434. Capital Gains Account Scheme, 1984 – No penalty/interest to be levied in cases where due date of filing return of income is 30th June and assessee makes deposit and furnishes return by 31-7-1988
1. Under sections 54, 54B, 54D, 54F and 54G, the capital gains earned by a taxpayer from the transfer of a long-term capital asset is exempt from tax if the taxpayer complies with certain conditions. Under section 54(1), the capital gains arising from the transfer of a residential house is exempt from tax if the taxpayer has within a period of one year before the date of transfer or two years after the date on which the transfer took place purchased or has within a period of three years after the date of transfer constructed a residential house. Where the amount of capital gains earned on the transfer is less than the cost of acquisition of the new property, full amount of capital gains is exempt. Where the amount of capital gains is more than the cost of the new asset, the exemption is given on a proportionate basis. The Finance Act, 1987 introduced a new sub-section (2) which makes it obligatory on the part of the taxpayer to deposit the amount of capital gains not yet utilised for the purpose of purchase or construction of a residential house, in any bank in accordance with a Scheme framed by the Central Government for this purpose. A provision similar to sub-section (2) of section 54 was incorporated in sections 54B, 54D, 54F and 54G of the Income-tax Act by the Finance Act, 1987. The Capital Gains Accounts Scheme, 1988 was notified in the Official Gazette on 22-6-1988. The Scheme applies to sections 54, 54B, 54D, 54F and 54G.
2. To avail of the exemption provided for in the abovementioned sections, taxpayers have to deposit the unappropriated amount of capital gains in the specified banks by the due date of furnishing the return of income laid down in section 139(1). For a large number of taxpayers the due date for furnishing the return of income is 30th of June. Taxpayers whose returns of income had to be filed by 30th of June and who intended to avail of the benefit of the capital gains tax exemption by depositing the capital gains in the specified banks may not have been in a position to do so. For the benefit of such taxpayers who had to furnish the return of income by 30th of June, the time limit for the deposit and the due date for the furnishing of the return of income has been extended up to the 31st of July, 1988. In cases, where the due date of furnishing the return of income is 30th of June and the taxpayer makes the deposit and furnishes the return of income by 31st July, 1988, no penalty and interest should be levied and the deposit itself will be treated as having been made in time and the concession in respect of tax on capital gains will be allowed.
Circular : No. 520, dated 11-8-1988.