The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), ruled that Section 54F Deduction under the Income Tax Act, 1961 can be allowed even if amount not Deposited in Capital Gains Account Scheme.
The assessee, T Pandian, filed his return of income for the assessment year 2016-17 declaring an income. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961. Thereafter, the case was selected for scrutiny under CASS, and notice under section 143(2) was issued on 04.08.2017 and duly served on the assessee. After following due procedure, the Assessing Officer completed the assessment.
In the assessment order, the Assessing Officer has noted that the assessee has sold the property for a consideration of and also claimed sale expenses and that the assessee had also received for the property of 2.09 acres. The assessee has claimed deduction under section 54F of the Income Tax Act in respect of property purchased for consideration.
After considering the explanations of the assessee against the show-cause notice, the Assessing Officer has denied the claim of deduction under Section 54F as the assessee has not fulfilled the procedural requirement laid down by the law of depositing into the capital gain account scheme with a nationalized bank before the due date of furnishing of return. The Assessing Officer assessed the income by taking capital gains.
As per Section 54F of the Income Tax Act, 1961, the long term capital gains earned by selling a capital asset except a house property can be exempted from tax subject to the given condition. The capital assets comprise bonds, gold, shares, and other such items. The condition prevails that the gains from the sale must be reinvested in either the purchase of the construction of a house property.
A Coram comprising V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member), observed that even though the assessee has not invested the sale proceeds in Capital Gain Account Scheme, but complied with the conditions under section 54F(1) by purchasing an independent house by executing a sale agreement.
The Bench concluded by noting that the provisions of section 54F of the Act are beneficial provisions and are to be considered liberally in the aspect of the limitation period. But the investment in residential property is a must, which the assessee has proved with evidence and complied before the lower authorities.
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