Section 54 deduction eligible on investment in house purchased abroad within stipulated time u/s 139(4)

Joseph K. Zachariah Vs ACIT (ITAT Bangalore)

Section 54(2) of the Act has two conditions for availing deduction u/s 54(1) of the Act. Firstly, the assessee has to utilize the capital gain in purchase of new property before the due date of furnishing the return of income u/s 139 of the Act, which encompasses sub-section (1), sub­section (4) & sub-section (5) of section 139 of the Act. Secondly, if it is not done so, it has to be deposited in a capital gain account scheme before the due date of furnishing return of income as provided u/s 139(1) of the Act. In the present case, the assessee filed the return of income for the assessment year 2014-15 on 13.6.2014 before the due date of filing return u/s 139(1) of the Act. However, by that time, he has not utilized the amount of Rs.2,59,03,849/- in construction of new residential house or deposited the same in capital gain account scheme as notified by the Central Government. In other words, unutilized capital gain should have been deposited in capital gain account before due date of filing of return u/s 139(1) of the Act. Now the contention of the Ld. A.R. is that even if the assessee deposited unutilized portion of capital gain after the due date provided u/s 139(1) of the Act, assessee is entitled for deduction u/s 54 of the Act. This argument cannot be upheld. To avail benefit u/s 54 of the Act, unutilized portion of capital gains shall be deposited by assessee in capital gain account scheme before due date of filing of return of income u/s 139(1) of the Act as prescribed u/s 54(2) of the Act.

Assessee made an alternative argument that the assessee made investment in purchase of house at Chicago in USA within the stipulated time u/s 139(4) of the Act. Even the investment in residential property in foreign country, he has also entitled the assessee to claim such deduction. As held by coordinate bench in IT(IT)A No.15/Bang/2019 in the case of Shri Rajasugumar Subramani dated 10.1.2020, we are completely agreed with this proposition.

However, we make it clear that assessee shall furnish necessary evidences of construction or purchase of new residential property in Chicago, USA. The A.O. has to examine the same and decide the issue in the light of the order cited (supra).

FULL TEXT OF THE ITAT JUDGEMENT

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