The Income Tax Appellate Tribunal (ITAT) Chennai Bench has recently, in an appeal filed before it, confirmed the denial of Tax benefit u/s.54 for non-deposit in Capital Gain Account Scheme.
The brief facts of the case are that during the Financial Year relevant to the AY 2015-16, the assessee has sold a land & building for a consideration of Rs.1,51,00,000/- on 29.01.2015 and computed long term capital gains.
The assessee had claimed exemption u/s.54 of the Act, for an amount of Rs.90 lakhs for purchase of another residential house property site on 29.04.2015 and amount spent for construction of house thereon.
The Assessing officer has allowed proportionate deduction towards exemption claimed u/s.54 of the Act, to the extent of Rs.48,59,420/- being consideration paid for purchase of property and stamp registration fees. However, denied exemption for remaining amount on the ground that the assessee has violated provisions of Sec.54(2) of the Act, in not depositing unutilized amount of capital gains in ‘Capital Gain Account Scheme’.
Sec 54 Under Income tax Act provides an exemption to the taxpayer who sells his residential house and from the sale proceeds he acquires another residential house.
The Counsel for the appellant contended that the assessee has utilized full amount of capital gains derived from sale of original asset for acquiring new residential house property within three years from the date of transfer of original asset.
Although, the assessee has not deposited unutilized amount of capital gains in ‘Capital Gain Account Scheme’ as required u/s.54(2) of the Act, but facts remain that the entire amount has been utilized within three years from the date of transfer of original asset .
The assessing officer on behalf of revenue noted that in order to get the benefit of exemption u/s.54 of the Act, the assessee should invest full amount of capital gains for purchase of new residential house property before one year from the date of sale of original asset or within three years from the date of sale of original asset, in case of construction.
In case, the assessee is not able to spend full amount of capital gains on or before due date of furnishing of return of income u/s.139(1) of the Act or u/s.139(4) of the Act, then unutilized amount of capital gains should be deposited in ‘Capital Gain Account Scheme’ in a nationalized bank.
A Coram comprising Justice Mahavir Singh and Manjunatha (accountant member) observed that the assessee could not furnish any evidences with regard to completion of construction of house within three years from the date of sale of original asset and also any other evidences to prove that amount has been spent for construction of house property, except filing a statement referring certain payments to M/s.Keshthana Infrastructure Pvt. Ltd., and claimed that said payments are for construction of house property.
It further held that the assessee has failed to satisfy conditions prescribed u/s.54 of the Act, for claiming benefit of exemption u/s.54 of the Act, for remaining amount and thus, we are of the considered view that there is no error in the reasons given by the AO and the Ld.CIT(A) to reject the benefit of exemption for balance amount and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the assessee.
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