TaxTMI 
TaxTMI 
2013 (10) TMI 746
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....ion arising from the sale of shares of Capital Advertising Private Limited ("CAPL") to the Special Capital Gains Account did not, in law, constitute "deposit" on such date of such net consideration in the Special Capital Gains Account as required by Section 54F(4) of the Act. 1.2 That on the facts and in the circumstances of the case, the CIT(A) erred in law in holding that non-furnishing of proof of deposit of net consideration on 30.7.2008 in the Special Capital Gains Account was fatal to the claim of the appellant for exemption under Section 54F(4) of the Act. 1.3 That, without prejudice, on the facts and in the circumstances of the case, the CIT(A) failed to appreciate that the unutilized net consideration arising from sale of shares of CAPL having being considered by the assessing officer as deposited in the Special Capital Gains Account on 31.07.2008, i.e., before date stipulated under Section 139(1) for filing of return of income, the exemption claimed under section 54F of the Act was admissible in law. 2. That on the facts and in the circumstances of the case, the CIT(A) erred in law in enha....
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....; "During the course of appellate proceedings, the counsel for the appellant filed written submissions which is reproduced as under:- "On 20.9.2007, the appellant sold certain shares held by him in Capital Advertising Private Limited (CAPL), for Rs. 5,62,87,500/-, which resulted in capital gains of Rs. 5,50,93,628. Out of the aforesaid of capital gains, the appellant offered Rs. 1,19,52,809 to tax under Section 45 of the Act. As regards the balance amount of capital gains the appellant claimed exemption, as follows: S.No. Particulars Amount 1 Exemption under Section 54EC of the Act, being investment in notified bonds Rs. 50,00,000 2 Exemption under Section 54F(1) of the Act, being amount utilized for purchase/ construction of a residential House Rs. 2,60,41,875 3 Exemption under Section 54F(4) of the Act, being unutilized net consideration deposited in Special Capital Gains Account Rs. 1,22,23,250 In order to avail the exemption in respect of the sum of Rs. 1,22,23,250 (point No.3 in the table ab....
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....p; It is most respectfully submitted, that the action of the assessing officer in denying exemption under Section 54F(4) of the Act to the appellant is not based on proper appreciation of facts and the position in law and calls for being deleted, for the reasons elaborated hereunder: Section 54F(1) of the Act exempts taxable capital gains arising on transfer of a long-term capital asset, other than the residential house property, where the amount of net sale consideration is utilized by the assessee to: (a) purchase a residential house within one year before or within 2 years after the date of transfer of the original asset; or (b) construct a residential house within three years after the date of transfer of the original asset. Where, however, an assessee is unable to utilize the net sale consideration received on the transfer of the long term capital asset before the date of filing the return, sub-section (4) of section 54F provides that exemption from the capital gains tax under Section 45 of the Act would still be available, provided that the assessee deposits t....
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....ble with the assessing officer during the course of assessment proceedings, the fact that the same had not been furnished along with the return would not ml1itate against aval1ability of benefit of exemption under section 54F(4) of the Act. It is, therefore, respectfully submitted that the denial of exemption under Section 54F(4) of the Act on the above ground was contrary to law. Manner of utilization could not have been the basis for denial of exemption in the assessment year under consideration. In the assessment order, the assessing officer has alleged that the appellant failed to furnish any evidence of utilization of the aforesaid amount deposited under the scheme, for the purposes of purchase/construction of residential house. On that basis, too, the assessing officer held that the claim of the appellant for exemption under Section 54F of the Act was not acceptable. It is further respectfully submitted, that the appellant from time to time paid the sum, deposited in the Special Capital Gains Account, to DLF Hotels & Apartments Private Limited towards the cost of fi....
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....ear 2010-11 (relevant to the assessment year 2011-12) and not in the previous year relevant to the assessment year under consideration and, therefore, denial of exemption under section 54F(4) of the Act for the assessment year under consideration was uncalled for. In view of the above, the denial of exemption under section 54F of the Act by the Assessing Officer in respect of the aforesaid amount of Rs. 1,22,23,250/-, it is most respectfully submitted, is without basis and consequently calls for being deleted." 4.1 Considering the aforesaid submissions, Ld. Commissioner of Income Tax (A) observed that capital gain of Rs. 5,50,93,628/- has arisen to the assessee from the transfer of long term asset other than residential house i.e. shares of M/s Capital Advertising Pvt. Ltd. on 20.9.2007. Out of this amount the assessee claimed exemption u/s. 54F(1) of Rs. 2,60,41,875/- on account of investment in house in Flat No. 704-A, Magnolias, DLF, Gurgaon. Ld. Commissioner of Income Tax (A) further observed that out of this amount assessee is not eligible u/s. 54F(1) on payment of Rs. 55,70,800/- by M/s Capital Advertising Pvt. Ltd. and not by the assessee. Ld. ....
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....u/s. 54F(4) to the extent of Rs. 1,22,23,250/- on account of investment in Special Capital Gains Account after filing of return. Hence, this resulted in an enhancement of Rs. 55,70,800/-. 5. Against the above order the Assessee is in appeal before us. 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We can gainfully refer the provisions of section 54F, which read as under:- "[Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. 54F. (1) [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or [two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital ....
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....come from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. (3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred.] [(4) The amount of the net consideration which is not appropriated by the assessee ....
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....ling of return. In this regard, it is the submissions of the assessee that in order to avail the exemption in respect of a sum of Rs. 1,22,23,250/- u/s. 54F(4) of the Act, the assessee on 30.7.2008 issued instruction to the Syndicate Bank, Hauz Khas, New Delhi to transfer the aforesaid amount of Rs. 1,22,23,250/- from the savings bank account maintained by the assessee in the aforesaid branch to the special capital gain account maintained with the same branch of the said bank. In this regard, assessee has furnished a certificate issued by the bank on 15.12.2010 wherein it has been confirmed that instruction has been received from the assessee on 30.7.2008 for transfer / deposits of funds to the special capital gain account. It has further been claimed by the assessee that assessee having issued necessary instructions to the aforesaid bank in which both the accounts (i.e. savings bank account as well as special capital gain account) were maintained for transfer / deposits in the capital gain of Rs. 1,22,23,250/- in the special capital gain account on 30.7.2008, the assessee proceeded to file his return of income on the same date i.e. 30.7.2008 wherein it claimed that exemption of th....