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2016 (3) TMI 823 - ITAT JAIPUR

2016 (3) TMI 823 - ITAT JAIPUR - TMI - Deduction u/s 54B and 54F - Entitlement to claim whether the return has actually been filed under section 139(1) or under section 139(4)? - Held that:- A combined reading of section 54B(2) read with the proviso clearly provides that the amount of the capital gain which is not utilized by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139(1) should be deposited with a bank/institution in a spec .....

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so deposited in the specified capital gains scheme were taken into consideration for allowing the deduction and were deemed to be the cost of new asset. The said deposit will therefore act as a safeguard to the Revenue that claim of deduction has been lawfully allowed in absence of actual purchase of the new asset. It is further provided that subsequently where the assessee doesn’t utilize the funds so deposited with the prescribed time limit of two years, the amount not so utilized shall be ch .....

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asset together with the amount so deposited shall be deemed to be the cost of the new asset. “ Under section 54B(1) of the Act, it is for the assessee to claim the deduction and it is only when the assessee makes a claim of said deduction, the Revenue is well within its jurisdiction to examine whether the assessee has satisfied the necessary conditions for claiming such deduction. Under subsection 1 to section 54B, it requires the purchase of the new asset and under subsection 2 to section 54B, .....

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same time, neither claim nor comply with the second condition as prescribed under section 54B(2) of the Act, the appellant would be eligible for deduction under section 54B of the Act.

The provisions of section 54F(2) are pari-materia with the provisions of section 54B(2) of the Act. Hence, the above discussion would hold equally good for the purposes of claim of deduction under section 54F of the Act. The AO is accordingly directed to allow deduction to the appellant under section 54 .....

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verification. - Decided in favour of assessee. - ITA No. 909/JP/14 - Dated:- 17-2-2016 - SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri P.C. Parwal (C.A.) For The Revenue : Shri Rajendra Singh (JCIT) ORDER PER SHRI VIKRAM SINGH YADAV, A.M. These are two common appeals filed by the respective assessees against the order of CIT(A), Alwar of even date 27.10.2014 wherein the assessees have taken the following grounds of appeal: ITA No. 909/JP/13 (1) In the facts and .....

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70,343/- u/s 50C by adopting the DLC rate. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 11,70,343/-. (3) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of ₹ 37,000/- by rejecting the claim of indexation u/s 48 of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjust .....

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g the relief. (2) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of ₹ 5,67,595/- u/s 50C by adopting the DLC rate. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 5,67,595/-. 2. First, we take up appeal in case of Shri Virendra Singh wherein the assessee has filed an application for .....

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ssee has taken similar grounds before the ld. CIT(A), the modified ground where the assessee has raised an additional legal ground in respect of deduction u/s 54F of the IT Act, 1961 is allowed. 2.2 The relevant facts as apparent from the records are as under: The assessee had filed its original return on 30.03.2012 declaring total income of ₹ 2,62,500/-. During the year, assessee sold out certain portion of his agricultural land on various dates for consideration of ₹ 1,26,42,892/-. .....

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377; 1,09,40,000/- Deduction u/s 54F ₹ 22,69,000/- ₹ 1,32,09,000/- Long Term Capital Gain NIL Subsequently, the assessee filed a revised return on 20.07.2012 at total income of ₹ 7,29,735/- wherein the capital gain was computed with reference to the value adopted by stamp authorities at ₹ 1,37,13,235/- in accordance with the provisions of section 50C. The deduction u/s 54B was claimed on purchase of an agricultural land bearing khasra No. 682/1938 situated at Village Khoh .....

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69,000/-. The AO disallowed the assessee s claim of deduction u/s 54B and 54F by holding that the assessee has not deposited the amount of sales consideration in capital gain account scheme and has not purchased the agricultural land/house before the due date of filing of original return i.e. 31.07.2010. 2.3 Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) where it contended that the provisions of IT Act do not specifically provide for making an investment in the purc .....

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54B of the Act and the relevant findings are reproduced as under: I have carefully considered the material placed on record and find that there is no dispute that the sale consideration received by the appellant on sale of agricultural land has not been deposited in the prescribed bank account under the capital gains account scheme. Further, as regards the issue of investment of the sale consideration for purchase of new property is concerned, it would be relevant to look at the following facts: .....

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clearly failed to purchase the new capital asset i.e. agricultural land within the time limit as provided under the provisions of section 54B of the IT Act. It may be seen from the above that the provisions of sub-section 2 of section 54B of the IT Act provide that the capital gain which is not utilized by the assessee for the purchase of new asset before the date of furnishing of return of income u/s 139, shall be deposited by him before furnishing such return in a separate bank account in acco .....

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lso failed to deposit the amount of capital gain in a separate bank account as provided under capital gains account scheme. 2.4 During the course of hearing, the ld. AR has submitted that: The sub-section (2) of section 54B reads as under: The amount of the capital gain which is not utilised by the assessee for the purchase of new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return (such deposit being made in any cas .....

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assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset. From the above, it can be noted that sub-section (1) of section 139 is mentioned only with regard to the time limit for deposit of the funds in capital scheme. There is no mention of any such sub-section of section 139 with regard to the time limit for utilization of the funds for the purchase of the new asset. Hence, it cannot be interpreted that section 139 mention .....

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bed u/s 139(4). Hence, assessee is entitled to deduction u/s 54B. For this purpose, reliance is placed on the following cases: Nandlal Shamra vs. ITO (2015) 122 DTR 404 (Jpr )(Trb.) CIT vs. Jagtar Singh Chawla (2013) 87 DTR 217 (P&H) (HC) CIT vs. Jagriti Aggarwal (2014) 64 DTR 333 (P&H) (HC) 339 ITR 610 Fathima Bai vs. ITO, (2009) 32 DTR 243 (Kar) (HC) CIT vs. Smt.Vrinda P. Issac (2011) 64DTR 0376 (Kar,) (HC) Nipun Mehrotra vs. ACIT (2008) 110 ITD 520 (Bng.) (Trib.) 2.5 T .....

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ubsection( 2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee, or a parent of his for agricultural purposes (hereinafter referred to as the original asset), and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, .....

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previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil, or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost .....

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ion as may be specified in, and utilized in accordance with, any scheme 19 which the Central Government may, by notification in the Official Gazette. frame in this behalf and such 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 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-sect .....

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987. The CBDT circular No. 495 dated 27.09.1987 contains the explanatory notes on the provisions relating to direct taxes as introduced by the Finance Act, 1987. The relevant clauses of CBDT circular No. 495 are reproduced as under: 26.1 Under the existing provisions of section 54, 54B, 54D and 54F, long term 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 as .....

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ins or the net consideration, as the case may be, is not appropriated or utilized by the taxpayer 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 the bank or institution and utilized in accordance with a scheme framed by the Central Government in this regard. The amount already utilized together with the amounts of deposit shall .....

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all be entitled to withdraw such amount in accordance with this scheme. This scheme will be applicable in relation to the new section 54G also. 2.8 A combined reading of section 54B along with the explanatory notes contained in CBDT circular no 495 makes the provisions crystal clear. First and foremost condition for eligibility for deduction as provided in section 54B(1) of the Act is that the assessee should purchase any other land for being used for agricultural purposes within a period of two .....

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ear in which the original asset was transferred. In such cases, there is no dispute and the assessee shall be eligible for deduction subject to fulfillment of other conditions relating to quantum of investment in the new asset as well as the nature of the new asset. The second scenario is where the assessee has not purchased the new asset and return of income relating to the year in which the original asset was transferred has become due. In such situations, the assessee used to claim the deduct .....

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as the legal position which the legislature intended to cure in respect of second scenario by introduction of subsection 2 to section 54B of the Act as it is made clear by the explanatory notes to Finance Act, 1987. Having examined the intent behind introduction of section 54(2), let s examine its provisions. If one were to dissect its language, it reads as under: The amount of the capital gain which is not utilized by the assessee for the purchase of the new asset before the date of furnishing .....

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ll 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 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 utilized wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then the amount not so utilized shall be charged under section 45 as th .....

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or the purchase of the new asset. Hence, it cannot be interpreted that section 139 mentioned in the section is to be read as section 139(1). Section 139 would include section 139(4) and therefore where agricultural land is purchased before the time limit prescribed u/s 139(4), assessee would be entitled for deduction and he is not required to deposit the same in the capital gain account scheme. 2.10 In our view, the provisions of section 54B(2) clearly provides that where the amount of capital g .....

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ct and states that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires. In our view, the provisions of section 54B(2) doesn t dilute the initial condition as specified in section 54B(1) and contin .....

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tion in such scheme as specified and such deposit shall be made within due date of filing of the return of income under section 139(1) of the Act and the return shall be accompanied by proof of such deposit. As a necessary corollary, it thus envisages a situation that a return of income is filed within the due date under section 139(1) and based on the proof of such deposit which is submitted along with the return of income, the assessee shall be eligible for deduction. 2.11 The next issue that .....

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to be eligible for deduction under section 54B of the Act. As we have stated above, the provisions of section 54B(2) doesn t dilute this initial condition as specified in section 54B(1) and continues to provide that in order to be eligible for deduction, the utilisation of capital gains should be within the period of two years from the date of transfer of the original asset and where the same is not fulfilled, the capital gains will be brought to tax in the year in which the period of two years .....

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is the due date of filing of return of income under section 139(1) of the Act. Where the capital gains are not utilized before the due date under section 139(1), it requires the assessee to deposit in the capital gains scheme which can subsequently be withdrawn and utilized for the purchase of the new asset. The cut off date as provided under section 139(1) would apply equally to assessee which actually files the return under section 139(1) or to the assessee who files its return belatedly unde .....

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n 54B of the Act. In our view, the same cannot be read in the provisions of section 54B(2) of the Act. In our view, a combined reading of section 54B(2) read with the proviso clearly provides that the amount of the capital gain which is not utilized by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139(1) should be deposited with a bank/institution in a specified scheme irrespective of whether the return has actually been filed und .....

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007 which provides that the original assessment needs rectification whenever the taxpayer fails to acquire the corresponding new asset within the prescribed period of 2 years and with a view to dispense with rectification of assessments, the amendments has been made to section 54, 54B, 54D and 54F which provides for a new scheme for deposit of amounts meant for reinvestment in the new asset. The legislative intention behind the introduction of subsection 2 to section 54B was therefore to obviate .....

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as been lawfully allowed in absence of actual purchase of the new asset. It is further provided that subsequently where the assessee doesn t utilize the funds so deposited with the prescribed time limit of two years, the amount not so utilized shall be charged under section 45 as income of the previous year in which the period of two years from the date of transfer of the original asset expires. In other words, the requirements of section 54B(2) are therefore to supplement, support and aid in ad .....

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within its jurisdiction to examine whether the assessee has satisfied the necessary conditions for claiming such deduction. Under subsection 1 to section 54B, it requires the purchase of the new asset and under subsection 2 to section 54B, it is provided that even if the assessee has not purchased the new asset but has deposited the funds in the capital gains account scheme, such deposit shall be considered as deemed cost. In a situation where assessee has neither claimed nor deposited the unut .....

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of section 54B(2) of the Act. Hence, the above discussion would hold equally good for the purposes of claim of deduction under section 54F of the Act. 2.14 The AO is accordingly directed to allow deduction to the appellant under section 54B as well as under section 54F of the Act after verifying the satisfaction of necessary condition by the appellant as prescribed under section 54B(1) and 54F(1) of the Act respectively. The ground no. 1 of the assessee is thus allowed. 3. Regarding ground No.2 .....

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appellant only on 30.03.2012 as against the due date of 31.07.2010 for filing return of income. No claim u/s 48 was made in this return of income filed. Thereafter, a revised return has been filed on 20.07.2012 by the appellant in which the income from long term capital gain of ₹ 4,67,235/- has been declared along with income from other sources of ₹ 1,67,500/-(this amount was declared in the original return also) and agricultural income of ₹ 95,000/-(this amount was declared in .....

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