Capital gain: Exemption: Sections 54 and 139(1), (4): A.Y. 2006-07: Condition precedent: Profit to be used for purchase of residential property or deposited in specified account before due date for furnishing return: Due date can be u/s.139(4).

The assessee had sold a house property on 13-1-2006 and had purchased another house property on 2-1- 2007. The Assessing Officer disallowed the assessee’s claim for deduction u/s.54 of the Income-tax Act, 1961 holding that the assessee failed to deposit the amount in the capital gains account scheme and also failed to purchase house property before the due date for filing the return of income. The Commissioner (Appeals) allowed the assessee’s claim and held that the assessee had complied with the provisions of section 54 as she had purchased the new residential property on 2-1-2007 i.e., before the due date u/s.139(4) of the Act. The Tribunal affirmed the order of the Commissioner (Appeals).

On appeal by the Revenue, the Punjab and Haryana High Court upheld the decision of the Tribunal and held as under:

“(i) The sale of the asset had taken place on 13- 1-2006, falling in the previous year 2006-07, the return could be filed before the end of the relevant A.Y. 2007-08 i.e., 31-3-2007. Thus, s.s(4) of section 139 provides the extended period of limitation as an exception to s.s(1) of section 139 of the Act.

(ii) S.s (4) was in relation to the time allowed to an assessee u/ss.(1) to file the return. Therefore, such provision is not an independent provision, but relates to the time contemplated u/ss.(1) of section 139. Therefore, s.s(4) had to be read along with s.s(1).

(iii) Therefore, due date for furnishing return of income according to section 139(1) of the Act was subject to the extended period provided u/ss.(4) of section 139 of the Act.”