ITO, TIRUPPUR vs. PALANISAMY ESWARI, TIRUPPUR

Sh. T. Banusekar, the Ld. representative for the assessee, submitted that the assessee sold a vacant land inherited from her father Shri R. Subramaniam on 10.01.2011. The assessee invested in REC Bonds in two instalments on 31.03.2011 and 30.06.2012 to the extent of `50 lakhs and `20 lakhs respectively. The assessee has also taken initiative for construction of residential house and obtained approval from Neruperichal Panchayat Union for construction of house on 21.07.2011. The Assessing Officer, however, disallowed the investment in bonds to the extent of `24,42,300/- on the ground that the same was not deposited within the time frame provided under Section 139(1) of the Income-tax Act, 1961 (in short 'the Act') for filing the return of income. According to 3 I.T.A. No.378/Mds/15 the Ld. representative, the assessee has invested in residential property to the extent of `22.42 lakhs. In fact, the approval was obtained on 21.07.2011 from Panchayat Union. Therefore, the disallowance made by the Assessing Officer is not justified.

On the contrary, Shri N. Madhavan, the Ld. Departmental Representative, submitted that the assessee admittedly sold a property on 10.01.2011. The due date for filing of return for the assessment year 2011-12 is 31.07.2011. The assessee obtained the approval from Panchayat Union on 21.07.2011. Therefore, the assessee could not have constructed the house before 31.07.2011. Hence, the assessee has to naturally deposit the same in the Capital Gains Account for the purpose of claiming deduction under Section 54F of the Act. Since the deposit was not made, according to the Ld. D.R., the assessee is not eligible for deduction. The Ld. D.R. placed his reliance on the judgment of Apex Court in Prakash Nath Khanna and Another v. CIT (2004) 266 ITR 1.

I have considered the rival submissions on either side and perused the relevant material available on record. From the material available on record it appears that the property originally belongs to one Shri Muthusamy Gounder. The assessee inherited on 31.03.2011. The Assessing Officer allowed the claim of the assessee with regard to this deposit made in REC Bonds. A sum of `20 lakhs was deposited on REC Bonds on 30.06.2012, which was disallowed by the Assessing Officer. However, the CIT(Appeals) allowed the claim of the assessee. The dispute is with regard to `24,42,000/-. In the case before us, the assessee has not deposited within the due date for filing of return of income. In fact, the assessee filed the return on 06.02.2013 within the time provided under Section 139(4) of the Act. The return was not filed within the time provided under Section 139(1) of the Act. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the entire claim of deduction under Section 54F of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh and find out whether the assessee has invested the money in construction of property after getting approval of Panchayat Union and thereafter decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee.

Now coming to the appeal of the Revenue in I.T.A.

Shri N. Madhavan, the Ld. Departmental Representative, submitted that the assessee claimed before the Assessing Officer that a sum of `50 lakhs was invested in REC Bonds on 31.03.2011 and another sum of `20 lakhs was invested on 30.06.2011. According to the Ld. D.R., the investment was to be made within six months from the date of transfer. The investment was not made within the period of six months, hence, according to the Ld. D.R., the Assessing Officer has rightly disallowed the claim of the assessee.

On the contrary, Sh. T. Banusekar, the Ld. representative for the assessee, submitted that admittedly the assessee deposited in REC Bonds on 30.06.2011, which is within the due date provided for filing of return of income under Section 139(1) of the Act. Since the capital gain arising out of transfer of property the assessee is eligible for exemption under Section 54F of the Act in case the 6 I.T.A. No.378/Mds/15 money was deposited before the due date for filing of return of income, the Ld. representative submitted that investing in REC Bond is one of the methods prescribed by the Legislature for investing the capital gain. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee.

I have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the property was sold on 10.01.2011 and the assessee deposited a sum of `50 lakhs on 31.03.2011 and another sum of `20 lakhs on 30.06.2011 in REC Bonds. REC Bond, admittedly, is a capital gain bond. Since the deposit was made within the due date for filing of return of income, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee.

In the result, assessee’s appeal in is allowed for statistical purposes and the Revenue’s appeal in I.T.A.