The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has recently held that the provisions of section 54 of the Income Tax Act, which is a beneficial provision shall be interpreted liberally. The Tribunal, while concluding an appeal in favour of the assessee, held that the deduction under section 54F of the Act is allowable even in case of unutilized capital gain was deposited into the prescribed account within the due date of filing of the income tax return.
The assessee sold his immovable property and had faithfully disclosed the reason for not depositing the capital gain amount into a separate capital account before filing the due date of return of income. The assessee claimed that the said capital gain amount has been utilized in acquiring the property within the time allowed by Section 54F of the Income Tax Act, 1961.
Before the tax authorities, the assessee claimed that though he did not invested the capital gain asset scheme before 139(1) of the Act but complied with the conditions under Section 54F(1) of the Act for purchasing and construction of residential property within three years from the date of transfer of the original asset. However, the department denied the claim and passed an order against the assessee.
The Tribunal bench consisting of Accountant Member Waseem Ahmed and Judicial Member Madhumaita Roy observed that section 54F is a beneficial provision that shall be interpreted liberally in favor of the assessee.
The bench further relied on the decision in ITO vs. Nilima Abhijit Tannu passed by the ITAT, Mumbai Benches, where the same issue has cropped up and it was observed that when the unutilized portion of a capital gain on sale of a capital asset is required to be deposited before the date of furnishing of return of tax under Section 139, in such a situation Section 139 cannot be meant only Section 139 but it means all sub-Sections of Section 139.
“Therefore the Ld. Tribunal has been pleased to hold that the assessee has fulfilled the condition for deduction under Section 54F within the extended time limit of filing of return under Section 139(4) and the claim of the assessee cannot be negated merely he did not deposit the amount in the said scheme before the expiry of the time period provided under Section 139(1) of the Act,” the Trib8unal said.