Case Law Details

Case Name : Manilal Dasbhai Makwana Vs ITO (ITAT Ahmedabad)
Appeal Number : ITA No. 109/Ahd/2017
Date of Judgement/Order : 04/07/2018
Related Assessment Year : 2012-13
Courts : All ITAT (6377) ITAT Ahmedabad (437)

Manilal Dasbhai Makwana Vs ITO (ITAT Ahmedabad)

Section 54B(2) of the Act enjoins that the capital gain is required to be utilized by the assessee towards purchase of new asset before furnishing of return of income under s.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 gain in specified bank account before the due date of filing of return of income under s. 139(1) of the Act. Thus, a distinction has been drawn in the Act in the two situations; (i) where purchase of new asset is involved and (ii) where the assessee opts to deposit the unutilized amount in the specified bank account.

The assessee, in the instant case, does not claim to have deposited the money in the specified bank accounts under capital gain claim 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 the purchase of new asset before the date of furnishing return of income under s.139 of the Act.

As noted, 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 s.139(1) has been specified for deposit in capital gain account scheme. When viewed equitably and liberally, the distinction between the two different forms of expression to time limit can yield different results. Section 139 encompasses both Section 139(1) and 139(4) of the Act. There is a normal presumption that words are used in Act of Parliament correctly and exactly and not loosely and in-exactly.

In the present case, we are concerned with the utilization of capital gains by purchase of new asset for which the legislature has stopped short by making reference of Section 139 of the Act, in variation to Section 139(1) of the Act referred for deposit in capital gain scheme. This distinction assumes significance for interpretation of a beneficial provision. Thus, a beneficial view may be taken to say that Section 139 being omnibus and colorless would cover extended time limit provided under s. 139(4) of the Act. Thus, when an assessee furnishes return subsequent to due date of filing return under s.139(1) but within the extended time limit under s.139(4), the benefit of investment made up to the date of furnishing of return of income prior to filing return under s.139(4) cannot be denied on such beneficial construction. Thus, on first principles, we hold that the capital gains utilized towards purchase of new asset before furnishing of return of income before either under s.139(1) or under s.139(4) of the Act will be deemed to be sufficient compliance of Section 54(2) of the Act.

FULL TEXT OF THE ITAT JUDGMENT

The captioned appeals have been filed at the instance of the two different assessees against the order of the CIT(A)-3, Ahmedabad (‘CIT(A)’ in short), dated 27th September, 2016 & 26th September, 2016; respectively, arising in the assessment orders both dated 13.03.2015 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2012-13.

2. The captioned appeals involve common issue of allowability of deduction under s. 54B of the Act and therefore were heard together and disposed of by this common order.

3. We first advert to ITA No.109/Ahd/2017 for appreciation of facts and determination of issue.

ITA No.109/Ahd/2017

4. The assessee has challenged the action of the Revenue Authorities in disallowing deduction of Rs.5,18,125/- claimed under 54B of the Act.

5. Briefly stated, the assessee is an agriculturist and filed his return of income belatedly on 24.02.2014 under s.139(4) of the Act declaring total income of Rs.2,23,912/-. The return filed by the assessee was subjected to scrutiny assessment. In the course of scrutiny assessment, the AO noticed that two parcels of agricultural land amounting to Rs.1,85,238/- and Rs.1,91,325/-; respectively was purchased before the sale of agricultural land. Similarly, another agricultural land was purchased for Rs.5,18,125/- (share of the assessee) after due date of filing the return of income under s.139(1) of the Act. The AO thus took a view that in terms of provisions of Section 54B(2), the assessee was required to deposit the capital gains in the prescribed bank account before the due date of filing return of income under s.139(1) of the Act. The assessee however has failed to deposit the capital gain in the bank account as per the requirements of Section 54B(2) of the Act. The AO therefore disallowed the claim of deduction under s.54B (with reference to capital gains arising on sale of agricultural land) in respect of both (i) agricultural lands purchased before the sale of the land and (ii) agricultural land purchased after the due date of filing of return of income under s.139(1) of the Act.

6. In the first appeal, the CIT(A) allowed deduction under s.54B of the Act aggregating to Rs.3,76,563/- in respect of land purchased before sale of original land having regard to judicial precedents and CBDT Circular on this account. The CIT(A) however continued to deny the deduction of long term capital gains of Rs.5,18,125/- under 54B of the Act towards purchase of agricultural land after the due date of filing of return of income under s. 139(1) of the Act based on interpretation of embargo placed under s. 54B(2) of the Act.

7. Aggrieved by the denial of deduction under s.54B towards purchase of agricultural land after the due date of filing of return under s.139(1) of the Act, the assessee preferred appeal before the Tribunal.

8. When the matter was called for hearing, none appeared for the assessee despite service of notice. Accordingly, the matter was proceeded ex parte.

9. The learned DR relied upon the order of the CIT(A) and contended that in view of the provisions of Section 54B(2) of the Act, the assessee was required to either purchase another agricultural land (now asset)or in the alternative was required to deposit the un-utilized capital gains in specified bank account for its subsequent utilization for purchase of new asset. The assessee has neither acquired the new asset (agricultural land) nor deposited the amount of capital gain in the specified bank account within the due date of filing of return of income under s.139(1) of the Act i.e. 31st July, 2012. The learned DR accordingly contended that the learned CIT(A) has rightly declined to interfere with the action of the AO.

10. We have carefully considered the submissions made on behalf of the Revenue and also perused the assessment order as well as the first appellate order of the CIT(A). The assessee in the present appeal has controverted the denial of deduction claimed under s.54B towards capital gain arising sale of agricultural land. It is the case of the assessee that it has purchased new asset (agricultural land) on 06.02.2013 which falls within the extended due date for filing the return of income under s.139(4) of the Act. The assessee has filed its return of income on 24.02.2014 (i.e. after investment in new asset) under s.139(4) of the Act. It is thus the claim of the assessee before the lower authorities that the assessee complies with the condition placed under s.54B(2) of the Act for the purposes of eligibility of deduction under s.54B(1) of the Act. It is apparently the case of the assessee that the embargo placed under s.54B(2) is that the un-utilized capital gain is required to be invested for acquisition of new asset within the time limit prescribed under s.139 of the Act and therefore the time limit cannot be restricted to what is referred to under s.139(1) of the Act but also extends to encompass extra time limit available under s.139(4) of the Act.

11. We find ourselves in agreement with the case made out by the assessee before the lower authorities as noted above. Section 54B(2) of the Act enjoins that the capital gain is required to be utilized by the assessee towards purchase of new asset before furnishing of return of income under s.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 gain in specified bank account before the due date of filing of return of income under s. 139(1) of the Act. Thus, a distinction has been drawn in the Act in the two situations; (i) where purchase of new asset is involved and (ii) where the assessee opts to deposit the unutilized amount in the specified bank account. The assessee, in the instant case, does not claim to have deposited the money in the specified bank accounts under capital gain claim 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 the purchase of new asset before the date of furnishing return of income under s.139 of the Act. As noted, 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 s.139(1) has been specified for deposit in capital gain account scheme. When viewed equitably and liberally, the distinction between the two different forms of expression to time limit can yield different results. Section 139 encompasses both Section 139(1) and 139(4) of the Act. There is a normal presumption that words are used in Act of Parliament correctly and exactly and not loosely and in-exactly. In the present case, we are concerned with the utilization of capital gains by purchase of new asset for which the legislature has stopped short by making reference of Section 139 of the Act, in variation to Section 139(1) of the Act referred for deposit in capital gain scheme. This distinction assumes significance for interpretation of a beneficial provision. Thus, a beneficial view may be taken to say that Section 139 being omnibus and colorless would cover extended time limit provided under s. 139(4) of the Act. Thus, when an assessee furnishes return subsequent to due date of filing return under s.139(1) but within the extended time limit under s.139(4), the benefit of investment made up to the date of furnishing of return of income prior to filing return under s.139(4) cannot be denied on such beneficial construction. Thus, on first principles, we hold that the capital gains utilized towards purchase of new asset before furnishing of return of income before either under s.139(1) or under s.139(4) of the Act will be deemed to be sufficient compliance of Section 54(2) of the Act.

12. On the basis of legal principles set out above, the assessee would be required to demonstrate before the AO that the investment in the new asset has actually happened before furnishing of return of income by the assessee under s.139(4) of the Act on 24.02.2014. The AO shall grant relief to the assessee under s.54B of the Act in accordance with law, where it is found that the investment has been carried out in the new asset as contemplated in Section 54B before the date of furnishing belated return of income under s.139(4) of the Act. Accordingly, the issue is set aside to the file of the AO for the purposes of verification of factual aspects after giving proper opportunity to the assessee.

13. In the result, appeal of the assessee in ITA No. 109/Ahd/2017 is allowed ex parte for statistical purposes.

ITA No.110/Ahd/2017

14. The facts and issue in ITA No.110/Ahd/2017 are identical. Therefore while upholding the claim of the assessee for eligibility of deduction under s.54B of the Act on first principles, the factual aspects towards investment in new asset made shall be examined by the AO on the similar lines as per the other appeal. In parity, the issues in appeal in ITA No.110/Ahd/2017 are thus restored to the file of AO for fresh adjudication.

15. In the result, appeal of the assessee in ITA No. 110/Ahd/2017 is allowed ex parte for statistical purposes.

16. In the result, both the appeals of the assessee herein are allowed for statistical purposes.

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