Can exemption U/s. 54F be denied for non-deposit of amount in specific bank account

Sunayana Devi Vs. ITO (ITAT Kolkata)

Since assessee had invested the sale consideration in construction of a residential house within three years from the date of transfer, deduction under section 54F could not be denied under section 54F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed under section 139(1).

Assessee had utilised the net consideration in construction of a house within the period of three years from the date of transfer, the question would be whether the absence of deposit of unutilised net consideration in a specific bank account as is required under section 54F(4) of the Act, should the assessee be denied the benefit of deduction under section 54F of the Act. On this issue the learned Counsel for the assessee brought to our notice the decision of the Hon’ble Karnataka High Court in the case of CIT, Bangalore v. K.Ramachandra Rao (2015) 277 CTR 522 (Karnataka). In the aforesaid decision the assessee had not deposited the unutilised net consideration in a specific bank account as is required under section 54F of the Act. The assessee had however invested the net consideration in construction of a residential house within the period contemplated under section 54F(1) of the Act. The Hon’ble Karnataka High Court had to decide whether the assessee could be given a deduction of benefit under section 54F(1) of the Act. The Hon’ble Karnataka High Court held that if the assessee invests the entire consideration in construction of the residential house within three years from the date of transfer he cannot be denied deduction under section 54F of the Act on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed under section 139(1) of the Act. In the light of the aforesaid decision of the Hon’ble Karnataka High Court and in the light of the admitted factual position that the assessee invested the sale consideration in construction of a residential house within three years from the date of transfer, we are of the view that the assessee should be given the benefit of deduction under section 54F of the Act on the sum of Rs. 16,50,000 also and cannot be denied the benefit the said benefit for the reason that he had not complied with the requirements of section 54F(4) of the Act. Thus in effect the assessee would be entitled to deduction under section 54F of the Act of Rs. 20,31,839 viz., for the investment of Rs. 3,50,000 in purchase of the land, Rs. 31,839 stamp duty and registration charges and Rs. 16,50,000 utilized for construction of a residential house within this period specified in section 54F(1) of the Act. The assessing officer is accordingly directed to allow deduction under section 54F of the Act a sum of Rs. 20,31,839.