The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that there is no need to invest the sale proceedings in the specified Government schemes when the assessee has purchased the new property within three years of the sale of the old asset.
The Assessing Officer, during the proceedings, found that the assessee sold residential house situated at Raj Nagar, Ghaziabad on 19.08.2011 for a consideration of Rs.1,05,00,000/-. Capital Gain on this transaction was shown at Rs.1,02,03,907/-. This capital gain was claimed as exempt under section 54 of the Income Tax Act, 1961 on the ground that the assessee constructed the residential house within the stipulated time.
After purchasing a new plot, the assessee constructed a house which was completed within 3 years as the Competent Authority issued the Occupation Certificate on 25.07.2014. The assessee, however, did not deposit the unutilized part of the sale consideration in an account in a specific bank or Institution before due date of filing return under section 139(1). While concluding the proceedings, the Officer held that the claim of deduction on the balance amount was not allowable as assessee failed to deposit the balance amount in the account in specified bank or Institution before the due date of filing of return under section 139(1) of the Income Tax Act.
The assessee contended that the whole of funds for the purchase of new plot for the purpose of construction of the new residential house to claim an exemption under Section 54 of the Income Tax Act was utilized by the assessee out of advance money received from the sale of the old residential house. The sale funds though invested by assessee in his wife’s name were out of sale proceeds of the old house only. The assessee further submitted that in these circumstances the investment towards the purchase of plot in the name of his wife out of advance received from the sale of the house was eligible for deduction under section 54 of the Act.
Allowing the second appeal filed by the assessee, the Tribunal observed that “the assessee has purchased the residential plot from the sale proceeds of the earlier residential house. The sale proceeds were utilized for construction of the residential house with the three years itself. The decision of the Hon’ble Karnataka High Court is apt in the present case as the Hon’ble High Court held that it is not a pre-condition to invest the money in the specified Central Govt. Scheme of the sale proceeds if the property is purchased and constructed for residential purposes.”
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