Deduction u/s  54 F Income Tax Act  shall not be  denied by reason of  Sale Amount  is not deposited in Capital Gain Account: ITAT [Read Order]

The  Jaipur  bench of Income Tax Appellate Tribunal (ITAT) has held that deduction under Section 54 F Income Tax Act, 1961 should not be  denied by reason of  sale amount not deposited in Capital Gain Account.

The assessee Lalit Kumar Kalwar Sarwar engaged in the trading of Tyres under the name and style M/s. Jai Ambey Tyres. The assessee filed his return of income declaring income of Rs. 3,97,590/- on 30.09.2013 . The case of the assessee was selected for scrutiny.

During the proceedings, AO noted that the assessee had sold a parental property for Rs. 20,78,310/- and shown long term capital gain at Nil after claiming exemption under section 54F of the Income Tax Act. The AO completed the assessment by computing the total income by taking the long term capital gain after allowing deduction under Chapter VIA of Income Tax  Act, 1961.

Aggrieved by the order, assesee filed an appeal before the Commissioner of Income Tax (Appeal) [CIT(A)]. The CIT(A) allowing some relief, allowed the appeal of the assessee in part. Thus the assessee filed a second appeal before the tribunal.

Commissioner of Income Tax (Appeal) allowed deduction under Section 54F amounting to Rs. 6,49,100/- and Rs. 19,00,000/- invested by the assessee in construction of residential house in A.Y. 2014-15 & 2015-16 respectively. The denial of the deduction only reason that the assessee has not deposited consideration in capital gain account

When the matter was considered for hearing, the assessee submitted that the assessee has sold shops and received actual sales consideration of Rs. 12,00,000/-which was less than the value accepted by the DLC of Rs. 20,78,310/-. The assessee has claimed long term capital gain nil after exemption under Section 54F of the Income Tax Act.

The assessee has computed long term capital gain nil as the entire actual consideration was invested in construction of residential house.

The actual consideration received by the assessee was invested in purchase of plot and construction of residential house before due date of filing of return on 31.03.2014 as per provisions of section 139(4) of the Income Tax Act.

The tribunal observed that cost of new assets is not less than the net consideration thus the whole of the capital gains would not be charged even if the capital gains has been computed by adopting the value adopted by stamp registration authority   .

The Section  54F(4) of Income Tax Act also says that net consideration which is not appropriated towards the purchase of new assets then the same is to be taxed in case such net consideration not appropriated is not deposited in the capital gain account. It is not necessary that the new asset should be registered before filing the return.

The requirement of the law is that net consideration is required to be appropriated towards the purchase of the new asset. Thus, the deduction under Section  54F Income Tax Act  is clearly applicable.

The bench  also determined that the assessee has invested the entire actual sales consideration received by him in the purchase and construction of new house in accordance with the provision of section 54F(1) Income Tax Act thereafter the provision of section 50C Income Tax Act  has not been applicable .

After considering the facts, a single  member bench of Sandeep Gosain, (Judicial Member) allowed the appeal filed by the assessee. 

Monisha Choudhary , counsel appeared for the revenue. Mahendra Gargieya, counsel appeared for the assessee.

To Read the full text of the Order CLICK HERE

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