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I-T - Exemption u/s 54F can still be allowed if sale consideration is invested to purchase new residential flat before date specified u/s 139(4) : ITAT

By TIOL News Service

KOLKATA, DEC 20, 2018: THE ISSUE IS - Exemption u/s 54F can still be allowed if sale consideration is invested to purchase new residential flat before date specified u/s 139(4) of Act. YES IS THE VERDICT.

Facts of the case

The assessee an Individual, had filed return of income for relevant AY. The assessee entered into an agreement with Wagholi Properties Pvt. Ltd. for purchase of flat in the building known as Panchshil Towers. The AO issued notice u/s 133(6) of the Act to Wagholi Properties wherein the flat cost was confirmed at Rs. 2,37,47,500/- + other charges of Rs. 22,73,575/-. The assessee sold shares of K.B. Industrial Alloys Pvt. Ltd for Rs. 1,46,92,300/-. These shares were purchased by the assessee in financial year 1988-89 and 2008-09. The assessee derived long term capital gain of Rs. 1,45,42,091/-. The assessee claimed exemption u/s 54F of Act in view of his new investment in purchase of flat. The AO observed that out of sale proceeds received on sale of shares, the assessee had advanced a sum of Rs. 1,21,00,000/- for providing unsecured loan to M/s Kay Bee Functionary Services Pvt. Ltd. in which he was one of the directors and holding majority of the shares thereon. The AO also observed that further a sum of Rs. 20,00,000/- was invested in Kotak Bond and Rs. 2,00,000/- for other purposes by the assessee. The AO also observed that the assessee failed to deposit the monies in the capital gain account scheme before the due date of filing of return of income. Accordingly, AO, held that the assessee was not entitled for claim of exemption u/s 54F of the Act. The assessee pleaded that the entire long term capital gain and net sale consideration had been duly invested by the assessee in purchase of new residential flat before the due date specified u/s 139(4) of the Act. However on appeal, CIT(A) upheld the order of AO.

Tribunal held that,

++ the assessee had invested net sale consideration for purchase of new residential flat before the date specified u/s 139(4) of the Act. The issue under dispute is squarely covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in the case of Sunayana Devi vs. ITO, wherein it was held that Karnataka High Court in the case of CIT, Bangalore vs K.Ramachandra Rao had held that if the assessee invests the entire consideration in construction of the residential house within three 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 gain account scheme before the due date prescribed u/s 139(1) of the Act. Respectfully following this decision, it was held that the assessee is entitled for claim of exemption u/s 54F of the Act in the facts of the instant case. In the result, the appeal of the assessee is allowed.

(See 2018-TIOL-2447-ITAT-KOL)


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