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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-2, Chennai dated 31.03.2016 in for the assessment year 201-12 passed U/s.250(6) r.w.s. 143(3) of the Act.
The assessee has raised several grounds in her appeal, however the crux of the issue is that the Ld.CIT(A) has erred by granting only part relief when the assessee was entitled for the entire claim of deduction U/s. 54F of the Act.
The brief facts of the case are that the assessee is an individual, filed her return of income for the assessment year 2011-12 on 30.09.2011 admitting income of Rs.8,57,020/-. Subsequently the case was selected for scrutiny and the assessment was completed U/s.143(3)3 of the Act on 25.02.2014, wherein the Ld.AO computed the long term capital gain of the assessee at Rs.63,10,803/-.
During the course of scrutiny assessment it was observed by the Ld.AO that the assessee had jointly sold property along with her mother and brother, and her share in the sale proceeds worked out to Rs.69,34,674/- out of which Rs.68,64,325/- was deposited in her savings bank account maintained with Indian Overseas Bank. The assessee had claimed the land sold by her to be agricultural land. However the Ld.AO held it to be non- agricultural land because the assessee had sold a part of that land in the year 2008 as residential plot, the land was classified as residential from 01.08.2007 by the Tamil Nadu Registration Department and the land was within 3 Kms. from Tenkasi panchayat the population of which was 12000 as per 2001 census. Accordingly, the Ld.AO held that the land sold by the assessee cannot be treated as agricultural land. Thereafter the assessee claimed deduction U/s.54F of the Act by stating that she had constructed a residential house within the stipulated period provided under the Act. Since the assessee had not produced the details of purchase of land and construction cost of the residential house the Ld.A.O rejected the claim of the assessee and worked out the taxable capital gain at Rs.63,10,803/-.
5. On appeal before the Ld.CIT(A), it was established by the assessee that she had constructed a residential house on the land purchased by her within the stipulated period provided under the Act. However, the Ld.CIT(A) further observed that the assessee had not deposited the sale proceeds in the capital gains scheme account as per the provision of the act and since she had utilized only Rs.3 lakhs for the construction of the house before the expiry of the period stipulated under the Act for depositing the sale proceeds in the capital gain scheme account, the Ld.CIT(A) granted relief U/s.54F of the Act to that extent.
6. Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before us. The Ld.AR submitted before us that the assessee has deposited Rs.68,64,325/- out of her share in the total sale proceeds of Rs.69,34,674/- in the savings bank account maintained with Indian Overseas Bank which is a nationalized bank. The Ld.AR further submitted that from the savings bank account maintained with IOB the assessee had made payment to the contractor Mr.Poolikannu for construction of her house and the amount was not withdrawn or used for any other purposes. The Ld.A.R further argued since it was only a minor technical flaw for failing to intimate the bank authorities to classify her bank deposit under the “capital gain scheme account” the lapse may be condoned because there is no loss to the Revenue. The Ld.AR also pointed out the decision of the Chennai Bench of the Tribunal in the case Shri P. Sankaran in order dated 15.09.2016, wherein on the identical situation the identical technical breach was condoned.
It was therefore pleaded that in the case of the assessee also the decision rendered by the Chennai Bench of the Tribunal in the case of Shri P. Sankaran cited supra may be followed and accordingly relief may be granted. The Ld. DR vehemently opposed to the submission of the Ld.AR and argued in support of the order of the Ld.CIT(A).
We have heard the rival submissions and carefully perused the materials on record. We find merit in the submission of the Ld.AR. On perusing the order cited by the Ld. AR we find that the facts in the case of the assessee is identical. The relevant portion of the order of the Tribunal cited by the Ld.AR is reproduced herein below for reference:
“It was explained by the assessee before the learned Assessing Officer that he had constructed a residential house at Somangalam village, Kancheepuram District within a period of three years from the date of the sale of land and furnished the proof of the same along with the valuation report and other relevant documents. The learned Assessing Officer after examining the particulars furnished by the assessee came to the conclusion that the assessee is not eligible for deduction under section 54 of the Act because he has not deposited the sale proceeds in the capital gain scheme account as per section 54 (2) of the Act in a nationalized bank account but had deposited only in his regular savings account. Accordingly, he taxed the amount of Rs.18,41,724/- under the head ‘long term capital gain’.
On appeal, the learned Commissioner of Income Tax (Appeals) dismissed the appeal of the assessee by observing as under:- “However, in the instant case assessee is a petrol bunk owner and runs the bank in the name of M/s. Sarathi Service Station who is supposed to be aware that mere technical breach or a lapse will not make assessee eligible for his claim of exemption under section 54. In the instant case, the capital gain was not deposited in the capital gain account scheme of a nationalized bank however, the same was deposited in his regular bank account only. Thus, the assessee has not deposited the capital gain that arose on account of sale of property in any capital gain account scheme of a nationalized bank as specified in section 54(2). For claiming exemption U/s.54(1) & 54(2) has to be fulfilled and in this case the assessee has not fulfilled the conditions U/s.54(2). Therefore, I confirm the addition made by the Assessing Officer withdrawing the exemption U/s.54 of the Income Tax Act, 1961. The ground of the appeal is dismissed.”
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8. 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).”
Since on the identical issue on the earlier occasion, we have held that the technical breach of not directing the bank authorities to classify the savings bank deposit under the “capital gain scheme account” will not disentitle the claim of deduction U/s.54/54F of the Act, in the case of the assessee also the same decision will hold good. Accordingly we hereby direct the Ld.AO to grant proportionate deduction U/s.54F(1)(b) of the Act with respect to the investment made by the assessee for purchase of the land and construction of the residential house amounting Rs.65 lakhs against the long term capital gain of Rs.63,10,803/- and sale proceeds of Rs.69,34,674/-.
In the result the appeal of the assessee is allowed.
Order pronounced in the court on 27th April, 2017.