Deduction u/s 54F denied for non deposit in capital gains accounts scheme allowed

Deduction u/s 54F denied for non deposit in capital gains accounts scheme allowed as investment in flat purchase was made before due date u/s 139(4)

ABCAUS Case Law Citation:
ABCAUS 2660 (2018) (12) ITAT

Important Case Laws Cited/relied upon:
Xavier J Pulickal vs. DCIT 379 ITR 534
Sunayana Devi vs. ITO 86 taxmann.com 7
CIT vs K.Ramachandra Rao 

This appeal was filed by the Assessee against the order of the Commissioner of Income Tax( Appeal ) in upholding the rejection of exemption claimed by the assessee u/s 54F of the Income Tax Act, 1961 ( the Act ).

The assessee sold shares and against the long term capital gains arising therefrom, the assessee claimed exemption u/s 54F of the Act in the return of income for investment in purchase of flat.

The AO observed that the assessee had failed to deposit the monies in the capital gain account scheme before the due date of filing of return of income u/s 139(1) of the Act. Accordingly, he upheld that the assessee is not entitled for claim of exemption u/s 54F of the Act and hence denied the claim.

Before the CIT(A), the assessee pleaded that the entire long term capital gain and net sale consideration had been duly invested by the assessee in purchase of new residential flat before the due date specified u/s 139(4) of the Act.

The assessee placed reliance on the decision of Hon’ble Supreme Court in support of his contentions. It was also pleaded that even though the assessee had not made any deposit in capital gains account scheme, ultimate purpose of reinvestment in any residential property had been duly complied with by the assessee.

Accordingly, it was pleaded that the claim of exemption u/s 54F of the Act should have been granted to the assessee.

The CIT(A) however did not agree to the contention and dismissed the contention of the assessee.

The Tribunal observed that it was not in dispute that the assessee had invested net sale consideration for purchase of new residential flat before the date specified u/s 139(4) of the Act.

The Tribunal found that the issue under dispute was squarely covered in favour of the assessee by the Co-ordinate Bench decision of the Tribunal.

In the said case, the Tribunal relied upon the decision of the Karnataka High Court that if the assessee invests the entire consideration in construction of the residential house within three years from the date of transfer he cannot be denied deduction u/s 54F of the Act on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s 139(1) of the Act.

Following the said decision, the Tribunal held that the assessee was entitled for claim of exemption u/s 54F of the Act in the facts of the case.

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