2014 (1) TMI 1922 - AT - Income Tax

Exemption u/s 54 - Denial of exemption as assessee failed to invest LTCG for purchase of residential flat within a period of one year from the date of transfer of such flat and had also failed to deposit the amount of capital gain in the capital gain account before the due date of furnishing of return of income u/s 139(1) as per provisions of section 54(2) - HELD THAT - As relying on MR. KISHORE H. GALAIYA 2012 (9) TMI 40 - ITAT MUMBAI FATHIMA BAI 2008 (10) TMI 563 - KARNATAKA HIGH COURT RAJESH KUMAR JALAN. 2006 (8) TMI 126 - GAUHATI HIGH COURT and MS. JAGRITI AGGARWAL 2011 (10) TMI 279 - PUNJAB AND HARYANA HIGH COURT if the assessee had utilized the amount which was more than capital gain earned towards construction of new residential house within the extended period u/s 139(4) of the Act there was no default in not depositing the amount into the Capital Account Gain Scheme and the claim of the assessee cannot be denied. That the assessee is entitled to exemption u/s 54 of the Act. Appeal of revenue dismissed.

Summary

Issues:
Disallowance of exemption u/s 54 for failure to invest Long Term Capital Gain within the specified period.

Analysis:
The Department filed an appeal against the order of the ld. CIT(A) for the assessment year 2009-10, challenging the deletion of a disallowance of Rs.55,57,600 made by the AO for denying exemption u/s 54. The assessee sold a property, declared LTCG, and claimed exemption u/s 54 for investing in a new flat. The AO contended that the investment was made after one year from the transfer date, and the amount was not deposited in the capital gain account before the due date of filing the return. The ld. CIT(A) considered the time limit under sections 139(1) and 139(4) of the Act. Referring to various High Court decisions, it was held that the assessee can fulfill the requirements of section 54 up to the extended time limit for filing the return u/s 139(4). Since the new property was purchased before the extended time limit, the ld. CIT(A) allowed the exemption u/s 54.

The Department appealed to the Tribunal, arguing that the AO's decision should be upheld. The ld. DR supported the AO's order, while the ld. AR contended that the issue favored the assessee based on High Court decisions and a previous ITAT ruling. Citing the Mumbai ITAT decision in a similar case, it was held that if the amount exceeding the capital gain was utilized for constructing a new house within the extended period u/s 139(4), the exemption u/s 54 cannot be denied. The Tribunal found no fault in the ld. CIT(A)'s order, as it was supported by the decisions of various High Courts and the Mumbai ITAT. Consequently, the appeal of the Department was dismissed, upholding the order of the ld. CIT(A).

In conclusion, the Tribunal upheld the decision of the ld. CIT(A) to allow the exemption u/s 54 for the assessee, as the purchase of the new property was within the extended time limit specified under section 139(4) of the Act. The Tribunal relied on precedents from High Courts and a previous ITAT ruling to support its decision, ultimately dismissing the Department's appeal.