The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the capital gain exemption under section 54 of the Income Tax Act, 1961 cannot be denied on the sole ground that the amount invested in the capital gain account is utilized for the purchase of new house without the NOC from Assessing Officer within two years as permitted in the statute.
The assessee, Mr. Ramesh Chander Ni Jhawan has filed a return of income on 28.08.2015 declaring an income of Rs.63,35,840/-. The assessee has derived income from house property, capital gains, and income from other sources. The AO disallowed the deduction under section 54F on the grounds that the capital gain account has been closed without the approval of the Assessing Officer and thus failed to satisfy the mandatory requirement of closing the account with due approval of the AO. The CIT(A) concurred with the observation of the Assessing Officer.
A bench consists of Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member observed that “It is not in dispute that an amount of Rs. 40,00,000/- has been invested in the specified bonds, in this case, REC Bonds and purchased house for Rs .82,50,000/-. Hence, the observation of CIT(A) that the assessee is not eligible for claim of exemption u/s 54 and u/s 54F is against the provisions of the Act. With regard to the closer of the account without the NOC of the Assessing Officer, the broad provisions and compliance of the law surpass the mere default in not taking the prior permission o f the ITO before closer o f the account, especially when the amounts have been utilized for purchase of the house in accordance with the provisions of the Act within two years from the date o f sale.”
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