2024 (1) TMI 206 - AT - Income Tax

Section 54F deduction allowed despite procedural lapses in Capital Gain Account deposit and documentation deficiencies

ITAT Jaipur allowed assessee's claim for deduction under section 54F despite AO's objection regarding non-deposit of unutilized amount in Capital Gain ... LTCG - Deduction u/s 54F - Assessee has failed to deposit the unutilized amount in the Capital Gain Account out of the total investible/exempted amount - agreement produce in the paper book no details or post dated cheque has been furnished - As the assessee has not paid full amount the ld. AO called for proof of deposit of unutilized amount in capital gain account - AO contended that proof of payment toward investment in house property before the date of filing the return of income is not conclusive. The assessee also did not deposit the money in the capital gain account scheme. HELD THAT:- Merely the cheque details not mentioned in the agreement or in the certificate of the builder will not change the ultimate purpose of making the investment by the assessee and the assessee has placed on record the relevant evidence that the payment has been made and there is a requirement to make the payment in installments. The bench noted that the intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are ‘purchased’ or ‘constructed’. Here in this case, there is no doubt that the assessee has fulfilled the condition precedent for claiming benefit under section 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete, and it is not such a watertight condition to be fulfilled and does not disentitle the assessee to claim section 54F relief. To reach this conclusion the bench has considered the circular no. 471 dated 15.10.1986 and circular no. 672 dated 06.10.1993. The bench also considered the various judicial precedents cited by the assessee in the written submission. So, conspectus of the facts suggest that the assessee is entitled for deduction u/s. 54F of the Act as claimed, merely the postdated cheque was not cleared or the details thereof for an amount not mentioned in the agreement will not disentitle the assessee to claim the investment amount. Not only that, the bench noted that the assessee has paid 28,00,000/- and the balance amount was sufficiently available to be invested by the assessee therefore the reasons to denied the benefit was not in accordance with the provision and intention of the law. Based on these observations the ground no. 1 to 3 raised by the assessee is allowed. Issues Involved:1. Denial of relief under Section 54F of the Income Tax Act.2. Ignoring the circulars No. 471 and 672 regarding payment to builders.3. Misinterpretation of the beneficial provisions of Section 54F.Summary:Issue 1: Denial of Relief under Section 54FThe assessee filed her return of income for the A.Y. 2016-17, declaring a total income of Rs. 14,99,850/-. She sold two immovable properties for Rs. 1,49,00,000/- and claimed a deduction under Section 54F for Rs. 1,03,06,141/-. The AO noted that only Rs. 28,00,000/- was paid at the time of the agreement, and the remaining amount was not deposited in the Capital Gain Account Scheme. The AO restricted the deduction to Rs. 28,00,000/-, disallowing Rs. 80,22,354/-. The CIT(A) upheld the AO's decision, stating that the deposit in the Capital Gain Account Scheme is mandatory. The Tribunal, however, found that the assessee had issued post-dated cheques and maintained sufficient funds for the payment. It concluded that the intention of the legislature was to encourage investments in residential houses and that the procedural lapse should not disentitle the assessee from the exemption.Issue 2: Ignoring Circulars No. 471 and 672The assessee argued that the CIT(A) ignored Circulars No. 471 and 672, which state that payment to builders in installments is sufficient compliance for claiming exemption under Section 54F. The Tribunal agreed, noting that the circulars treat allotment of flats by builders as construction and not purchase, making subsequent payments in installments irrelevant. The Tribunal cited various judgments supporting the view that substantial compliance with the law should be considered, and technical lapses should not deny the benefit.Issue 3: Misinterpretation of Beneficial Provisions of Section 54FThe assessee contended that the CIT(A) misinterpreted the beneficial provisions of Section 54F, which aim to promote housing investments. The Tribunal concurred, emphasizing that the section should be construed liberally. It noted that the primary goal of the exemption provisions is to promote housing, and procedural lapses should not defeat this purpose. The Tribunal cited several judgments supporting a liberal interpretation of Section 54F, allowing the benefit even if the construction was not completed within the prescribed period.Conclusion:The Tribunal allowed the appeal, stating that the assessee had substantially complied with the law by investing in a residential house and maintaining sufficient funds. It held that the procedural lapse of not depositing the amount in the Capital Gain Account Scheme should not deny the benefit of Section 54F. The Tribunal emphasized the intention of the legislature to promote housing investments and ruled in favor of the assessee.