Wrong Section in Return Cannot Defeat Valid Section 54F Claim: ITAT Mumbai

DCIT 17(1) Vs Chandraprakash Mukutbihari Gupta (ITAT Mumbai)

Summary: ITAT Mumbai dismissed the Revenue’s appeal and upheld the CIT(A)’s decision allowing deduction of INR.5,50,00,000/- under Section 54F of the Income Tax Act, 1961, even though the assessee had originally claimed the amount under Section 54EC and had not filed a revised return. The assessee had transferred tenancy rights in Flat No.7B, Mohammad Building, for INR.6,00,00,000/- and offered Long Term Capital Gain of INR.50,00,000/- after claiming exemption of INR.5,50,00,000/- under Section 54EC. During scrutiny, the assessee first stated that the deduction should have been claimed under Section 54 and subsequently claimed the correct deduction under Section 54F, explaining that the tenancy rights were long-term capital assets, the sale consideration had been deposited in the Capital Gain Account and was thereafter utilised to purchase a residential house within the prescribed period.

The Assessing Officer rejected the claim solely because it had not been made through a revised return and added INR.5,50,00,000/- as taxable Long Term Capital Gain. The CIT(A), however, held that the assessee had made a deduction claim in the return, though under an incorrect provision, and that an inadvertent reference to the wrong section could not defeat the substantive Section 54F benefit where the necessary conditions were fulfilled. ITAT observed that the Revenue had not disputed the Section 54F claim on merits or alleged failure to satisfy any statutory condition.