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DCIT, Circle-3, Lucknow Versus Sri Aseem Rastogi and Vica-Versa

2015 (9) TMI 123 - ITAT LUCKNOW

Addition on account of Capital Gains - denial of the exemption u/s 54 - CIT(A) deleted the addition - Held that:- As per the scheme of Section 54 of the Act and Circular No 495, it is clear that capital gains cannot be charged to income tax in the previous year in which the transfer of the original asset takes place if the amount of capital gain is utilised by the assessee for acquisition of new asset and the balance, if any, is deposited on or before the due date for filing of return of income .....

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sallowance, if any, will have to be considered in the previous year in which the period of three years from the date of the transfer of the original asset expires. - Decided against revenue.

Investment in the Capital Gains Accounts Scheme, 1988 - Held that:- It is very much evident and an admitted fact that the deposit of ₹ 63,00,000/- was made in the Savings Account or Deposit Account A before 31/07/2008 i.e. before the due date of filing of return u/s 139(1) of the Act and thu .....

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he entire initial deposit in the savings bank (Deposit A account) amounting to ₹ 63,00,000/- was made within the prescribed period, it is immaterial that a further transfer from this account was made to Deposit B account (Fixed Deposit Account) after the prescribed due date, the exemption on this count also cannot be denied to the assessee. Even if the transfer is not as per law in the year of withdrawal from Deposit account A, it can be considered as amount withdrawn and not utilised and .....

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pondent : Shri A.P. Sinha, Advocate ORDER PER SUDHANSHU SRIVASTAVA , J.M. : ITA 363/LKW/2014 is the Department s appeal directed against the order of Learned CIT (A) - II, Lucknow, dated 31.12.2013 for A.Y. 2008 - 2009 deleting the addition of ₹ 1,16,40,000/- on account of Capital Gains made by ACIT Range - III, Lucknow vide Order u/s 143(3) dated 28.12.2010. CO 33/LKW/2014 has been filed by the assessee. We are disposing both by this common order. 2. ITA 363/LKW/2014 : The facts in brief, .....

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ed the Act ). It may also be mentioned that due to some computational error on the part of the assessee, the total amount invested and claimed as exempt u/s 54 of the Act was taken at ₹ 1,16,40,000/-and this amount claimed as exempt is in dispute before us. During the course of assessment proceedings for the assessment year 2008-09 and while examining the validity of claim of exemption u/s 54, the AO called for the Inspector s Report on the issue of completion of construction of house prop .....

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the Act, the new residential house should have been constructed within three years from the date of transfer i.e. in between 11.05.2007 and 10.05.2010. The AO further concluded that since ₹ 54,40,000/- were spent on purchase of a plot and not towards the construction of a residential property, the same would not qualify for exemption u/s 54 of the Act. Accordingly, the AO disallowed the exemption claim of ₹ 54,40,000/- towards the purchase of plot in AY 2008-09 itself. As regards th .....

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. beyond the due date of filing of the return of income for AY 2008-09. The AO concluded that since the amount of ₹ 63,00,000/- was deposited beyond the stipulated date, the claim of exemption could not be allowed. Thus, the total claim of exemption of ₹ 1,16,40,000/- was disallowed and was added back to the income of the assessee in AY 2008-09 itself. 3. In the first appellate proceedings, the Learned CIT(A) held that since the assessee had invested the sale proceeds in acquiring a .....

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40,000/- towards purchase of plot of land; and (ii) Deposit of ₹ 63,00,000/- in the Capital Gains Accounts Scheme, 1988. 5. We take up the issue of purchase of land first. It is seen that, it is not in dispute that the land was purchased by the assessee in assessment year 2008-09. It is also not in dispute that the nature of the land purchased is residential, as is evident from the copy of purchase deed on record. The only ground for denying the exemption is that the construction of the ho .....

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o drew our attention to Pages 4 to 10 of the Paper Book filed by him which contain a copy of the Valuation Report dated 21.07.2010 in which the estimated cost of construction has been worked out at ₹ 51,61,000/-. 6. It will also be worthwhile to reproduce section 54 of the Act which reads as under: Profit on sale of property used for residence. 54. [(1)] [ [Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the .....

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l house], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (i) if the amount of the capital gain [is greater than the cost of [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset .....

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ital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. [***] [(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of fur .....

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return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amoun .....

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provisions relating to direct taxes as contained in the Finance Act, 1987. Para 26.1 and 26.2 are relevant to the issue involved and are reproduced here under : 26.1 Under the existing provisions of sections 54, 54B, 54D and 54F, longterm capital gains arising from the transfer of any immovable property used for residence, land used for agricultural purposes, compulsory acquisition of lands and buildings and other capital assets are exempt from income tax if such gains are reinvested in new ass .....

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d or utilised by the tax payer for acquisition of the new asset before the date for furnishing the return of income, it shall be deposited by him on or before the due date of furnishing the return of income, under section 139(1) in an account with a bank or institution and utilised in accordance with a scheme framed by the Central Government in this regard. The amount already utilised together with the amounts of deposit shall be deemed to be the amount utilised for the acquisition of the new as .....

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nsfer of the original asset takes place if the amount of capital gain is utilised by the assessee for acquisition of new asset and the balance, if any, is deposited on or before the due date for filing of return of income u/s 139(1) in the specified Capital Gains Account Scheme and if the amount is not utilised fully for acquiring the new asset within the prescribed period, the unutilised amount can be taxed in the year in which the period expires. 9. Our view is also in consonance with the view .....

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een constructed. The issue of disallowance, if any, will have to be considered in the previous year in which the period of three years from the date of the transfer of the original asset expires. Hence, the appeal of the revenue is dismissed on this issue. 11. As far as the second issue of investment of ₹ 63,00,000/- in the Capital Gains Accounts Scheme, 1988 is concerned, it is the contention of the Department that although the initial deposit in the Capital Gains Account Scheme (Savings .....

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Notification No. GSR 724(e), dated 22nd June, 1988 which provides as under: (1) ......... (2)........... (3).......... (4) Types of Deposits - (1) There shall be two types of deposit accounts, namely :- (i) Deposit account - A and (ii) Deposit account - B. (2) The deposit made under account A shall be in the form of savings deposit and subject to the other provisions of this Scheme, withdrawals under this account can be made from time to time by the depositor. (3)The deposit made under account B .....

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n 139 of the Act as is applicable in the case of the depositor [or the eligible assessee as referred to in section 54GB]. 13. On perusal of the Remand Report dated 04.12.2012 submitted before the CIT(A), it is seen that the AO has himself admitted in the Remand Report that the assessee had opened an account with Punjab National Bank, Hazratganj Branch, Lucknow under Capital Gains Account Scheme and that the copy of the assessee s bank account statement showed that deposits totaling to ₹ 63 .....

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