Smt. Gurumurthappa Krishnamurthy Yashoda Vs DCIT (ITAT Bangalore)
Bangalore ITAT: Section 54 Relief Cannot Be Denied If Capital Gains Are Invested Before Filing Return u/s 139(4)
The Bangalore ITAT allowed the assessee’s claim for Section 54 exemption and held that capital gains invested in a new residential house before filing the return under Section 139(4) qualify for exemption even if the unutilized amount was not deposited in the Capital Gains Account Scheme before the due date under Section 139(1).
The assessee had sold a residential property and earned capital gains of about ₹2.33 crore. While a substantial portion of the gains was invested before the due date under Section 139(1), the balance amount of ₹95 lakh was utilized for construction of a new house before filing the belated return under Section 139(4). The Assessing Officer denied exemption on this portion solely because the amount had not been deposited in the Capital Gains Account Scheme before the due date prescribed under Section 139(1).
The Tribunal observed that the assessee had actually invested the entire capital gain in the new residential house before filing the return under Section 139(4) and had produced documentary evidence supporting such investment. It clarified that the requirement of depositing funds in the Capital Gains Account Scheme arises only where the amount remains unutilized up to the date of filing the return. Where the capital gains have already been invested before filing the return under Section 139(4), denial of exemption would be contrary to settled law.
Relying on the Karnataka High Court decisions in Fathima Bai v. ITO, R. Srinivas v. ITO, and other jurisdictional precedents, the ITAT reiterated that the expression “due date under section 139” includes the extended time available under Section 139(4). Accordingly, the exemption under Section 54 was directed to be allowed and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
