Income Tax Appellate Tribunal

Deputy Commissioner of Income Tax vs. Malavika Shivakumar, Chennai

MANU/IX/0002/2021

18.01.2021

Direct Taxation

If an assessee invests full consideration from sale of original asset for purchasing or constructing another residential house, then assessee is entitled for 100% exemption from capital gain tax

Present appeal filed by the Revenue is directed against order of the learned Commissioner of Income Tax (Appeals). The learned CIT(A) held that, assessee has completed construction of building on or before May, 2017 and hence eligible for exemption under Section 54F of the IT Act. Accordingly, learned CIT(A) deleted additions made by Assessing Officer towards disallowance of exemption claimed under Section 54F of the Income Tax Act, 1961 (IT Act). It is submitted on behalf of Revenue that, learned CIT(A) has erred in deleting disallowance of claim of exemption under Section 54F of the IT Act without appreciating the fact that assessee has failed to comply with the condition mandated under the provisions of section 54F(4) of the Act to avail benefit of exemption under Section 54F(1) of the IT Act.

Assessing Officer has erred in coming to the conclusion that, building construction was not completed before May, 2017 only on the basis of non-furnishing of completion certificate from municipal authorities. No doubt, completion certificate is one evidence for having completed construction of building, but it is not material evidence to draw adverse inference against assessee, when assessee has placed all other evidences which indicate completion of construction of building. The learned CIT(A) after considering relevant facts has rightly held that, construction of building was completed within three years from the date of transfer of original asset and hence, present Tribunal is inclined to uphold the findings of learned CIT(A) and reject grounds taken by the Revenue.

As regards another observation of Assessing Officer regarding investment of balance sale consideration in capital gain account deposit scheme on or before due date for furnishing of return of income, the provisions of section 54F of the IT Act nowhere states that, assessee should invest full sale consideration in capital gain account deposit scheme in order to be eligible for exemption from capital gain. The law is very clear as per which, if an assessee invests full consideration from sale of original asset for purchasing or constructing another residential house, then assessee is entitled for 100% exemption from capital gain tax. In case, where assessee has invested part sale consideration for purchase or construction of another residential house, then proportionate deduction is allowed commensurate with investment made in new asset.

In present case, on perusal of details filed by assessee, present Tribunal find that, assessee has made investment of Rs.1,20,00,000 in capital gain account deposit scheme on or before due date of furnishing of return of income and said deposit account has been utilized for construction of building within three years from the date of transfer of original asset. Therefore, Assessing Officer has erred in rejecting the claim of assessee on the ground that, assessee ought to have invested balance consideration in capital gain account deposit scheme, more particularly, when assessee has claimed that she has paid tax on remaining sale consideration in accordance with law.

However, facts with regard to amount of exemption claimed under Section 54F of the IT Act and the amount of capital gain which was subjected to tax was not forthcoming from the orders of lower authorities. The assessee claims that, it has claimed exemption under Section 54F for Rs.3,72,81,393 and for balance capital gain she has paid tax, whereas Assessing Officer held that, assessee has claimed exemption of ` 3,70,75,929. Therefore, for the limited purpose of ascertaining facts with regard to computation of capital gain from sale of shares and amount of sale consideration invested in purchase/construction of new asset and amount of capital gain included in return and payment of taxes, Assessing Officer is directed to verify facts in light of claim of assessee that she had paid tax for balance amount of capital gains. In case, Assessing Officer found that assessee has paid tax on balance capital gain, then Assessing Officer is directed to delete additions made towards disallowance of exemption claimed under Section 54F of the IT Act. Appeal allowed.

Tags : Assessment Exemption Legality

Share :