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Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
PER M.BALAGANESH, AM:
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-1, Gurgaon, [hereinafter referred to as ‘Ld. CIT(A)’, in short] in Appeal No.105/16- 17, Assessment Year 2013-14 dated 20.02.2018 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.03.2016 by the Deputy Commissioner of Income Tax, Circle-3, Gurgaon (hereinafter referred to as ‘Ld. AO’).
Though the assessee has raised several grounds, the only effective issue to be decided in this appeal is as to whether the assessee would be eligible for exemption u/s 54E of the Act in respect of Long Term Capital Gain derived by him when the entire sale consideration has been reinvested by him in the new house property.
We have heard the rival submissions and perused the materials available on record. The assessee is a geophysicist and was employed with Cairn Energy Ltd. deriving income from salary, house property, investment in mutual funds, etc. The return of income for the Assessment Year 2013-14 was filed by the assessee on 26.07.2013 declaring total income of Rs.61,17,830/- after claiming deduction u/s 54 of the Act in the sum of Rs.60,38,585/- on account of capital gains on sale of residential house. It is not in dispute that the assessee has purchased one residential property in Gurgaon out of the sale proceeds arising from sale of old property, being reinvested in the new property. It is also not in dispute that the assessee did not deposit the sale consideration in the designated bank account under “Capital Gains Accounts Scheme”. But it is a fact that the assessee had started making payments towards the purchase of property amounting to Rs. 26,80,938/- up to the date of filing of return of income u/s 139(1) of the Act itself. There is absolutely no dispute with regard to the computation of Long Term Capital Gains on sale of old property at Rs.60,38,585/-.
The assessee had made payments towards reinvestment in the new property to the tune of Rs.56,81,626/- up to 31.03.2015 which is the time limit prescribed u/s 139(4) of the Act for filing return of income for Assessment Year 2013-14.
The Ld. Assessing Officer granted exemption u/s 54 of the Act to the extent of payments made to the tune of Rs.26,80,938/- (i.e. the payments made up to the due date of filing of return u/s 139(1) of the Act) and denied the exemption for the remaining amounts reinvested after 31.07.2013. This action was upheld by the Ld. CIT(A).
We find that the Hon’ble Punjab & Haryana High Court in the case of Shri Jagtar Singh Chawla vs ACIT in of 2012 dated 20.03.2013 had categorically held that when the assessee has reinvested in another residential house property within the time limit prescribed u/s 139(4) of the Act and even when he had not deposited the money in the “Capital Gains Scheme” but had duly reinvested the sale consideration/Long Term Capital Gains of old property by purchasing the new property within the prescribed time, then all the payments made by the assessee up to the due date of filing of return u/s 139(4) of the Act would be eligible for exemption u/s 54 of the Act.
As per this proposition of Hon’ble Punjab & Haryana High Court, the assessee would in any case be eligible for exemption u/s 54 of the Act to the tune of Rs.56,81,626/- i.e. the investment made by the assessee upto the due date of filing return of income u/s 139(4) of the Act i.e. 31.03.2015. Further the total amount reinvested by the assessee was Rs.63,75,938/- in the new house property. Hence, it could be seen that even though the assessee derived Long Term Capital Gains on sale of old house property, but had not deposited the sale consideration/Long Term Capital Gain in “Capital Gains Accounts Scheme” but had duly reinvested in the new house property within two years from the date of transfer of the old property to the tune of Rs.63,75,939/- which is much more than the Long Term Capital Gains of Rs.60,38,585/- arising on sale of old house property, hence, the assessee would be eligible for exemption u/s 54 of the Act in the facts and circumstances of the instant case. The purpose of law mandating the deposit of sale consideration/Long Term Capital Gain in “Capital Gains Accounts Scheme” and thereafter withdrawing from that designated bank account for the purpose of reinvestment in new property is only to ensure that the assessee if he intends to avail the exemption u/s 54 of the Act, then he has to invest in new property and he should not run short of funds for making such reinvestment. Yet another purpose of availing of granting exemption u/s 54 is that every assessee should have his / her own house for his/her livelihood and habitation. Considering this purpose also and applying the same to the facts and circumstances of the instant case and respectfully following the judicial precedent applying hereinabove, we hold that the assessee had substantially complied with the provisions of section 54 of the Act by actually reinvesting in the new house property within the prescribed time thereon. While this is so, the assessee should not be denied exemption u/s 54 of the Act for a mere procedural irregularity of not routing the funds for making reinvestment through the “Capital Gains Accounts Scheme”. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on 21st December, 2023.