2021 (9) TMI 348 - AT - Income Tax

Appellate Tribunal emphasizes compliance with Section 54F provisions for tax deductions

The Appellate Tribunal allowed the appeal, emphasizing compliance with Section 54F provisions on reinvesting sale consideration and completing ... Deduction u/s 54F - claim denied as date of completion of new house not give by assessee - it is not clear whether the house property was constructed within 3 years from the date on which transfer of original asset - HELD THAT:- The assessee has reinvested entire sale consideration of ₹ 19,20,000/- for purchase of land and constructed residential house property. It is also not in dispute that the assessee has completed construction of house property within 3 years from the date of sale of old asset. In fact, the AO in his assessment order had admitted that the assessee has completed construction of new house within 3 years. Thus once the assessee has reinvested its entire sale consideration for purchase / construction of another new asset within extended due date of filing return of income u/s.139(4) & 139(5) of the Act, and also filed necessary evidences to prove that construction of house property was completed within 3 years from the date of sale of original asset, then there is no reason for the ld.CIT(A) to direct the AO to once again verify whether house property was constructed within 3 years from the date of transfer of original asset. Hence, we set aside the direction given by the CIT(A) and direct the AO to allow deduction claimed u/s.54F of the Act - Decided in favour of assessee. Issues:1. Interpretation of Section 54F of the Income Tax Act, 1961 regarding exemption eligibility.2. Requirement of depositing sale consideration in capital gain deposit scheme.3. Completion of construction within the specified time frame.Analysis:1. The appeal involved the interpretation of Section 54F of the Income Tax Act, 1961, regarding the eligibility of the assessee for exemption. The assessee claimed exemption under Section 54F after selling a property and reinvesting the proceeds in a new asset. The Assessing Officer (AO) denied the deduction, stating non-compliance with conditions under Section 54F(4) due to not depositing the sale consideration in a capital gain deposit scheme. The Commissioner of Income Tax (Appeals) directed the AO to verify if the house property was constructed within the specified time frame, leading to the appeal before the Appellate Tribunal.2. The requirement of depositing the sale consideration in a capital gain deposit scheme as per Section 54F(4) was a crucial aspect of the case. The AO rejected the deduction claim based on this non-compliance, despite the assessee reinvesting the entire sale consideration in a new asset within the extended due date for filing returns under Section 139(4) & 139(5). The CIT(A) set aside the issue for verification, leading to a dispute on the necessity of depositing the consideration in the capital gain deposit scheme.3. Another significant issue was the completion of construction within the stipulated time frame. The AO acknowledged that the construction was completed within 3 years from the sale of the original asset. However, the CIT(A) directed verification of this aspect, leading to a debate between the parties. The Appellate Tribunal, relying on legal precedents, held that once the sale consideration was reinvested within the due date and construction completed within the specified time frame, the assessee was entitled to the deduction under Section 54F. The Tribunal set aside the CIT(A)'s direction and directed the AO to allow the deduction claimed by the assessee.In conclusion, the Appellate Tribunal allowed the appeal filed by the assessee, emphasizing compliance with the provisions of Section 54F in reinvesting the sale consideration and completing the construction within the prescribed time frame. The Tribunal's decision highlighted the importance of meeting statutory requirements for claiming exemptions under the Income Tax Act.