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TMI Blog2012 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... f three years. Merely because the possession had not been taken within the period of three years, the exemption cannot be denied Dis-allowance on ground of non deposit of unutilized capital gain amount in the capital gain account scheme before the due date of the filing of the return of income for the relevant year - assessee had deposited Rs 1 lacs as booking amount before due date of filing of return - Held that:- In our view, this is only a technical default and on this ground the claim of exemption cannot be denied particularly when the amount had been actually utilized for the construction of residential house and not for any other purpose - Decided in favor of assessee - ITA No. 7326/M/2010 - - - Dated:- 13-6-2012 - SHRI B.R.MITTAL AND SHRI RAJENDRA SINGH JJ. Assessee by: Shri Bhavesh Doshi Revenue by: Shri K.R.Vasudevan O R D E R PER RAJENDRA SINGH (AM) : This appeal by the assessee is directed against the order dated 13.8.2010 of CIT(A) for the assessment year 2006-07. 2. The only dispute raised by the assessee in this appeal is regarding disallowance of claim of exemption u/s 54 of the Income Tax Act, 1961 (the Act) in respect of long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption u/s 54 of the Act. Accordingly, he disallowed the claim. 4. The assessee disputed the decision of the AO and submitted before the CIT(A) that the AO had disallowed the claim on the ground that there was no evidence that the assessee had taken possession of the new flat within the period of two years but the said period of two years was applicable only in case of purchase of flat. In the present case, the assessee had booked a new flat with the builder M/s Rajyog Enterprises which was under consideration and therefore, it was a case of construction of building and not purchase of flat. The assessee referred to the circular No.471 dated 15.10.1986 issued by the CBDT in which it has been mentioned that the flat allotted by the Delhi Development Authority (DDA) has to be considered as construction of flat. It was also submitted that CBDT circular vide No.672, dated 16.12.1993 had clarified that circular No.671 would also apply to allotment of flat by Co-operative Societies and other institutions. The assessee also referred to the decision of the Mumbai Bench of the Tribunal in the case of ACIT Vs Smt. Sunder Kaur Sujan Singh Gadh (3 SOT 206) in which the Tribunal after refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither been deposited in the prescribed scheme nor the possession of the new asset had been obtained within the three year period and, therefore, the conditions prescribed u/s 54 were not satisfied. The CIT(A), accordingly, confirmed the disallowance made by the AO aggrieved by which the assessee is in appeal before the Tribunal. 5. Before us, the Ld.AR for the assessee submitted that the assessee had sold the old flat on 7.3.2006 on which the long term capital gains earned was Rs.9,98,411/-. The assessee booked a new flat with the builder to whom total payments made in installments were Rs.14,62,500/- till 16.2.2009 and the balance amount of Rs.2,87,500/- had been paid after the period of three years. It was also submitted that in view of the circular No.471, dated 15.10.86 and circular No.472 dated 16.12.1993 of CBDT, the case of the assessee had to be considered as construction of new residential house and therefore, the time period of three years from the date of transfer of old flat would apply in case of the assessee. The entire capital gain had been invested in the new house within the period of three years. The assessee had therefore obtained the domain over the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for exemption u/s 54 in case the assessee has invested the entire amount of the capital gain in purchase of a new residential house within a period of one year before or two years after the date of transfer or has constructed a new residential house within a period of three years from the date of transfer. In case the investment in the new residential house is less than the capital gain, then only the difference is required to be charged to tax. Section also provides that in case, the amount of capital gain is not appropriated towards the purchase of new residential house within one year before the due date on which the transfer took place or which is not utilized by him for purchase or construction of new residential house before the date of furnishing the return of income u/s 139(1)for the relevant year, the amount shall be deposited by the assessee in an account in any bank or institution as may be specified or utilized in accordance with any scheme framed by the Central Government. However, if the amount deposited as per the scheme mentioned above is not utilized wholly or partly for the purchase or construction of a new residential house, the amount not so utilized shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of long term capital gain arising from sale of residential house if the capital gain is invested in construction of new residential house within a period of three years from the date of transfer and, therefore, in case, the assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of the provisions. of the flat It is not necessary that the possession of the flat should also be taken within the period of three years. The taking of the possession may be delayed because of many factors not under the control of the assessee due to default on the part of the builder and therefore merely because the possession had not been taken within the period of three years, the exemption cannot be denied. This aspect had also been considered by the Hon ble High Court of Bombay in the case of Mrs. Hilla J.B.Wadia (supra) in which the Hon ble High Court held that in case the assessee entered into an agreement with the society for purchase of flat and paid almost the entire consideration within a period of 2 years, the assessee would be entitled to exemption u/s 54 of the Act. The Hon ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xception to the period provided u/s 139(1). Therefore, the Hon ble High Court held that the provision of section 139(4) is not an independent provision but is related to the time contemplated under the provisions of section 139(1) of the Act. Accordingly, the Hon ble High Court held that sub-section (4) to section 139 had to be read along with sub-section (1) and the due date for furnishing the return of income u/s 139(1) is subject to the extended period provided u/s 139(4) and hence the extended period u/s 139(4) has to be considered for the purposes of utilization of the capital gain amount. In that case, the assessee had sold the old flat on 13.1.2006 and the new residential house was purchased by the assessee on 2.1.2007 which was within the extended time limit till 31.3.2007 u/s 139(4) for assessment year 2006-07 and therefore the claim was allowed even though the amount had not been deposited in the capital gain account. The said judgment has been followed by the Delhi Bench of the Tribunal in the case of Jagtar Singh Chawla Vs ACIT in ITA No.4923/Del/2010(AY-2007-08), order dated 30.6.2011, in which case the Tribunal held that since the assessee had invested the whole a ..... 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