Section 54 r.w.s. 139 – Assessee would be entitled to claim exemption u/s 54 to extent of having invested capital gain on sale of old residential flat towards purchase of new residential property up to date of filing of his revised return of income u/s 139(5)

24.  [2019] 199 TTJ
(Mum.) 873

Rajendra Pal Verma vs. ACIT

ITA No.: 6814/Mum/2016

A.Y.: 2013-14

Date of order: 12^th March, 2019

Section 54 r.w.s. 139 – Assessee would be entitled to claim
exemption u/s 54 to extent of having invested capital gain on sale of old
residential flat towards purchase of new residential property up to date of
filing of his revised return of income u/s 139(5)

FACTS

The assessee had e-filed
his return of income on 31^st July, 2013. Thereafter, the assessee
filed a revised return of income on 15^th November, 2014. The AO
observed that the assessee had during the year under consideration sold an old
residential flat and the entire long-term capital gain (LTCG) on the sale of
the old flat was claimed as exempt u/s 54. The assessee had purchased a new
residential flat as per an agreement dated 29^th December, 2014 with
the builder / developer, as per which the construction of the property was
expected to be completed by September, 2017. However, the AO observed that the
assessee had failed to substantiate his claim of exemption u/s 54 amounting to
Rs. 1.75 crores; hence he declined to allow the same.

Aggrieved by the order, the assessee preferred an appeal to
the CIT(A). The CIT(A) was of the view that the assessee was entitled for claim
of exemption u/s 54 only to the extent he had invested the LTCG up to the due
date of filing of his return of income for the year under consideration, i.e.,
assessment year 2013-14 as envisaged u/s 139(1), therefore, he had restricted
his claim for exemption up to the amount of Rs. 83.72 lakhs.

HELD

The Tribunal held that on a perusal of section 54(2), it
emerges that the assessee in order to claim exemption u/s 54 remains under an
obligation to appropriate the amount of the capital gain towards purchase of
the new asset as per the stipulated conditions of section 54.Where the capital
gain was not appropriated by the assessee towards purchase or construction of
the residential property up to the date of filing of the return of income u/s
139, then in such a case the entitlement of the assessee to claim the exemption
by making an investment towards purchase or construction of the new asset would
be available, though subject to the condition that the assessee had deposited
the amount of such capital gain in the CGAS account with the specified bank by
the due date contemplated u/s 139(1). Further, in case any part of the capital
gain had already been utilised by the assessee for the purchase or construction
of the new asset, the amount of such utilisation along with the amount so
deposited would be deemed to be the cost of the new asset.

On the basis of the
aforesaid deliberations, it was viewed that the outer limit for the purchase or
construction of the new asset as per sub-section (2) of section 54 was the date
of furnishing of the return of income by the assessee u/s 139. It was viewed
that the date of furnishing of the return of income u/s 139 would safely
encompass within its sweep the time limit provided for filing of the return of
income by the assessee u/s 139(4) as well as the revised return filed by him
u/s 139(5). It was found that the instant case clearly fell within the sweep of
the aforementioned first limb, i.e., sub-section (1) of section 54. As the
assessee in the instant case had utilised an amount of Rs. 2.49 crores (i.e.,
much in excess of the amount of LTCG on sale of the residential property) up
till the date of filing of his revised return of income u/s 139(5) on 15^th
November, 2014, therefore, his claim of exemption u/s 54 in respect of the
investment made towards the purchase of the new residential property up to the
date of filing of the revised return of income u/s 139(5) was found to be in
order.

Therefore, the assessee in the instant case was entitled to
claim exemption u/s 54 to the extent he had invested towards the purchase of
the new residential property under consideration up to the date of filing of
his revised return of income u/s 139(5), i.e., on 15^th
November,  2014.