2021 (7) TMI 159 - AT - Income Tax

Appeal allowed for Section 54F deduction, emphasizing beneficial interpretation

The appeal was allowed, remitting the matter back to the Assessing Officer to verify if the entire sale proceeds were deposited in a Nationalized Bank, ... Addition made towards LTCG denying the benefit of deduction u/s. 54F - assessee had not deposited the sale proceeds in the capital gains deposit accounts scheme maintained with any Nationalised Bank as per section 54F(4) of the Act and therefore, disallowed the claim of deduction - HELD THAT:- On an earlier occasion the SMC Bench of Hyderabad Tribunal in the case of Satya Prakash Reddy Aedudodla [2021 (7) TMI 76 - ITAT HYDERABAD] following the decision of the Division Bench of Chennai Tribunal [2018 (1) TMI 1572 - ITAT CHENNAI] had held that if the sale proceeds are deposited in any Nationalised Bank it would suffice though not transferred to the capital gain deposit scheme account Therefore, in the interest of justice, we hereby remit the matter back to the file of the Ld. AO to verify whether the assessee has deposited the entire sale proceeds in any of the Nationalised Bank and if found so then the Ld. AO is hereby directed to grant the benefit of deduction provided all the other conditions stipulated under the Act are complied with - Appeal of the assessee is allowed for statistical purposes. Issues:1. Denial of deduction under Section 54F of the Income Tax Act for LTCG.Analysis:The appeal was filed against the order of the Ld. CIT(A)-3, Hyderabad, regarding the denial of the benefit of deduction under Section 54F of the Act for LTCG of Rs. 12,26,790. The assessee, an individual, failed to file the return of income for AY 2008-09 but later disclosed LTCG of Rs. 3,29,460, claiming deduction under Section 54/54F for Rs. 11,07,971. The assessment was completed accepting the returned income, but the CIT observed that the sale proceeds were not deposited in the capital gains deposit account scheme as required by Section 54F(4) of the Act. The assessment was set aside, and the AO disallowed the deduction, assessing the LTCG at Rs. 12,26,790. The CIT(A) upheld the AO's decision.The AR argued that the sale proceeds were deposited in a Nationalized Bank, albeit not in the capital gains scheme account, due to a technical oversight. Referring to a Hyderabad Tribunal decision, it was noted that depositing the sale proceeds in a Nationalized Bank sufficed for claiming the deduction under Section 54F. Considering the legal precedents and the facts of the case, the matter was remitted back to the AO to verify if the entire sale proceeds were deposited in a Nationalized Bank, directing to allow the deduction if all other conditions were met.The Tribunal's decision was based on the interpretation of Section 54F, emphasizing that the provision should be construed beneficially to grant relief to the assessee. Citing previous judicial decisions, the Tribunal held that a small technical breach, such as not depositing the sale proceeds in the capital gains scheme account, should not disentitle the assessee from the benefit of Section 54. Therefore, the matter was remitted to the AO for verification and granting the deduction if all conditions were fulfilled.In conclusion, the appeal was allowed for statistical purposes, remitting the matter back to the AO for verification and decision in accordance with law and the Tribunal's decision. The order was pronounced considering the extraordinary circumstances of the Covid-19 pandemic, ensuring justice in the case.