Section 54F – Deposit of the amount of capital gains in a separate savings bank account and utilisation thereof for the purposes specified u/s. 54F is said to be substantial compliance with the requirements of section 54F.

Section 54F – Deposit of the amount of
capital gains in a separate savings bank account and utilisation thereof for
the purposes specified u/s. 54F is said to be substantial compliance with the
requirements of section 54F.

FACTS

The assessee, an individual, received
certain compensation on compulsory acquisition of land. The assessee offered
the said receipts as long-term capital gains and claimed exemption u/s. 54F of
the Act by depositing the amount of capital gains in a separate savings bank
account. The assessee contended that the amount of gains was deposited under
Capital Gains Accounts Scheme 1988. The Assessing Officer (AO) observed that
the account in which amount was deposited by the assessee was not a Capital
Gains Scheme Account and therefore denied exemption u/s. 54F of
the Act.

Aggrieved the assessee preferred an appeal
to the CIT(A) who confirmed the order of the AO.

Aggrieved, the assessee preferred an appeal
to the Tribunal.

HELD

The Tribunal noted that the undisputed facts
viz. that despite having an existing account in another bank, the assessee
opened a new bank account and deposited not only the amount of consideration
but also the TDS refund received by it in this respect. Subsequently, the
assessee utilised the said amount for the construction of house. Thus, the
Tribunal noted that since the assessee had not utilised the amount for the
purposes stated u/s. 54F, he had duly deposited the entire compensation in the
bank account at the time of filing of return of income and claimed exemption
u/s. 54F of the Act. The Tribunal held that the assessee was entitled to claim
exemption as the assessee had substantially complied with the provisions of
sub-section (4) of section 54F.

The Tribunal held that the idea of opening
capital gains account under the scheme is to delineate the funds from other
funds regularly maintained by the assessee and to ensure that benefit availed
by an assessee by depositing the amount in the said account is ultimately
utilised for the purposes for which the exemption has been claimed i.e, for
purchase or construction of a residential house.

The Tribunal further observed that though
savings bank account was not technically a capital gains account, however the
essence and spirit of opening and maintaining a separate capital gains account
was achieved and demonstrated by the assessee. The Tribunal thus held that
merely because the saving bank account is technically not a capital gains
account, it cannot be said that there is violation of the provisions of s/s.
(4) of the Act in terms of not opening a capital gains account scheme.

The Tribunal allowed the appeal filed by the
assessee.