SHRI NANDKISHORE RAMANLAL PARIKH HUF,,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-5(2)(3),, AHMEDABAD

Assessee has taken four grounds of appeal, which are argumentative and descriptive in nature. At the time of hearing, the ld.counsel for the assessee has confined grievance of the assessee qua one issue viz. whether exemption under section 54F is available to the assessee or not on the investment of capital gain in purchase of a flat.

With the assistance of the ld.representatives, I have gone through the record carefully. It emerges out from the record that the assessee has filed her return of income electronically on 6.7.2013 declaring total income at Rs.278/-. Her case was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. Scrutiny of the accounts, it revealed to the AO that the assessee was having 1/8th share in a property at Patidar Society, C.G.Road, Ahmedabad. She has sold her 1/8th share on 25.2.2013 for a sum of Rs.90.00 lakhs. She invested Rs.80 lakhs on 3.7.2013 in Bank of Baroda under capital gain account scheme as per section 54F of the Act. Thereafter, she had purchased residential flat on 18.10.2014 for a sum of Rs.1,25,00,000/-. This purchase has been made within the prescribed time limit of two years as provided under section 54F(1) of the Act. She claimed that no capital gain tax is leviable upon the assessee. The ld.AO did not accept this contention of the assessee, and he allowed the deposits made in the capital account at Rs.80 lakhs. He made addition of Rs.8,01,740/-. Appeal to the CIT(A) did not bring any relief to the assessee.

The ld.counsel for the assessee compiled certain details in tabular form and it is imperative upon us to take note of these details for adjudication of this issue. It reads as under:

The stand of the assessee is that since she has made investment in purchase of a new flat and utilised the total capital gain. In other words, she has invested the amount more than the sale consideration, therefore, no capital gain is taxable in her hands under section 54F(1), and she is entitled for exemption in toto. The case of the AO is that since she has not deposited the sale consideration in a capital account before the due date of filing of return under section 139(1) of the Act, therefore, she cannot claim exemption as contemplated under section 54F(4). In other words, according to the AO, benefit of section 54F should be available to the assessee, if she had purchased new residential flat within one year before the sale of house or two years after the sale, but in such condition she has to make deposit of consideration/capital gain in a bank account maintained under the capital gains cheme. She failed to make such deposits before the date of filing of return, therefore, she is not entitled for exemption under section 54F. Before me, the ld.counsel for the assessee made reference to the decision of ITAT, Ahmedabad Benches in the case of Ashok Kapasiawala vs. IT), 63 taxamnn.com 284. She has placed on record copy of this order. Division Bench of the ITAT has considered this aspect and after putting reliance upon the decision of Karnataka High Court, allowed the claim of the assessee in an identical

I find no disparity on the facts. In the case of Ashok Kapasiawala (supra) also the assessee did not deposit the sale consideration in the bank account before the due date of filing of return. But otherwise purchase of house is within two years stipulated in section 54F(1) of the Act. It is not the case of the assessee that she has purchased beyond the period as contemplated in section 54F(1). The only failure is, she has not deposited the sale consideration in capital account. This condition has not been considered as mandatory by the Hon’ble Karnataka High Court. In the decision of Tribunal in the case of Ashok Kapasiawala (supra) Division Bench has followed this decision. No contrary decision was brought to my notice by the department. Therefore, respectfully following the decision of Hon’ble Karnataka High Court and decision of ITAT (supra), I allow the appeal of the assessee and direct the AO to grant exemption under section 54F to the assessee.

In the result, appeal of the assessee is allowed. Pronounced in the Open Court on 30th April, 2019.