SAFIQUE SADRUDDIN BALSARRA,,PUNE vs. INCOME-TAX OFFICER, WARD - 6 (3),, PUNE

The assessee raised two grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) is justified in confirming the order of AO in denying exemption u/s. 54F of the Act.

Brief facts relating to the issue on hand are that the assessee is an individual and derives income from retail business in footwear and from commission. The assessee filed its return of income declaring a total income of Rs.2,10,900/- and the same was processed u/s. 143(1) of the Act. Under scrutiny, notices u/s. 143(2) and 142(1) of the Act issued. In response to the said notices, an authorized representative representing the assessee attended before the AO and filed necessary information, documents etc. On an examination of such details filed by the assessee, the AO was of the opinion that the assessee is not entitled to claim exemption u/s. 54F of the Act as the assessee failed to invest the capital gains towards purchase of a new flat before due date of filing of return of income u/s. 139 of the Act or further, failed to deposit the capital gains in the capital gain account. Having not satisfied with the submissions of assessee, the AO added an amount of Rs.10,05,777/- on account of long term capital gains to the income of the assessee and determined the total income of the assessee at Rs.12,16,670/- vide its order dated 30-09-2016 passed u/s. 143(3) of the Act. The CIT(A) confirmed the order of AO in denying the claim of exemption u/s. 54F of the Act. Aggrieved by the order of CIT(A), the assessee is before me.

The ld. AR, Shri M.K. Kulkarni submits that sub-section (4) of section 54F of the Act is not to be strictly interpreted and the provisions u/s. 54F is a beneficial legislation. The said provisions should be liberal construed. Further, he submits that the assessee invested his share of capital gains in purchasing a new flat at Kalyaninagar, Pune on 06-02- 2015 within stipulated time as contemplated in provisions u/s. 54F(1) of the Act. He argued that the denial of exemption u/s. 54F of the Act is not justified as the assessee invested the capital gains within one year from the date of sale of a shop belonging to the assessee and his brother. The ld. AR drew our attention to the judgment of Hon’ble High Court of Karnataka

On the other hand the ld. DR, Shri M.G. Jasnani drew our attention to the decision of Hon’ble High Court of Bombay in the case of Humayun Suleman Merchant Vs. CCIT reported in [2016] 387 ITR 421 (Bombay) and argued that when the provisions under statute is clear and no necessity arises to give beneficial construction to the said provisions. He argued that the Hon’ble High Court of Bombay held there is no ambiguity in the provisions of section 54F of the Act and no occasion arises to apply liberal/beneficial construction while interpreting the said section. He submits that the assessee sold his share of property on 21-02-2014 and invested capital gains on 06-02-2015, which clearly shows that the assessee did not deposit capital gains before due date of filing of return of income. He argued that no interference from this Tribunal requires that the AO discussed the issue in detail in assessment order and was rightly confirmed by the CIT(A) at Para No. 6.3 of the impugned order. He

Heard both the parties and perused the material available on record. I note that the assessee along with his brother sold a shop on 21-02-2014 for a total consideration of Rs.35 lakhs and the assessee received Rs.17.5 lakhs as his share out of the said total consideration. The assessee invested the entire sale consideration received by him towards purchase of a new flat on 06-02-2015 which is undoubtedly within the stipulated period i.e. two years after the date on which the transfer took place u/s. 54F(1) of the Act, but, according to the AO the assessee must have deposited the capital gains in the account specified by the Central Government before the due date for filing return of income u/s. 139(1) of the Act. The contention of ld. DR is that the assessee has to deposit the said capital gains in the capital gain account before filing the return of income failing which provisions under sub-section (4) of section 54F of the Act is attracted. Further, he contends that the assessee did not appropriate the net consideration towards the purchase of a new asset within one year before the date on which the transfer of original asset took place and sub-section (4) of section 54F of the Act is rightly invoked by the AO which was correctly confirmed by the CIT(A). I note that admittedly the due date for filing of return of income u/s. 139(1) of the Act is 31-07-2014 and the time limit available for assessee for filing of return of income u/s. 139(4) of the Act is 31-03-2015. Admittedly, there is no dispute that the assessee made investment in purchasing a new flat on 06-02-2015 and it is evident from the assessment order that the assessee filed e-return of income on 27-02-2015 which is u/s. 139(4) of the Act. I note that sub- section (4) of section 54F of the Act is also clear that the net consideration which is not utilized for the purpose or construction of a new asset before due date of furnishing return of income u/s. 139 of the Act, the assessee

In the result, the appeal of assessee is allowed.