Case Law Details
Venkata Dilip Kumar,Kartha-HUF Vs CIT (Madras High Court)
No doubt, Section 54 (2) contemplates that if the amount of the capital gain is not appropriated by the assessee towards purchase of new assets within one year before the date on which the transfer of original asset took place or which is not utilised by him for the purchase of new asset before the date of furnishing the return of income under Section 139, he has to deposit the said sum in an account in any such bank and utilised in accordance with any scheme which the Central Government may, by notification frame in that behalf. In other words, if the assessee has not utilised the amount of the capital gain either in full or part, such unutilised amount should be deposited in a capital gain account to get the benefit of deduction in the succeeding assessment years.
In this case, the only objection raised by the Revenue is that the disputed sum has not been deposited in the capital gain account. At the same time, it is not in dispute that the petitioner/assessee has deposited Rs.1.50 crores in the capital gain deposit account and the deduction was granted to the said sum under Section 54. The dispute is only with regard to the balance sum spent on additional construction cost, which according to the Revenue, is not entitled for deduction under Section 54, since it was not deposited in capital gain account as required under Section 54(2).
In my considered view, the contention deny the benefit of deduction to the petitioner/assessee cannot be justified for the following reasons:
Section 54(2) cannot be read in isolation and on the other hand, application of Section 54(2) should take place only when the assessee failed to satisfy the requirement under Section 54(1). While the compliance of requirement under Section 54(1) is mandatory and if complied, has to be construed as substantial compliance to grant the benefit of deduction, the compliance of requirement under Section 54(2) could be treated only as directory in nature. If the assessee with the material details and particulars satisfies that the amount for which deduction is sought for under Section 54 is utilised either for purchasing or constructing the residential house in India within the time prescribed under Section 54(1), the deduction is bound to be granted without reference to Section 54(2), which compliance in my considered view, would come into operation only in the event of failure on the part of the assessee to comply with the requirement under Section 54(1). Mere non compliance of a procedural requirement under Section 54(2) itself cannot stand in the way of the assessee in getting the benefit under Section 54, if he is, otherwise, in a position to satisfy that the mandatory requirement under Section 54 (1) is fully complied with within the time limit prescribed therein.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
