J.DEVARAJAN,CHENNAI vs. DCIT BUSINESS CIRCLE III, CHENNAI

Ld.Counsel for the assessee submitted that the assessee was denied the deduction claimed u/s.54 of the Act for a reason that the Capital Gains arising from the sale of the property was not deposited in a bank account :- 2 -: opened under the Capital Gains Accounts Scheme. As per the Ld.AR, the assessee had sold the property on 05.06.2009 and re-invested Long Term Capital Gains in residential flat. According to the Ld.AR, assessee had paid Rs.5,30,400/- on 03.03.201 and further sum of Rs.31.54 lakhs on 12.09.2011, towards cost of construction. Contention of the Ld.AR was that lower authorities had taken due date for filing of the return for the impugned Assessment Year, which was 07.08.2010, as the last date for depositing the Capital Gains in an account opened under Capital Gains Accounts Scheme. According to the Ld.AR, assessee was denied the deduction claimed u/s.54 of the Act despite re-investing the Capital Gains in a new residential flat, before the end of the three year period allowed u/s.54(1) of the Act. Reliance placed on the decisions of Co-ordinate Bench of this Tribunal in the case of Shri P.Sankaran v. ITO in dated 15.09.2016 and in ACIT v. Justice T.S.

We have heard the rival contentions and perused the material placed on record.

Only reason assessee was denied its claim u/s.54 of the Act was that it had not kept the Capital Gains in a bank account opened under the Capital Gains Accounts Scheme. In other words, all other conditions for :- 3 -: giving the benefit of Sec.54 of the Act was satisfied by the assessee. In the case of Shri P.Sankaran, cited supra, the Co-ordinate Bench of this Tribunal, in a similar situation, had held as under:

We have heard the rival submissions and carefully perused the materials available on record. In the decision of Shri Madhuvan Prasad Vs. ITO, supra the 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 of the Act barring the deposit of the sale proceeds in the “capital gain scheme account” as 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 Motilal Padampat Sugarmill Co.Ltd. Vs. State of Uttar Pradesh & Ors wherein it was held that ‘thus there is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement there is no such Maxim known to the law. In the given case before us also, it is not 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 scheme account”. Moreover, the facts reveal that the assessee had deposited the 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 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 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 small technical lapse of the assessee, the benefit of section 54 should not be 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. The assessee had proceeded 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 should not disentitle the assessee for the benefit of section 54 of the Act. Therefore, we hereby direct the learned Assessing Officer to grant the benefit of 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 Tax (Appeals).

That part, the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Jagriti Agrawal reported in 339 ITR 610 and the Hon’ble Guwahati High Court in the case of CIT vs. Rajesh Kumar Jalan reported in 286 ITR 274 have taken a view that considering the intention of enacting an alleviating provision like Sec.54 of the Act, a liberal interpretation, accentuating the purpose of such enactment has to be preferred over a strict interpretation. In the given circumstances, I am of the opinion that the assessee could not have been denied the claim made it u/s.54 of the Act. The AO is directed to allow the claim of the assessee. :- 4 -:

In the result, the appeal filed by the assessee is allowed.