The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), allowed capital gain exemption claim under Section 54 of the Income Tax Act on purchase of new residential property upto date of filing of belated Income Tax Return.
The assessee,Dr Dharmista Mehta filed her return of income declaring total income of Rupees three lakhs. The case was selected for scrutiny under CASS to examine large deduction claimed under section 54 of the Income Tax Act. During the course of proceeding, it was observed by Assessing Officer (AO) that assessee has sold immovable property for Rs. 1.7 Cr. and purchased a new property for Rs. 1.66 Cr.
It is also observed that assessee has failed to deposit the amount in Capital Gains Accounts Scheme (CGAS) and also failed to purchase House Property before the due date of filing of return as per section 139(1) of the Income Tax Act. Based on these observations, AO issued a show-cause that why Rs. 1.9 Cr should not be taxed under the head “Long Term Capital Gain (LTCG)”
The AO was not convinced with the argument advanced by the assessee in her favour and disallowed the claim of the assessee. The Commissioner of Income Tax (Appeals) also affirmed the view of the AO. Hence the present appeal has been preferred.
Section 54 of the Income Tax Act, 1961 provides for exemption of capital gains arising to a specified assessee from transfer of a long term capital asset to the extent capital gains are invested in a residential house within a prescribed period. The said exemption is available if the residential house is purchased or constructed within the prescribed period of one year before or two years after (in case of purchase); or three years after (in case of construction) the date of transfer of the long-term capital asset.
A Bench consisting of Aby T Varkey, Judicial Member and Gagan Goyal, Accountant Member held that “It can be safely be concluded that the assessee in the case before us is entitled to claim exemption under section 54 to the extent she had invested towards the purchase of new residential property under consideration upto the date of filing of belated return under section 139(4) of the Income Tax Act.”
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