2017 (6) TMI 771 - AT - Income Tax

Tax Tribunal denies exemption claim due to missed deadline for capital gains deposit

Shri Ravi Kant HUF, Mohanlal Jain & Co., Versus Income Tax Officer, Ward-23 (4), Mumbai

The Tribunal upheld the disallowance of the exemption claimed under Section 54 of the Income Tax Act, 1961. The decision was based on the failure of the ... Disallowance of exemption u/s 54 - non deposit unutilized amount in the capital gain account before the due date of furnishing of return u/s 139(1) - Held that:- The assessee shall be entitled for deduction u/s 54 to the extent the amount is invested by the assessee in purchase/construction of the new asset till the date of furnishing of return by the assessee on 31/03/2009, for which the Assessing Officer is directed to allow the deduction in accordance with our aforesaid directions. The assessee shall not be entitled for deduction u/s 54 on the amount, which has been deposited in capital gain account maintained with the bank beyond the due date of furnishing of return of income u/s 139(1) of the Act. As in the instant case assessee has not deposited the unutilized amount in the capital gain account before the due date of furnishing of return u/s 139(1) and hence as per section 54(2), no deduction shall be allowed to the assessee with respect to the deposits of ₹ 60 lakhs made with the capital gain account with the bank. See Humayun Suleman Merchant (2016 (9) TMI 70 - BOMBAY HIGH COURT) - Decided against assessee. Issues Involved:1. Disallowance of exemption under Section 54 of the Income Tax Act, 1961.2. Interpretation of the provisions of Section 54(2) and Section 54F(4) of the Income Tax Act, 1961.3. Compliance with the requirement of depositing unutilized capital gains in a specified account before the due date of filing the return.Detailed Analysis:1. Disallowance of Exemption under Section 54 of the Income Tax Act, 1961:The assessee sold a residential property and claimed an exemption under Section 54 of the Income Tax Act, 1961. The capital gain amounting to Rs. 59,58,733 was to be deposited or utilized before the due date of furnishing the return of income under Section 139(1). The assessee deposited the amount in installments on 01/11/2008, 14/11/2008, and 17/11/2008, totaling Rs. 60 lakhs. However, the Assessing Officer disallowed the exemption claim.2. Interpretation of the Provisions of Section 54(2) and Section 54F(4) of the Income Tax Act, 1961:The Tribunal considered the interpretation of Section 54(2) and Section 54F(4) of the Act. The provisions require that the capital gain amount not utilized for the purchase or construction of a new asset before the filing of the return must be deposited in a specified account before the due date under Section 139(1). The Tribunal referred to the case of Humayun Suleman Merchant vs. Chief CIT, where the Bombay High Court held that the unutilized amount must be deposited in a specified account to claim the exemption.3. Compliance with the Requirement of Depositing Unutilized Capital Gains in a Specified Account Before the Due Date of Filing the Return:The Tribunal analyzed whether the assessee complied with the requirement of depositing the unutilized capital gains in the specified account before the due date of filing the return. The Tribunal concluded that the assessee did not deposit the unutilized amount in the capital gain account before the due date of furnishing the return under Section 139(1). As per the Bombay High Court's decision in Humayun Suleman Merchant, the assessee is entitled to the exemption only to the extent of the amount invested in the new asset before the due date of filing the return. Since the assessee did not comply with this requirement, the exemption claim was disallowed.Conclusion:The Tribunal dismissed the appeal of the assessee, upholding the disallowance of the exemption under Section 54 of the Income Tax Act, 1961. The decision was based on the interpretation of the provisions of Section 54(2) and Section 54F(4) and the requirement of depositing unutilized capital gains in a specified account before the due date of filing the return. The Tribunal's decision was supported by the Bombay High Court's ruling in the case of Humayun Suleman Merchant. The assessee was not entitled to the exemption for the amount deposited in the capital gain account beyond the due date of furnishing the return under Section 139(1).