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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI. G. PAVAN KUMAR
आदेश / O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The assessee filed appeal against the order of Commissioner of Income Tax (Appeals)-16, in dated 04.07.2016 passed u/s. 143 r.w.s. 147 and 250 of the Income Tax Act.
:- 2 -: 2. The only substantive ground raised by the assessee that the CIT(A) erred in confirming the action of AO in disallowance of exemption u/s. 54 of the Act in respect of cost of new residential house though the assessee has filed Return of income within the time under provisions of sec. 139(5) of the Act and the CIT(A) is nor correct in confirming the action of the AO that assessee has not deposited the long term capital gains in capital gains account scheme before due date of Return of income u/s. 139(1) of the Act.
The Brief facts of the case that, The assessee is a non-resident and have income from capital gains and other income and filed the Return of income on 17.06.2009 with total income of Rs. 3,66,49,000/-. Subsequently, assessee filed Revised Return of income on 27.05.2010 declaring total income of Rs. 3,04,480/- in which the assessee has claimed exemption u/s. 54 of the Act in respect of investment of long term capital gains in residential property in United Kingdom (UK). Further, the case was selected for scrutiny and notice u/s. 148 of the Act was issued. The assessee filed letter to treat return of income filed on 27.05.2010 as due compliance. The Ld. AO observed that the assessee is a non- resident and has sold property at Chennai along with her sister for Rs. 7,33,28,000/- and 50% assessee's share worked out to Rs. 3,63,44,163/- and claimed exemption u/s. 54 on investment in a Residential property in UK. The assessee filed letter dated 16.02.2015 explaining that the Restriction of investment in House property in India only is applicable from assessment year 2015-16, and relied on the Tribunal decision of Prema P. Shah vs ITO 100 ITO 60 [Mum], where a Residential property acquired in foreign country is allowed as :- 3 -: deduction under the said provisions. The Ld. AO found that the assessee has invested in residential property at UK on 13.10.2009 and issued show cause notice as the assessee has not deposited capital gains in capital gains account scheme before due date u/s. 139(1) of the Act. The assessee filed reply on 17.06.2009 explaining that the process of acquiring property takes place minimum 3 to 4 months and finally the Residential property was purchased on 13.10.2009 and assessee filed Revised Return on 27.05.2010 disclosing the fact of acquisition of property at UK and claimed deduction u/s. 54 of the Act.
Whereas, the Assessing Officer is of the opinion that the assessee should have invested amount in capital gains account scheme before filing the Return of income u/s. 139(1) of the Act and dealt exhaustively on the facts and provisions of law at Page 3 to 6 of the order and disallowed claim of sec.54 of the Act Rs. 3,66,49,000/- and passed order u/s. 143(3) r.w.s. 147 of the Act on 11.03.2015
Aggrieved by the order, assessee filed an appeal with the CIT(A). In the appellate proceedings, the Ld. CIT(A) considered the findings of the Assessing Officer and the written submissions of the assessee in support of claim u/s. 54 of the Act at Page 5 of his order and capital gain account scheme and concurred with the action of Assessing Officer and dismissed the assessee appeal.
Aggrieved by the CIT(A) order, the assessee filed an appeal with the Tribunal. Before us, the Ld. AR argued the grounds and reiterated the submissions of assessment and appellate proceedings and submitted that the :- 4 -: assessee is non-resident and filed income tax return on 17.06.2009 within the due date u/s. 139(1) of the Act and after purchase of Residential property in UK on 13.10.2009 assessee filed Revised return on 27.05.2010 claiming exemption u/s. 54 of the Act and further complied the conditions of sec. 54 of the Act on purchase of residential property within two years from the date of transfer of Asset on 10.11.2008 but the Ld. AO is of the opinion that the amount of capital gains not appropriated before due date of Return of income u/s. 139(1) of the Act shall be disputed in capital gains account scheme. But the assessee has complied the conditions of sec. 54 of the Act and claim deduction. Contra, the Ld. DR relied on the orders of the CIT(A).
6. We heard the rival submissions, perused the material on record and judicial decisions. The sole crux of the issue lies where the assessee has claimed exemption u/s. 54 of the Act by investment in Residential property at UK and filed Revised Return of income and the Ld. DR argued that that the assessee has not complied the condition of deposit of capital gains in the capital gains account scheme before date u/s. 139(1) of the Act. We found that the assessee has purchased the property in UK and was registered on 13.10.2009 and therefore not deposited in capital gain account scheme before due date u/s. 139(1) of the Act i.e., 31.07.2009. We are of the opinion that the provisions of section 54 have to be considered liberally and assessee was negotiating to buy property at UK and finally acquired in October 2009, which is not disputed by the AO. We find the similar issue on deposit in capital gain account scheme before due date u/s. 139(1) was dealt by the co-ordinate bench of the Tribunal in ACIT vs Umayal
ITA No. 2612/Mds/2016 :- 5 -: Annmalai in dated 22.04.2016 where the facts were considered at Para 8 of the order which read as under:
We heard the rival submissions, perused the material on record and judicial decisions cited. The ld. Departmental Representative contention being the assessee though constructed the property by investing, the net sale consideration but not before the due date of return u/s.139(1) of the Act nor said amount was deposited in Capital Gain Account Scheme. The argument of ld. Departmental Representative was in respect of the period of construction and there is no dispute on investment of the net consideration in residential property and provision of Sec. 54F(1) of the Act are as under:- ‘’54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (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, a residential house] (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,— (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ; (b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45: [Provided that nothing contained in this sub-section shall apply where— (a) the assessee,— :- 6 -: (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.] The assessee has complied the provisions considering the dates as under:- (i) Date of transfer of original asset : 14.02.2005. (ii) The date of filing of return : 17.03.2006. (iii) Due date of return for the Assessment year 2005-06 : 31.07.2005. (iv) Due date of filing belated return : 31.03.2007. (v) Possession of the property : 15.12.2007. On considering the provisions of law and facts of the case, the assessee has invested Rs. 68,00,000/- before due date of filing belated return i.e. 31.03.2007 and took the possession as per the findings of the Commissioner of Income Tax (Appeals) on 15.12.2007, being within three years from the date of transfer/sale of original asset being 14.02.2005. The assessee has not invested in Capital Gain Account Scheme before 139(1) of the Act but complied with the conditions u/s.54F(1) of the Act by purchasing and construction of residential property within three years from the date of transfer of original asset which is not disputed in the assessment proceedings or in appellate proceedings. The provisions of Sec. 54F are beneficial provisions and are to be considered liberally in the aspect of limitation period. But the investment in residential property is must which the assessee has proved with evidence and complied before the lower authorities. The ld. Commissioner of Income Tax (Appeals) relied on the legal provision and :- 7 -: submissions of the assessee exhaustively with judicial decisions. Considering the factual aspects, genuiness of the transactions and beneficial aspects of the provisions, we are of the opinion that the Commissioner of Income Tax (Appeals) has rightly construed the findings and the explanation of the assessee with observation in his order and allowed the deduction u/s.54F of the Act. Therefore, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and dismiss the ground of the Revenue."
We respectfully follow co-ordinate bench decision and in the present case the assessee has complied the primary condition of investment in Residential property under provisions of section 54 of the Act. Accordingly, we direct the Assessing Officer to grant the exemption u/s. 54 of the Act and allow the grounds of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced on Thursday, the 9th day of March, 2017 at Chennai.