2021 (1) TMI 907 - AT - Income Tax

Tribunal upholds Section 54F exemption for assessee, directs AO to verify capital gains computation.

The Deputy Commissioner of Income Tax, Central Circle-3 (2) Versus Malavika Shivakumar

The Deputy Commissioner of Income Tax, Central Circle-3 (2) Versus Malavika Shivakumar - TMI Issues Involved:1. Whether the assessee complied with the conditions mandated under Section 54F of the Income Tax Act for claiming exemption.2. Whether the construction of the new residential house was completed within the stipulated time.3. Whether the assessee invested the unutilized amount in the Capital Gains Accounts Scheme as required.4. The validity of the additional evidences submitted by the assessee.5. The correctness of the Assessing Officer's conclusions regarding the completion of construction and investment in the Capital Gains Accounts Scheme.Issue-wise Detailed Analysis:1. Compliance with Section 54F Conditions:The Revenue argued that the assessee failed to comply with the conditions under Section 54F(4) for availing the benefit of deduction under Section 54F(1), specifically the requirement to deposit the unutilized amount in the Capital Gains Accounts Scheme by the due date of filing the return of income under Section 139(1). The assessee contended that she had invested a substantial amount in the construction of a new residential house and provided evidence of such investments, including bills and vouchers.2. Completion of Construction within Stipulated Time:The Assessing Officer concluded that the construction was not completed within three years from the date of transfer of the original asset, citing the lack of a completion certificate and necessary utilities like electricity and water connection. However, the CIT(A) found that the assessee had provided sufficient evidence, including tax paid receipts and an electricity sanction letter, indicating that the construction was completed before the due date. The Tribunal upheld the CIT(A)'s findings, noting that the completion certificate is not the sole evidence of completion and that other substantial evidence provided by the assessee was sufficient to prove the completion of construction.3. Investment in Capital Gains Accounts Scheme:The Assessing Officer noted that the assessee did not deposit the entire unutilized amount in the Capital Gains Accounts Scheme, which led to the disallowance of the exemption claim. The CIT(A) and the Tribunal observed that the law does not mandate the investment of the full sale consideration in the Capital Gains Accounts Scheme for claiming exemption. The Tribunal emphasized that proportionate exemption is allowed if part of the sale consideration is utilized for constructing a new residential house.4. Validity of Additional Evidences:The CIT(A) considered additional evidences submitted by the assessee, such as bills and vouchers for construction expenses and a sanction letter from the electricity board. These were forwarded to the Assessing Officer for comments, who reiterated his earlier observations. The CIT(A) found the additional evidences credible and supportive of the assessee's claim.5. Assessing Officer's Conclusions:The Tribunal found that the Assessing Officer erred in concluding that the construction was not completed based solely on the absence of a completion certificate. The Tribunal noted that the assessee had provided ample evidence of construction activity and expenses incurred before the stipulated date. Additionally, the Tribunal directed the Assessing Officer to verify the facts regarding the computation of capital gains and the amount of tax paid on the balance capital gains, and to delete the additions if the assessee had indeed paid the required tax.Conclusion:The Tribunal upheld the CIT(A)'s decision to allow the exemption under Section 54F, finding that the assessee had complied with the conditions for exemption, completed the construction within the stipulated time, and provided sufficient evidence of the construction expenses. The Tribunal directed the Assessing Officer to verify the computation of capital gains and the tax paid on the balance amount, and to delete the additions if the assessee's claims were found to be accurate. The appeal filed by the Revenue was treated as allowed for statistical purposes.