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Facts
The assessee sold a residential flat and claimed deduction under Section 54 for investing in a new residential property. The sale proceeds were deposited in a capital gains account scheme, but with a delay of 14 days beyond the due date for filing the return of income. The AO denied the exemption due to this delay.
Held
The Tribunal held that the delay of 14 days in depositing the sale proceeds into the capital gains account scheme was a technical/venial breach, and since the substantive conditions of Section 54 were met, the exemption should not be denied. The AO's action was not countenanced.
Key Issues
Whether a minor delay in depositing sale proceeds into the capital gains account scheme can lead to denial of deduction under Section 54, despite fulfilling other conditions?
Sections Cited
54, 54(2), 139(1), 143(3)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRIMANOJ KUMAR AGGARWAL
आदेश / O R D E R
PER ABY T. VARKEY, JM:
This appeal preferred by the assessee trust against the order of the Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi, (hereinafter in short "the Ld.CIT(A)”) dated 09.08.2024 for assessment year (in short “AY") 2014-15.
The only issue in this appeal of the assessee is that the Ld.CIT(A) The only issue in this appeal of the assessee is that the Ld.CIT(A) The only issue in this appeal of the assessee is that the Ld.CIT(A)
1. erred in confirming the he disallowance made by the AO to the tune of disallowance made by the AO to the tune of Rs.1,58,37,000/- with respect to the disallowance of deduction u/s. 54(2 with respect to the disallowance of deduction u/s. 54(2 with respect to the disallowance of deduction u/s. 54(2) of the Income-tax Act, 1961 (hereinafter in short “the Act”) tax Act, 1961 (hereinafter in short “the Act”) tax Act, 1961 (hereinafter in short “the Act”) for not depositing the residue sale proceeds in capital gain scheme account wi depositing the residue sale proceeds in capital gain scheme account wi depositing the residue sale proceeds in capital gain scheme account within the stipulated period u/s. 139(1) of the Act. the stipulated period u/s. 139(1) of the Act.
The brief facts are that the assessee filed her return of income (RoI) The brief facts are that the assessee filed her return of income (RoI) The brief facts are that the assessee filed her return of income (RoI)
on 07.05.2015 for AY 2014 on 07.05.2015 for AY 2014-15 declaring income of Rs.3,62,240/ 15 declaring income of Rs.3,62,240/-. Later, the return (RoI) was selected for scrutiny u/s. 143(3) of t was selected for scrutiny u/s. 143(3) of t was selected for scrutiny u/s. 143(3) of the Act, which led to pass of an assessment order led to pass of an assessment order dated 30.12.2016 by which the AO dated 30.12.2016 by which the AO disallowed Rs.1,58,37,000/ disallowed Rs.1,58,37,000/-, since, the assessee didn’t deposit the , since, the assessee didn’t deposit the said sum in capital gain account scheme before the due date of filing of the in capital gain account scheme before the due date of filing of the in capital gain account scheme before the due date of filing of the RoI u/s. 139(1) of the Act. RoI u/s. 139(1) of the Act. On appeal the Ld.CIT(A) confirmed the same n appeal the Ld.CIT(A) confirmed the same by order dated 31.12.2018 which was set aside by this Tribunal by order by order dated 31.12.2018 which was set aside by this Tribunal by order by order dated 31.12.2018 which was set aside by this Tribunal by order in and restore and restored to the file of the AO to verify whether the sold out property was undivided shares the AO to verify whether the sold out property was undivided shares the AO to verify whether the sold out property was undivided shares (UDS) or residential property. While giving effect to the order of the or residential property. While giving effect to the order of the or residential property. While giving effect to the order of the Tribunal (supra), the AO confirmed that the sold out property was a , the AO confirmed that the sold out property was a , the AO confirmed that the sold out property was a residential property and there residential property and thereafter he again denied exemption u/s. 54 of denied exemption u/s. 54 of the Act on the ground that assessee didn’t utilize/reinvest the capital gain the Act on the ground that assessee didn’t utilize/reinvest the capital gain the Act on the ground that assessee didn’t utilize/reinvest the capital gain [by purchase of new residential property purchase of new residential property (at Neelankarai)] before the due date for filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014 filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014 filing of RoI u/s. 139(1) of the Act i.e. 31.07.2014; and in such a scenario, according to him, according to him, the assessee ought to have deposited the assessee ought to have deposited Rs.1,58,37,000/- in the capital gain account scheme in the capital gain account scheme before the due date before the due date of filing RoI u/s. 139(1) of the Act; of filing RoI u/s. 139(1) of the Act; and since, the assessee deposited the ince, the assessee deposited the same on 11.08.2014 of R same on 11.08.2014 of Rs.90 lakhs, & on 14.08.2014 Rs.18.50 lakhs on 14.08.2014 Rs.18.50 lakhs viz after the due date on 31.07.2014, the AO after the due date on 31.07.2014, the AO disallowed the Long Term disallowed the Long Term Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) Capital Gains (LTCG) claimed by the assessee. On appeal, the Ld.CIT(A) has confirmed the action of AO in the second round by action of AO in the second round by reproducing the reproducing the earlier order of his predecessor. Aggrieved, the assessee is before us. order of his predecessor. Aggrieved, the assessee is before us. order of his predecessor. Aggrieved, the assessee is before us.
We have heard both the parties and perused the records. We note We have heard both the parties and perused the records. We note We have heard both the parties and perused the records. We note that assessee has sold her residentia that assessee has sold her residential flat on 23.01.2014 for a sale l flat on 23.01.2014 for a sale- consideration of Rs.2,24,80,000/ consideration of Rs.2,24,80,000/- and from such a transaction, from such a transaction, she claimed LTCG of Rs.1,56,91,000/ Rs.1,56,91,000/-. Out of the sale sale-consideration received, the assessee deposited the assessee deposited under the capital gain account scheme under the capital gain account scheme i.e. Rs.1.08 crores [i.e. i.e. Rs.90 lakhs on 11.08.2014 and Rs.18.50 lakhs Rs.90 lakhs on 11.08.2014 and Rs.18.50 lakhs on 14.08.2014]. The assessee e assessee is also seen to have invested the invested the said sum for construction of new residential house at Neelankarai construction of new residential house at Neelankarai which was built which was built for a total cost of Rs.2,00,75,384/ of Rs.2,00,75,384/-. However, the AO has denied the . However, the AO has denied the exemption claimed u/s. 54 of the Act on the ground that ass exemption claimed u/s. 54 of the Act on the ground that ass exemption claimed u/s. 54 of the Act on the ground that assessee didn’t utilize/invest the capital gain for purchase of new residential property at the capital gain for purchase of new residential property at the capital gain for purchase of new residential property at Neelankarai within the due date u/s. 139(1) of the Act Neelankarai within the due date u/s. 139(1) of the Act i.e. on or before i.e. on or before belatedly deposited it only in 11th th& 14thAugust, 31.07.2014; and had 2014. Therefore, the AO erefore, the AO denied exemption claimed u/s. 54 of the Act claimed u/s. 54 of the Act which impugned action cannot be countenanced because the assessee has action cannot be countenanced because the assessee has action cannot be countenanced because the assessee has fulfilled all the substantive substantive conditions prescribed u/s. 54 of the Act conditions prescribed u/s. 54 of the Act for claiming the deduction, claiming the deduction, barring the deposit of the sale proceeds in sale proceeds in the “capital gain scheme account” “capital gain scheme account” by few days i.e. 14 days. According to us, by few days i.e. 14 days. According to us, the delay of 14 days in depositing the sum in the “capital gain scheme” the delay of 14 days in depositing the sum in the “capital gain scheme” the delay of 14 days in depositing the sum in the “capital gain scheme”
cannot come in the way of the claim, where the assessee has fulfilled the cannot come in the way of the claim, where the assessee has fulfilled the cannot come in the way of the claim, where the assessee has fulfilled the substantive conditions by investing the sum for building a substantive conditions by investing the sum for building a substantive conditions by investing the sum for building a residential property within the period allowed by law; and the breach of the condition property within the period allowed by law; and the breach of the condition property within the period allowed by law; and the breach of the condition of depositing the same can be term depositing the same can be termed as technical/venial breach, which ed as technical/venial breach, which cannot be a fetter for denying the deduction u/s. 54 of the Act. In this a fetter for denying the deduction u/s. 54 of the Act. In this a fetter for denying the deduction u/s. 54 of the Act. In this regard, it is noted that simil is noted that similar issue had come up before this Tribunal in ar issue had come up before this Tribunal in the case of ACIT vs Justice T.S. Arunachalam the case of ACIT vs Justice T.S. Arunachalam – AY 2014-15 dated 30.01.2018, wherein the Tribunal 15 dated 30.01.2018, wherein the Tribunal held that the delay to held that the delay to deposit the amount in capital gain account scheme deposit the amount in capital gain account scheme was only a technic only a technical lapse on the part of the assessee and therefore, the benefit of section 54 lapse on the part of the assessee and therefore, the benefit of section 54 lapse on the part of the assessee and therefore, the benefit of section 54 of the Act cannot be denied be denied to the assessee by holding as under: by holding as under:
We have heard the rival submissions and carefully perused the materials 8. We have heard the rival submissions and carefully perused the materials 8. We have heard the rival submissions and carefully perused the materials available on record. In the decision o available on record. In the decision of ShriMadhuvan Prasad Vs. ITO, supra the f ShriMadhuvan Prasad Vs. ITO, supra the Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act Chennai Bench of the Tribunal has allowed the benefit of section 54 of the Act because the assessee had fulfilled all the conditions prescribed under section 54 because the assessee had fulfilled all the conditions prescribed under section 54 because the assessee had fulfilled all the conditions prescribed under section 54 of the Act barring the deposit of of the Act barring the deposit of the sale proceeds in the "capital gain scheme the "capital gain scheme account" as prescribed under section 54(2) of the Act. In that decision reliance prescribed under section 54(2) of the Act. In that decision reliance prescribed under section 54(2) of the Act. In that decision reliance was also placed in the decision of Hon'ble Apex Court in the case of was also placed in the decision of Hon'ble Apex Court in the case of was also placed in the decision of Hon'ble Apex Court in the case of MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein MotilalPadampatSugarmillCo.Ltd. Vs. State of Uttar Pradesh &Ors wherein it was held that 'thus there is n no presumption that every person knows the law. law. It is often said that everyone is presumed to know the law, but presumed to know the law, but that is not a correct statement correct statement known to the law. In the given case before us also, it is not In the given case before us also, it is not there is no such Maxim known disputed that the assessee had not fulfilled the conditions prescribed under disputed that the assessee had not fulfilled the conditions prescribed under disputed that the assessee had not fulfilled the conditions prescribed under section 54 of the Act barring the deposit of the sale proceeds in the "capital gain section 54 of the Act barring the deposit of the sale proceeds in the "capital gain section 54 of the Act barring the deposit of the sale proceeds in the "capital gain scheme account". Moreover, the facts reveal that th scheme account". Moreover, the facts reveal that the assessee had deposited the e assessee had deposited the entire sale proceeds in his savings bank account maintained with nationalized entire sale proceeds in his savings bank account maintained with nationalized entire sale proceeds in his savings bank account maintained with nationalized
bank out of which he has constructed his house. The only small lacuna assessee bank out of which he has constructed his house. The only small lacuna assessee bank out of which he has constructed his house. The only small lacuna assessee had made is that the assessee though had placed the entire sale procee had made is that the assessee though had placed the entire sale procee had made is that the assessee though had placed the entire sale proceeds in the nationalized bank he has not transferred the same in the ·capital gain scheme nationalized bank he has not transferred the same in the ·capital gain scheme nationalized bank he has not transferred the same in the ·capital gain scheme account'. Considering these facts of the case and the decisions of the Tribunal and account'. Considering these facts of the case and the decisions of the Tribunal and account'. Considering these facts of the case and the decisions of the Tribunal and the Hon'ble Apex Court cited above, we are of the considered view that for this the Hon'ble Apex Court cited above, we are of the considered view that for this the Hon'ble Apex Court cited above, we are of the considered view that for this small technical lapse of the assessee, the benefit of section 54 should not be apse of the assessee, the benefit of section 54 should not be apse of the assessee, the benefit of section 54 should not be denied. Section 54 of the Act is a beneficial provision and a beneficial denied. Section 54 of the Act is a beneficial provision and a beneficial denied. Section 54 of the Act is a beneficial provision and a beneficial interpretation has to be made as far as possible for giving benefit to the assessee. interpretation has to be made as far as possible for giving benefit to the assessee. interpretation has to be made as far as possible for giving benefit to the assessee. The assessee has procee The assessee has proceeded to comply with the provisions of section 54 of the Act ded to comply with the provisions of section 54 of the Act but has only made a small technical breach which we are of the considered view but has only made a small technical breach which we are of the considered view but has only made a small technical breach which we are of the considered view should not disentitle the assessee tor the benefit of section 54 of the Act. should not disentitle the assessee tor the benefit of section 54 of the Act. should not disentitle the assessee tor the benefit of section 54 of the Act. Therefore, we hereby direct the l ereby direct the learned Assessing Officer to grant the benefit of ssessing Officer to grant the benefit of section 54 of the Act to the assessee and accordingly delete the addition made by section 54 of the Act to the assessee and accordingly delete the addition made by section 54 of the Act to the assessee and accordingly delete the addition made by him which was further sustained by the learned Commissioner of Income him which was further sustained by the learned Commissioner of Income him which was further sustained by the learned Commissioner of Income Tax (Appeals).
Since, the assessee has constructed the new residential house Since, the assessee has constructed the new residential house Since, the assessee has constructed the new residential house within three years from the date of transfer of original asset within three years from the date of transfer of original asset within three years from the date of transfer of original asset and deposited Rs.1.08 crores in the “capital gain scheme account” with a deposited Rs.1.08 crores in the “capital gain scheme account” with a deposited Rs.1.08 crores in the “capital gain scheme account” with a delay of 14 days, the claim of deduction u/s. 54 of the the claim of deduction u/s. 54 of the Act couldn’t have Act couldn’t have been denied to the assessee been denied to the assessee by respectfully following the decision of this respectfully following the decision of this Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), Tribunal in ACIT vs Justice T.S. Arunachalam (Supra), and direct the deletion of addition made by the AO. deletion of addition made by the AO.
In the result, appeal filed by the assessee is allow In the result, appeal filed by the assessee is allowed. ed.
Order pronounced on the 26th day of February, 2025, in Chennai. Order pronounced on the , in Chennai.