Depositing Unutilized Capital Gain in Deposit Account Scheme: ITAT grants Capital Gain Exemption [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), granted exemption under Section 54 of the Income Tax Act, 1961 (capital gain exemption) on depositing unutilized capital gain in Deposit account scheme.

The assessee, Arun Gupta has computed long term capital gains from sale of property and claimed exemption under Section 54 of the Income Tax Act, 1961by paying a sum of Rs. 50 lakhs to the builder as advance money for purchase of property and also deposited a sum of Rs. 1 crore in a capital gain deposit account scheme. The assessee had also claimed deduction under Section 54EC of the Income Tax Act for Rs. 50 lakhs towards investment in NHAI bonds.

During the course of assessment proceedings, the AO noticed that deduction claimed by the assessee under Section 54 of the Income Tax Act is not eligible because, the assessee has failed to deposit unutilized amount of capital gains in capital gains deposit account scheme on or before due date of filing of return under Section 139(1) of the Income Tax Act. Therefore, rejected the claim of the assessee and disallowed deduction claimed under Section 54 of the Income Tax Act.

The Assessee submitted that the assessee has satisfied conditions prescribed under Section 54 of the Income Tax Act, including depositing unutilized amount of capital gain into capital gain deposit accountscheme in a nationalized bank. However, there is small delay in depositing unutilized amount in capital gains account deposit scheme, and for said technical breach deduction under Section 54 of the Income Tax Act cannot be denied.

In fact, the AO has accepted fact that the assessee has satisfied all conditions prescribed therein under Section 54 of the Act, except the condition of depositing unutilized amount of capital gain in capital gain deposit account scheme on or before due date of filing return of income under Section 139(1) of the Income Tax Act. In other words, the assessee has satisfied a primary condition of acquiring new asset within three years from the date of transfer of original asset.

A Coram consisting of Mahavir Singh, Vice President and G Manjunatha, Accountant Member observed that “When the assessee has satisfied all conditions including depositing unutilized portion of capital gain in capital gain deposit account scheme, then for minor technical breach, benefit of deduction under Section 54 of the Income Tax Act cannot be denied.”

To Read the full text of the Order CLICK HERE

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