Sunayana Devi vs. ITO
ITA No. : 996/KOL/2013
A.Y. : 2004-05
Date of Order: 13th September, 2017
Section 54F – If the assessee has invested sale consideration in the construction of a new residential house within three years from the date of transfer, deduction u/s. 54F cannot be denied on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s. 139(1) of the Act.
FACTS
During the previous year under consideration, the assessee, an individual, sold land for a consideration of Rs. 20 lakh on 9.12.2003. The stamp duty value of the land sold was Rs. 41,00,000. Of the Rs. 20 lakh received on sale of land, the assessee utilised a sum of Rs. 3,50,000 on purchase of land for construction of a new residential house, on 29.7.2004, and also paid Rs. 31,839 as stamp duty thereon.
The Assessing Officer with a view to verify the details of deposit of balance consideration in Capital Gains Account called for the required details. The assessee did not file the required details. In the circumstances, the AO proceeded to compute long term capital gain at Rs. 38,94,750 by adopting stamp duty value of the land transferred as full value of consideration. He denied allow exemption u/s. 54F of the Act.
Aggrieved, the assessee preferred an appeal to CIT(A). In the course of appellate proceedings, photocopy of pay in slip was furnished to substantiate that cash of Rs. 2,60,000 was deposited on 31.7.2004 in Capital Gains Account Scheme and a cheque of Rs.13,90,000 was deposited on 30.7.2004 which cheque was misplaced by the Bank and on 12.2.2005 a fresh cheque was issued to the bank for deposit in Capital Gains Account Scheme. The CIT(A) held that the assessee was entitled to deduction of Rs. 2,60,000 u/s. 54F as this was the amount deposited in Capital Gains Account Scheme by 31.07.2004 being due date of furnishing return of income u/s. 139(1) of the Act. With regard to the balance sum of Rs. 13,90,000 ( Rs.16,50,000 – Rs. 2,60,000) since deposit was made after 31.07.2004, the CIT(A) held that the assessee will not be entitled to deduction u/s. 54F of the Act.
Aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
In the course of appellate proceedings before the Tribunal, it was submitted that though the completion certificate was not received within three years, the remand report established that an Inspector was deputed to conduct spot inquiry and the Inspector reported that the construction was completed within three years from the date of transfer.
The Madras High Court has in the case of CIT vs. Sardarmal Kothari [2008] 302 ITR 286 (Mad.), held that it would be enough if the assessee establishes that he has invested the entire net consideration within the stipulated period. The Chennai Bench of ITAT in the case of Seetha Subramanian vs. ACIT [1996] 59 ITD 94 (Mad.) has taken a view that investment of net consideration for construction of the house has alone to be seen for allowing deduction u/s. 54F of the Act. The Tribunal held that the absence of completion certificate cannot be a ground to deny the benefit of deduction u/s. 54F of the Act.
The Tribunal observed that having come to the conclusion that the assessee had utilised the net consideration in construction of a house within a period of 3 years from the date of transfer, the question would be whether the absence of deposit of unutilised net consideration in a specific bank account as is required u/s 54F(4) of the Act, should the assessee be denied the benefit of deduction u/s. 54F of the Act.
The Tribunal noted that the Karnataka High Court has in the case of CIT vs. K. Ramachandra Rao [2015] 567 taxmann.com 163 (Karn.) held that if the assessee invests the entire consideration in construction of the residential house within 3 years from the date of transfer, he cannot be denied deduction u/s. 54F of the Act on the ground that he did not deposit the said amount in capital gains account before the due date prescribed u/s. 139(1) of the Act.
Considering the factual position that the assessee invested the sale consideration in construction of a residential house within three years from the date of transfer and also the decision of the Karnataka High Court in the case of CIT vs. K. Ramachandra Rao (supra), the Tribunal held that the assessee should be given the benefit of deduction u/s. 54F of the sum of Rs. 16,50,000 also and this benefit cannot be denied on the ground that he had not complied with the requirements of section 54F(4) of the Act.
The Tribunal held that in effect the assessee would be entitled to a deduction of Rs. 20,31,839 viz. for the investment of Rs. 3,50,000 in purchase of land, Rs. 31,839 stamp duty and registration charges and Rs. 16,50,000 utilised for construction of a residential house within the period specified u/s. 54F(1) of the Act. It directed the AO to allow deduction of Rs. 20,31,839 u/s. 54F of the Act.