Case Law Details
Anita Ajay Shad Vs ITO (ITAT Ahemdabad)
When an assessee furnishes return subsequent to due date of filing return under section 139(1) but within the extended time limit under section 139(4), the benefit of investment made upto the date of furnishing return of income under 139(4) cannot be denied on such beneficial construction of section 54(2), however, any investment made after furnishing of return of income but before extended date available under section 139(4) would not receive beneficial construction in view of unambiguous and express provision of section 54(2) unless the same was first deposited in capital gain account scheme and utilized therefrom.
Full Text of the ITAT Order is as follows:-
The captioned appeal by the assessee is directed against the order of the Commissioner (Appeals)-Ahmedabad-5, (Commissioner (Appeals) in short) dated 21-8-2015 for the assessment year (AY) 2011-12.
2. The grounds of appeal raised by the assessee read as under :–
1. On facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in not appreciating that the appellant/assessee is entitled for the exemption under section 54 if the sale consideration utilized for investment in new residential property within the due date stipulated under section 139(4) of the Act.
2. On facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in restricting the claim of deduction under section 54 to Rs. 5,00,000 on the ground that utilization of sale consideration was no within the “due date” of return as under section 139(1) but within the “due date” of filing return as under section 139(4). The learned Commissioner (Appeals) ought to have accepted the appellant’s claim that she is entitled to deduction under section 54 for an amount of Rs. 35,23,226. The appellant, therefore, prays that the learned AO may please be directed to delete the remaining addition of Rs. 30,23,226 towards deduction under section 54.
3. Briefly stated, the assessee, an individual, filed its return of income for assessment year 2011-12 wherein indexed Long Term Capital Gain (LTCG) of Rs. 35,23,326 was inter alia declared on sale of Joint ownership immovable property for a total consideration of Rs. 1,15,00,000. The assessee claimed that sale consideration attributable to her was Rs. 57,50,000 being 50% of beneficial ownership in co-ownership property held together with husband. The assessee claimed exemption on aforesaid LTCG of Rs. 35,23,326 under section 54 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) arose in her hands on the ground that she has jointly purchased another new residential house on 30-3-2013 for a consideration of Rs. 35 lakhs (being ½ shares). It was thus claimed that entire LTCG was deployed towards purchases of new residential house and consequently the assessee is entitled to exemption under section 54 of the Act. The LTCG was thus computed at ‘NIL’ by the assessee. The assessing officer (AO), however, denied exemption claimed under section 54 of the Act on the ground that conditions postulated under section 54 of the Act has not been fulfilled. The assessing officer observed that out of Rs. 35 lakhs towards purchase, the assessee has invested Rs. 30 lakhs between September-2011 to December-2011 and thus has not invested the money before filing of return of income. Besides, the assessing officer further observed that the assessee has not acquired the new property before filing of return of income. The claim of exemption under section 54 was thus refused.
4. Aggrieved by the order of assessing officer, the assessee preferred the appeal before Commissioner (Appeals).
5. Before the Commissioner (Appeals), the assessee submitted that the assessee received her share in the sale consideration of co-ownership property being Rs. 57,50,000 on 21-2-2011. The assessee claimed that against the indexed capital gain of Rs. 35.23 lakhs arising on sale of aforesaid residential property, the assessee acquired new residential property for Rs. 35 lakhs and therefore eligible for exemption under section 54 of the Act. The assessee also submitted as per the ‘statement of facts’ before the Commissioner (Appeals) that it invested Rs. 30 lakhs before the due date of filing of return i.e., 31-7-2011 from the joint account with her husband and further Rs. 10 lakhs from this account on 8-8-2011 i.e., after due date of filing of return under section 139(1) but before filing of return of income on 25-8-2011 under section 139(4) of the Act. It was thus claimed that her share of investment being Rs. 15 lakhs before the due date of filing of return is required to be atleast allowed without any dispute. The assessee also contended that another Rs. 30 lakhs was paid between September-2011 to December-2011 and therefore has to be considered as investment of capital gains within time limit available under section 139(4) of the Act. The Commissioner (Appeals) after examining the facts and having regard to section 54(2) of the Act observed that the assessee claimed to have invested total amount of Rs. 35 lakhs towards purchase of new house out of which 30 lakhs have been invested after furnishing the return of income. Thus, the Commissioner (Appeals) concluded that the assessee is eligible for exemption to the extent of balance Rs. 5 lakhs only under section 54 of the Act. The Commissioner (Appeals) accordingly granted partial relief.
6. Still aggrieved, the assessee is in appeal before the Tribunal.
7. The learned Authorised Representative for the assessee Mr.P.B.Kedia reiterated the facts and submitted that the assessee sold one co-ownership residential property for a total consideration of Rs. 1.15 crores. The Assessee received her share in sale consideration between 9-3-2011 to 25-3-2011. The learned Authorised Representative submitted that a new residential property was acquired by the assessee jointly along with her husband for a total consideration of Rs. 70 lakhs. Her ownership in the joint property stands at Rs. 35 lakhs. It was claimed that the payment for this property was made between 28-5-2011 to 15-12-2011. In support of the purchase of the new residential property, the learned Authorised Representative referred to allotment letter dated 13-2-2012 issued by the builder “Maruti Finebuild”. The learned Authorised Representative submitted that the property was acquired and put to use within the period of two years and it was thus pleaded that the assessee deserves full relief under section 54 as claimed. The learned Authorised Representative relied upon the decision of Ahmedabad Bench in Ashok Kapasiawala v. ITO (2015) 155 ITD 948 (Ahmedabad – Trib.) and Gopal Saran Darbari v. (2017) 162 ITD 342 (Delhi – Trib.) to support its claim.
8. The learned Departmental Representative for the revenue Mr. Deepak Sutaria, on the other hand, relied upon the order of the Commissioner (Appeals) and submitted that in order to claim exemption under section 54 of the Act, the assessee is required to fulfill certain conditions stipulated therein. The learned Departmental Representative adverted our attention to section 54(2) of the Act and submitted that the amount of capital gain which is not appropriated by the assessee towards purchase of new residential House before the date of furnishing of return of income ought to have been deposited in the designated account in specified bank or institution in accordance with capital gains accounts scheme 1988 on or before the due date of filing of return of income under section 139(1) of the Act. The learned Departmental Representative submitted that the Commissioner (Appeals) has already granted the relief of Rs. 5 lakhs towards her contribution in purchase of new asset as eligible to the assessee having regard to the provisions of section 54(2) of the Act. The learned Departmental Representative accordingly pleaded that no interference with the order of the Commissioner (Appeals) is called for.
9. We have carefully considered the rival submissions and perused the orders of the authorities below. The assessee in the present appeal has controverted the denial of exemption claimed under section 54 of the Act towards capital gain arising on sale of residential property. Section 54 inter alia provides that capital gain invested in the purchase of residential House will be exempt from tax. Although, as per section 54, the assessee is given two years for purchase of House property (or three years for construction thereof) yet the taxable event of capital gains on transfer of original House property is the year in which it is sold. In terms of section 54(2), however, the assessee may at his discretion invest the capital gains before the filing of return of income to avoid incidence of tax. Section 54(2) inter alia specifies an alternative in the form of deposit under ‘capital gain accounts scheme’ before the due date of filing of return of income under section 139(1) of the Act. Thus, the amount of capital gains which is not utilized by the assessee for purchase or construction of new house before the date of furnishing of return of income ought to be deposited by him under the capital gains accounts scheme before the due date of furnishing the return.
9.1. In the instant case, the assessee claims to have utilized Rs. 15 lakhs (50% of Rs. 30 lakhs invested towards purchase of new residential House) before the due date of filing of return of income. The assessee simultaneously claims that another Rs. 5 lakhs (50% of Rs. 10 lakhs similarly invested) has been invested in the residential property before the actual filing of the return on 25-8-2011 i.e., within the time limit provided under section 139(4) of the Act.
9.2. Section 54(2) enjoins that the capital gain is required to be appropriated by the assessee towards purchase of new asset before furnishing of return of income under section 139 of the Act. Alternatively, in the event of non-utilization of capital gains towards purchase of new asset, the assessee is required to deposit the capital gains in specified bank account before the due date of filing of return of income under section 139(1) of the Act. Any payment towards purchase subsequent to the furnishing of return of income (25-8-2011 – in the instant case) but before the last date available to file the return of income under section 139(4) of the Act is irrelevant. Such subsequent payments after filing of return are required to be routed out of deposits made in capital gain account scheme. Thus, the plea of the assessee that utilization of capital gain can be made before the extended date for filing of return of income under section 139(4) of the Act even after filing of return do not coincide with the plain language employed under section 54(2) of the Act. Nonetheless, the capital gain employed towards purchase of new asset before the actual date of furnishing return of income either under section 139(1) or under section 139(4) of the Act will be deemed to be sufficient compliance of section 54(2) of the Act.
9.3. The assessee, in the instant case, does not claim to have deposited the money in these specified bank account under capital gain scheme at all. Therefore, the claim of the assessee is required to be weighed on the second limb of section 54(2) of the Act, i.e., whether the capital gain has been utilized for purchase of new asset before the date of furnishing of return of income under section 139 of the Act. At this juncture, we notice that the legislature in its own wisdom has used the expression section 139 for purchase etc. of new asset while on the other hand, time limit under section 139(1) has been specified for deposit in the capital gain account scheme. When viewed liberally, the distinction between the two different form of expression of time limit can yield different results. S.139 encompasses both section 139(1) and section 139(4) of the Act. There is presumption that words are used in an act of parliament correctly and exactly and not loosely and inexactly. In the present case, we are concerned with the utilization of capital gain towards purchase of new asset for which the legislature has stopped short by making reference of section 139 of the Act in variation to 139 (1) of the Act for deposit in capital gain scheme. This distinction assumes significance for interpretation of beneficial provision. Thus, a beneficial view may be taken to say that section 139 being omnibus would also cover extended time limit provided under section 139(4) of the Act. Thus, when an assessee furnishes return subsequent to due date of filing return under section 139(1) but within the extended time limit under section 139(4), the benefit of investment made upto the date of furnishing return of income under 139(4) cannot be denied on such beneficial construction. However, any investment made after the furnishing of return of income but before extended date available under section 139(4) would not receive beneficial construction in view of unambiguous and express provision of section 54(2) of the Act. The suggestion on behalf of the assessee on eligibility of payments subsequent to furnishing of return of income is not aligned with and militates against the plain provision of law certified in section 54(2) of the Act.
9.4. In the light of the mandate of section 54(2) as noted above, we shall now turn to the facts of the case. It is the case of the assessee that Rs. 40 lakhs in aggregate has been utilized towards purchase of new asset before furnishing the return of income under section 139(4) of the Act. The assessee claims to have invested Rs. 20 lakhs (being ½ of her share) for purchase of new asset. However, we notice that assessee appears to have shown a total investment Rs. 50 lakhs in aggregate i.e., 30 lakhs from personal account and Rs. 20 lakhs (½ share) from joint account as against her obligation to the extent of Rs. 35 lakhs only. Also ambiguity exists on record as to whether the other joint owner (husband of the assessee) has availed claim of exemption, if any, upto Rs. 20 lakhs (being ½ of his share only) or entire Rs. 40 lakhs made through joint account towards purchase in his own right. In such circumstances, the assessee, in our view, would be entitled to exemption to the extent of Rs. 20 lakhs being 50% of her share in the utilization of capital gain subject to the satisfaction of the assessing officer that the aforesaid claim of payments from joint account has not been simultaneously availed by other joint owner also.
9.5 The other portion on the investment claimed from the personal account of the assessee is stated to have been made after furnishing the return of income but before extended the due date of filing of return of income. However, as noted above, once the return has been furnished, the subsequent payments made towards purchase would not be eligible for exemption unless the same was first deposited in capital gain account scheme and utilized therefrom. Therefore, the assessee is entitled to relief to the extent of Rs. 20 lakhs only out of indexed capital gain subject, however, to the necessary verification of the claim of the other joint-owner as noted above. The decision relied upon by the assessee does not spell anything different.
10. In view of the foregoing discussion, the issue is set aside and remanded back to the file of assessing officer for the limited purpose of verification of extent of claim made by other joint-owner on payment of Rs. 40 lakhs towards purchase made out of joint Bank account as elaborated earlier. The assessee shall be at liberty to adduce the necessary evidences in this regard and remove prevailing ambiguity.
11. In the result, appeal of the assessee is allowed in part for statistical purposes.
