Case Law Details
Neelam Nananni Vs ITO (ITAT Mumbai)
Conclusion: Deduction under section 54 was available on purchase of new flats by assessee from long-term capital gain earned on sale of old asset even if investment was not made out of the proceeds of capital gain.
Held: Assessee earned a long-term capital gain on the sale of immovable property and claimed deduction under section 54 towards investment made in purchase of new flats. AO disallowed assessee’s claim of deduction under section 54 of the Act on two grounds -firstly, the flat was purchased in financial year 2003-04 relevant to assessment year 2004-05 and secondly, the investment made towards purchase of new flats was not out of assessee’s own funds. It was held as per the provisions contained under section 54, there was no restriction/condition imposed mandating investment of the capital gain/sale proceeds towards purchase of new house for claiming deduction under section 54. The deposit of capital gain in capital gain account scheme in sub-section (2) of section 54 became applicable only in a case where capital gain was not utilized for the purchase of new house within the stipulated time. In the present case, undisputedly, the investment in purchase of new house had been made within the period stipulated under section 54(1). Moreover, the quantum of investment made by assessee towards purchase of new house was much more than the long term capital gain computed by AO. That being the case, the provision of section 54(2) did not apply. There being no pre-condition under section 54(1) providing for investment of the long term capital gain in purchase of new house for claiming deduction under section 54, the departmental authorities could not import such restriction/condition to the statutory provision. As per the provision of section 54 applicable to the impugned assessment year, the expression “a residential house” used in section 54(1) did not mean “one residential house”. Moreover, there was no allegation by the departmental authorities that the flats were not in the same building or were not inter-connected.
FULL TEXT OF THE ITAT JUDGMENT
Aforesaid appeal has been filed by the assessee challenging the order dated 18th March 2016, passed by the learned Commissioner (Appeals)-32, Mumbai, for the assessment year 2005-06.
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