2023 (1) TMI 1075 - AT - Income Tax

Deduction u/s 54F - delay on the part of contractor to complete the construction - CIT(A) allowing partial relief to the assessee in respect of amount spent towards construction of new property - HELD THAT - Substantial portion of net consideration so received was re-invested within stipulated period from the date of transfer of capital asset. Certain amount was retained for construction of property whereas the remaining portion was offered to tax. It could also be seen that the assessee entered into construction agreement on 05.03.2012 wherein the contractor was required to complete the construction within a period of 12 months. Considering the same, the construction would have been completed well within the stipulated time - delay in construction is nowhere attributed to the assessee and the assessee could not be penalized for delay on the part of the contractor to complete the construction particularly considering the fact that the provisions of Sec.54F are beneficial provisions to promote investment in housing sector and encourage investments in acquisition of residential property. Once the assessee is found eligible to claim the same, the benefit should be granted to full extent as held in various judicial pronouncements. Therefore, the deduction could not be denied simply because there was delay on the part of contractor to complete the construction. The decision in CIT vs Sardarmal Kothari and Shanthilal Kothari 2008 (6) TMI 15 - MADRAS HIGH COURT supports the case of the assessee. Depositing the unappropriated capital gains in capital gain account scheme before date of filing of return u/s 139(1) - CIT(A) has relied on the binding judicial precedent of Chennai Tribunal in ACIT vs T.S. Arunachalam, 2018 (1) TMI 1572 - ITAT CHENNAI wherein it was held that it was enough if the assessee had invested substantial portion of net consideration in new asset within the stipulated period. No contrary decision has been placed on record. Further, from the factual matrix, it could be seen that the assessee has received the sale consideration in installments up-to financial year 2013- 14 and entire funds were not even otherwise available for the assessee to deposit the same into capital account scheme during this year. The assessee is only claiming part exemption. The same is evident from payment and investment schedule as extracted by us in preceding para- 4 of this order. - Decided against revenue.

Summary

Issues:
Computation of deduction u/s 54F

Detailed Analysis:

Computation of Deduction u/s 54F:
The appeals by Revenue for Assessment Year (AY) 2011-12 arose from a common order passed by the Commissioner of Income Tax (Appeals) concerning separate assessments framed by the Assessing Officer for different assessees under section 143(3) r.w.s 147 of the Act. The primary issue in consideration was the computation of deduction u/s 54F. The appellant contended that the CIT(A)'s order was contrary to the law and facts of the case. The CIT(A) had allowed partial relief to the assessee for the construction of a new property without fulfilling the conditions stipulated in section 54F of the Income Tax Act. The appellant argued against the reliance on certain decisions by the CIT(A) and highlighted errors in allowing the deduction u/s 54F without substantial construction spending before the specified time limits. The Tribunal examined the case records and heard rival submissions to make an adjudication.

Assessment Proceedings:
The assessee, along with other joint owners, sold a property and claimed deduction u/s 54F for the proportionate investment made in a new property. The Assessing Officer re-computed the share in the sale consideration and denied the deduction u/s 54F based on delays in construction completion and failure to deposit the unutilized amount in the Capital Gains Account Scheme. The appellant submitted various documents to support the utilization of sale consideration for land purchase and construction. The completion certificate obtained was beyond the stipulated period, and the AO denied the deduction accordingly.

Appellate Proceedings:
The CIT(A) analyzed the payment schedule and investments made by the assessee, noting substantial reinvestment of the sale consideration within the stipulated period. Relying on judicial precedents, the CIT(A) allowed the deduction u/s 54F, emphasizing that construction completion within the stipulated time was not mandatory for claiming the benefit. The CIT(A) also considered the beneficial nature of Sec. 54F to promote investments in the housing sector. The deduction was allowed as the substantial amount was invested in a new asset within the specified period.

Findings and Adjudication:
The Tribunal concurred with the CIT(A)'s decision, emphasizing that the delay in construction completion should not penalize the assessee, especially considering the beneficial nature of Sec. 54F. The Tribunal upheld the CIT(A)'s adjudication on the depositing of unappropriated capital gains in the Capital Gain Account Scheme before the filing of the return u/s 139(1). The Tribunal dismissed all appeals of the revenue, concluding that there was no reason to interfere with the impugned order based on the facts and circumstances of the case.

In conclusion, the Tribunal upheld the deduction u/s 54F for the assessee, emphasizing compliance with substantial investment requirements and the beneficial nature of the provisions to promote investments in the housing sector. The decision highlighted the importance of considering the specific facts and circumstances of each case while interpreting tax laws and provisions.