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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAIL & SHRI GAGAN GOYAL
PERSANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee against the order dated 23.10.2019, passed by the Commissioner of Income Tax (Appeals)– 37, Mumbai, [―the CIT(A)‖] under section 250 of the Income Tax Act, 1961 ("the Act") for the assessment year 2013–14.
In this appeal, the assessee has raised following grounds:–
―1. The Learned Assessing Officer and CIT(A) erred in assessing the income of Rs.41,59,952 instead of returned income of Rs.17,41,067. 2. The Learned Assessing Office and CIT(A) erred in not following the various decisions of Bombay High Court and Honorable Mumbai ITAT,
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which claimed that deduction u/s 54 is to be allowed even if the investment in Capital Gain scheme is made within the due date prescribed u/s 139(4). 3. The Learned Assessing Officer and CIT(A) erred in recognizing the fact that the Assessee had done all that she could do to make the investment in Capital Gain scheme and also issued the cheque and thus complied with provision of Section 54 as per the guidelines of Bombay High Court in case of Mrs. Hila J B Wadia, 215 ITR 376.‖
The brief facts of the case for deciding the present appeal as emanating from the record are: The assessee is an individual and has filed the return of income on 31.07.2013 declaring total income at Rs.17,41,067. During the year under consideration, the assessee derived income from salary, house property, capital gains and interest. On 31.01.2013, assessee sold a house property for Rs. 95,00,000 which resulted in Long Term Capital Gains of Rs.74,18,885 out of which Rs. 50,00,000 was invested in a new residential property and the balance of Rs. 24,25,000 was deposited in the Capital Gains Scheme to avail exemption from Capital Gains Tax. During the course of scrutiny assessment, it was observed that assessee had deposited sales consideration of capital asset in account under Capital Gains Scheme on 13.08.2013 i.e. after the due date of filing of return of income under section 139(1) of the Act and claim exemption under section 54 of the Act, whereas as per provisions of section 54(2) of the Act the net sale consideration which is not utilised for acquisition of a residential house property, must be deposited by the assessee before the due date of filing of return of income under section 139(1) i.e. 31.07.2013 in the present case. Accordingly, assessee was asked to show cause as to why the claim
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of exemption of capital gains under section 54 of the Act be not disallowed in respect of amount deposited in Capital Gains Scheme. In reply, the assessee submitted that the assessee had a bank account in Standard Chartered Bank Ltd, however, the account under Capital Gains Scheme could be open only in a nationalised bank. Accordingly, the assessee opened an account and gave a cheque for deposit of the amount in the bank on 31.07.2013. The assessee further submitted that bank promised to give the fixed deposit in a day or two. However, the cheque issued by the assessee was cleared and fixed deposit was issued by the bank only on 13.08.2013.
The Assessing Officer vide order dated 21.03.2016, passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the assessee has failed to deposit the net sale consideration before the due date of filing of return of income under section 139(1) of the Act i.e., 31.07.2013, which is clear from the bank statement of account under Capital Gains Scheme as the date of deposit in Capital Gains Scheme account is also reflected on 13.08.2013. The Assessing Officer further held that as per the provisions of section 54(2) of the Act, the amount of capital gains which is not appropriated/utilised by the assessee towards purchase / construction of new asset is required to be deposited in account under Capital Gains Scheme before the due date for filing the return of income under section 139(1) of the Act. The Assessing Officer further observed as under:
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―…….. Thus there are two different dates specified for the investments u/s 54 of the Act. In the first situation where the utilization of sale consideration are made for purchase / construction of property before the date of filing the return, it made for purchase / construction of property before the date of filing the return, it was mentioned as before the date of furnishing the return of income under section 139. In the second situation, where the amounts are to be deposited in the specified modes it was mentioned as ―such deposit being made in any case not later than the due date applicable in eth case of the assessee for furnishing the return of income under section 1 of section 139. Thus from the above it is clear that the time limits for the purpose of utilization of sale proceeds for purchase / construction of property before the date of filing of return and for the purpose of making deposits in the specified modes are totally different. In the former case, it was the date of filing the return u/s 139. In the later situation it was the date of file return u/s 139(1) of the Income Tax Act.‖ Accordingly, the Assessing Officer disallowed the claim of exemption made by the assessee under section 54 of the Act of Rs.24,25,000, and computed the Long Term Capital Gain at Rs.24,18,885.
In appeal, the CIT(A) vide impugned order dated 23.10.2019, upheld the order passed by the Assessing Officer and dismissed the appeal filed by the assessee holding that for the purpose of availing the benefit under section 54(2) of the Act, amount of capital gain, which is not apportioned/utilised by the assessee towards the purchase / construction of the new house, is required to be deposited in account under Capital Gains Scheme before the due date for filing of the return of income under section 139(1) of the Act. Being aggrieved, the assessee is in appeal before us.
During the course of hearing, Shri Ajay Singh, the learned Authorised Representative for the assessee (―the learned A.R.) submitted that on 31.07.2013, the assessee had approached the bank to open the capital gains account and deposit the cheque, however, the same was cleared only on 13.08.2013. The Assessing Officer as well as the CIT(A) treated the 4
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date of clearance of cheque as the date of deposit in the Bank. The learned A.R. submitted that the expression ―furnishing the return of income under sub-section (1) of section 139‖ under section 54(2) of the Act should be liberally construed to even include due date of filing return of income under section 139(4) of the Act. In support of his submissions, learned A.R. placed reliance on various decisions rendered by the Co–ordinate Bench of the Tribunal. The learned A.R. further submitted that in any case the amount has been utilised for the purchase of new asset prior to the due date of filing return of income under section 139(4) of the Act and accordingly eligible for benefit under section 54 of the Act.
On the other hand, Shri Chandra Vijay, the learned Departmental Representative (―the learned D.R.‖) vehemently relied on the orders passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. In the present case, in order to decide whether the assessee is entitled to benefit under section 54 of the Act in respect of the amount initially deposited in account under Capital Gains Scheme and later on withdrawn and used for payment in respect of the new house, it is relevant to analyse the provisions of section 54 of the Act, which reads as under:–
―54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income 5
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from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,— ………………… ……………….. (2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub- section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :‖
Therefore, in view of the above, the benefit under section 54 of the Act is available to the assessee when the capital gains arising from transfer of a long term capital asset is utilized (i) for the purchase of new residential house by the assessee, either one year before or two years after the date on which the transfer of original asset took place, or (ii) for construction of residential house by the assessee, within the period of three years from such date. The section further requires that if the amount of capital gains which is not utilized by the assessee for the purpose of purchase / construction of new residential house before the date of furnishing of return of income under section 139 of the Act shall be deposited by him in
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bank account in accordance with Capital Gains Scheme before the due date for furnishing the return of income under section 139(1) of the Act.
In view of the above, following dates became relevant to be noted, in the present case, before proceeding further:–
The assessee sold the house property i) 31.01.2013 Due date for filing return u/s 139(1) 31.07.2013 ii) The assessee claimed to have deposited the cheque with the Bank for the purpose of Capital 31.07.2013 iii) Gains Scheme The date on which the cheque issued by the iv) 13.08.2013 assessee was deposited in the account. The date on which the assessee issued cheque 13.02.2015 v) in respect of the new house. Last date for filing belated return u/s 139(4) vi) 31.03.2015
In the present case, the cheque issued by the assessee and submitted to the bank on 31.07.2013, was deposited in the capital gain account on 13.08.2013. To this extent, there is no dispute amongst the parties. The assessee’s claim is that the cheque and other documents relevant for the purpose of capital gains account was duly submitted to the bank on 31.07.2013, and only after confirmation from the bank, the return of income was filed on 31.07.2013, inter-alia, claiming benefit under section 54 of the Act. In the alternative, it has been submitted that the amount was subsequently withdrawn and has been deposited for the purchase of new residential house within the time period for filing the return of income under section 139(4) of the Act.
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For the relevant assessment year, the due date for furnishing the return of income under section 139(1) of the Act was 31.07.2013, which as per record was further extended by the CBDT to 05.08.2013. Further, the due date for furnishing the belated return of income under section 139(4) of the Act was 31.03.2015. As per the provisions of section 54(2) of the Act, for claiming benefit of the section 54, any amount of capital gains not utilized for purchase / construction of residential house is required to be deposited in account maintained with the bank under Capital Gains Scheme on/before the due date for filing of the return of income under section 139(1) of the Act. In the present case, it is evident that the amount of capital gains, which was not utilized by the assessee for the purpose of purchase of new residential house, was not deposited in Capital Gains Scheme account on/before 31.07.2013 (or 05.08.2013 as extended by the CBDT) i.e. the due date of filing return of income under section 139(1) of the Act. During the course of hearing, the learned A.R. submitted that the expression ―furnishing the return of income under sub-section (1) of section 139‖ under section 54(2) of the Act should be liberally construed to even include due date of filing return of income under section 139(4) of the Act. In support of its submissions, the learned A.R. has relied upon the decision of the Co–ordinate Bench of the Tribunal in ITO v/s Shri Dhruv Bishwa Tewari, ITA no.4233/Mum./2017, order dated 09.11.2018, wherein the Tribunal, while holding that the investment of entire capital gains receipt in acquisition of new residential property before the due date of
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filing of return of income under section 139(4) of the Act is eligible for benefit under section 54 of the Act, observed as under:– 8. We have given a thoughtful consideration to the issue before us and are persuaded to subscribe to the view taken by the CIT(A). On a perusal of Sec. 54(2), it emerges that the assessee in order to claim exemption under Sec.54 remains under an obligation to appropriate the amount of the capital gain towards the purchase of the new asset within a period of one year before or two years after the date on which the transfer of the original asset took place, or has within a period of three years after that date constructed, a residential house. In so far, where the capital gain is not appropriated by the assessee towards purchase or construction of the residential property within the period contemplated under Sec. 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 still be available, 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 under Sec. 139(1) of the Act. Further, in case if any part of the capital gain had already been utilized by the assessee for the purchase or construction of the new asset, the amount of such utilization along with the amount so deposited shall be deemed to be the cost of the new asset. We are of the considered view that the outer limit for the purchase or construction of the new asset as per subsection (2) of Sec. 54 is the date of furnishing of the 'return of income' by the assessee under Sec. 139. On a plain and literal interpretation of the aforesaid statutory provision, it can safely be gathered that the conscious, purposive and intentional providing by the legislature of "date of furnishing the return of income under Sec. 139" cannot be substituted and narrowed down to Sec. 139(1) of the Act. We are,-of the considered view, that the date of furnishing of the return of income under Sec. 139 would safely encompass within its sweep the time limit provided for filing of the 'return of income' by the assessee under Sec. 139(4) of the Act. In the backdrop of the aforesaid settled position of law, we are of the considered view that subsection (2) of Sec. 54 contemplates two situations viz. (a) a case where the assessee had appropriated the amount of LTCG towards acquisition of the new asset within a period of one year before the date on which the transfer of the original asset took place or for the purchase or construction of the new asset before the date of furnishing the return of income under Sec. 139 of the Act; and (b) a case where the assessee had not appropriated the amount of the capital gain before the date of furnishing the 'return of income' under Sec. 139, there he shall be eligible to claim exemption under Sec.54 towards purchase of the new asset within a period of two years after the date on which the transfer took place or towards construction of a new asset within a period of 3 years from the date on which the transfer took place, subject to a rider that the assessee should have deposited the amount of capital gain in a CGAS account with a specified bank by not later than the 'due date' applicable in his case for furnishing the 'return of income' under sub-section (1) of Sec. 139. We find that the case before us clearly falls within the sweep of the
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aforementioned first limb of sub-section (2) of Sec.54 of the Act. As the assessee in the case before us had appropriated the amount of the LTCG towards purchase of the new residential property viz. Flat A–203, Crown @ Hiranandani, Thane on 22.04.2014 i.e. before the date contemplated under sec. 139(4), thus by having utilized the LTCG before the date of furnishing the 'return of income' under Sec. 139, his claim of exemption under Sec. 54 is found to be in order. ……….‖
The learned A.R. has also relied upon another decision of the Co– ordinate Bench of the Tribunal in ACIT v/s Shri Manish Vasavada, ITA no.6741/Mum./2016, order dated 30.05.2018, in which assessee’s claim under section 54 of the Act was allowed in respect of capital gains which was utilized prior to filing of belated return of income under section 139(4) of the Act. On similar lines, is another decision of the Co–ordinate Bench of the Tribunal in Amandeep Singh M. Kohli v/s ITO, ITA no.5733/Mum./ 2017, order dated 01.03.2019.
Thus, in all the above decisions relied upon by the learned A.R., during the course of hearing, the Co–ordinate Bench of the Tribunal granted the relief by liberal construing the expression ―date of furnishing of return of income under section 139 of the Act‖ to include within its sweep the time limit provided for filing the return of income under section 139(4) of the Act.
Under section 54(2) of the Act, as also recorded by the Assessing Officer as well as the CIT(A), there are two different dates specified for the investments under section 54 of the Act. In the first situation, where the utilization of sale consideration is made for purchase / construction of property before the due date of filing the return of income, the expression
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used in section 54(2) is “before the date of furnishing the return of income under section 139”. In the second situation, where the amounts are to be deposited in the specified modes, section 54(2) of the Act uses the expression “for furnishing the return of income under sub-section (1) of section 139”. Thus, for both the purposes, i.e. (i) for utilization for purchase / construction of property; and (ii) for deposit in the specified modes, different time lines have been provided under section 54(2) of the Act. The aforesaid decisions of the Co-ordinate Bench of the Tribunal, relied upon by the learned A.R., dealt with the first situation where the sale consideration was utilised for purchase / construction of the property and accordingly the Co–ordinate Bench of the Tribunal liberally construed the expression ―date of furnishing of return of income under section 139 of the Act‖ to include within its sweep the time limit provided for filing the return of income under section 139(4) of the Act. Thus, we are of the view that these decisions do not support the contention of the learned A.R. that the expression ―furnishing the return of income under sub-section (1) of section 139‖ under section 54(2) of the Act should be construed to even include due date of filing return of income under section 139(4) of the Act. We are further of the view that such a construction, as proposed by the learned A.R., will render the time limit provided for filing return of income under section 139(1) of the Act completely otiose and will also be contrary to intention of the statute. Thus, we are of the view that the benefit under section 54 of the Act is not available to the assessee due to failure to deposit the amount of capital gain, which was not utilized for the purpose
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of purchase of new residential house, in account under Capital Gains Scheme on/or before the due date of filing of return of income under section 139(1) of the Act.
In the alternative, learned A.R. submitted that the assessee has utilized the amount of Rs.24,25,000 for the purchase of new asset and paid the amount vide cheque dated 13.02.2015. The learned A.R. further submitted that the amount has been utilised for the purchase of new asset prior to the due date of filing return of income under section 139(4) of the Act i.e. 31.03.2015 and in view of aforesaid decisions rendered by the Co- ordinate Bench of Tribunal, assessee is, in any case, entitled to benefit under section 54 of the Act. Insofar the learned A.R.’s submission that the Co–ordinate Bench of Tribunal in the aforesaid decisions have laid down liberal interpretation that the amount of capital gains utilized for purchase of new asset, prior to the due date of filing return of income under section 139(4) of the Act, is allowable under section 54 of the Act, is concerned the same merit acceptance in view of the aforesaid judicial precedences. However, it is pertinent to note that for claiming any benefit under section 54 of the Act, it is first of all required under sub–section (1) that capital gains arising from transfer of long term capital asset should be utilized for the purpose of purchase of new residential house within a period of either one year before or two years after the date of transfer of earlier asset or the same has been utilized for construction of residential house within a period of three years from the date of such transfer. In the present case, it is relevant to note that the assessee sold the earlier house property on 12
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31.01.2013, thus, the time period for utilization of the capital gains arising from such transfer was available till 31.01.2015, in case of purchase of new residential house and till 31.01.2016, in case of construction of the new residential house, under section 54(1) of the Act. It is an undisputed fact that in the present case, the assessee has not utilized the amount for the purpose of construction of the residential house and the initial amount of Rs. 50,00,000 and subsequent payment of Rs. 24,25,000 was made in respect of purchase of new residential house. Thus, in view of the above, the assessee was required to utilize the capital gains till 31.01.2015 i.e., within the period of two years from the date on which the earlier asset was sold, for the purpose of claiming benefit under section 54 of the Act. However, in the present case, though the first payment of Rs.50,00,000 was made within a period of two years and thus not in dispute, the second payment of Rs.24,25,000 was made vide cheque dated 13.02.2015, i.e. beyond the period of two years as per section 54(1) of the Act, for the purchase of new residential house. Thus, even if the provisions of section 54(2) of the Act are liberally construed, in view of judicial precedences relied upon by the learned A.R. in the present case, the assessee does not satisfy the conditions of section 54(1) of the Act in respect of amount of Rs.24,25,000 utilized for the purpose of purchase of new asset beyond the period of two years from date of transfer of original asset. Thus, in view of the above, we do not find any merit even in the alternative claim made by the assessee under section 54 of the Act. Consequently, the order passed by the CIT(A) is upheld. The grounds raised by the assessee are dismissed.
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In the result, appeal by the assessee is dismissed in terms of our aforesaid findings. Order pronounced in the open court on 12/04/2022
Sd/- Sd/- GAGAN GOYAL SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12/04/2022
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai