The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) held that utilising specific money deposited in a capital gain account scheme towards new investment is not mandated under the Income Tax Act,1961. There is no requirement that specific money as deposited in a capital gain account scheme should be utilized towards new investment, and the assessee may make investments from other funds as available to him and the same would not jeopardize the claim of the assessee.
Shri Ramasubramaniam Sridhar Paul, the assessee has deposited the sale consideration in the capital gain account scheme which was withdrawn. Later, the assessee purchased a new asset (plot) and entered into a construction agreement. The AO formed an opinion that the original plot was sold on 24-02-2012 and therefore, the investment ought to have been made within the stipulated time period in terms of Sec. 54F of the Act. As against this, the investment was made in Urbanvile on 07-02-2011.
The construction agreement was made on 19-01-2011 which was one year prior to the date of sale of the original asset. The assessee did not purchase a new asset within a period of one year prior nor constructed a new asset within a period of three years as stipulated. Therefore, the capital gains of Rs.56.36 Lacs was brought to tax and an assessment was framed against the assessee.
The Bench found that the lower authorities had considered the dates of the construction agreement as the relevant dates to examine the claim of the assessee overlooking the fact that the construction agreement had stipulations that the construction would be completed in 18 months from the date when the builder gets approval.
The payment towards construction for Rs.81.84 Lacs was made between 01-06-2011 to 14-06-2013 and the possession was obtained on 05-02-2013, and all these events are within the stipulated period of one year prior and two years thereafter as counted from 24-02-2012, added the Bench.
In light of the decision of Sohanlal Mohanlal Bhandari vs. ACIT, the two-member Bench of Mahavir Singh (Vice President) And Manoj Kumar Aggarwal (Accountant Member) reiterated that it is open for the assessee to use either own or borrowed funds for purchase or construction of the new residential house and it is nowhere provided that only sale proceeds of the original asset should be utilized for this purpose. It was held that utilising specific money deposited in a capital gain account scheme towards new investment is not mandated under the Income Tax Act,1961.
Hence, the ITAT answered in favour of the assessee and directed the AO to grant a deduction to the assessee.
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