Income Tax Appellate Tribunal

Nilanjan Chaudhari, Gurgaon vs. ITO

MANU/ID/1798/2023

21.12.2023

Direct Taxation

Assessee is eligible for exemption under Section 54E of the IT Act, when the entire sale consideration has been reinvested in the new house property.

Present appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals) ['Ld. CIT(A)']. The only issue to be decided in instant appeal is as to whether the assessee would be eligible for exemption under Section 54E of the Income Tax Act, 1961 (IT Act) in respect of Long Term Capital Gain derived by him when the entire sale consideration has been reinvested by him in the new house property.

Punjab and Haryana High Court in the case of Shri Jagtar Singh Chawla vs ACIT had categorically held that, when the assessee has reinvested in another residential house property within the time limit prescribed under Section 139(4) of the Act and even when he had not deposited the money in the "Capital Gains Scheme" but had duly reinvested the sale consideration/Long Term Capital Gains of old property by purchasing the new property within the prescribed time, then all the payments made by the assessee up to the due date of filing of return under Section 139(4) of the Act would be eligible for exemption under Section 54 of the Act.

The purpose of law mandating the deposit of sale consideration/Long Term Capital Gain in "Capital Gains Accounts Scheme" and thereafter withdrawing from that designated bank account for the purpose of reinvestment in new property is only to ensure that the assessee if he intends to avail the exemption under Section 54 of the Act, then he has to invest in new property and he should not run short of funds for making such reinvestment. Yet another purpose of availing of granting exemption under Section 54 is that every assessee should have his / her own house for his/her livelihood and habitation.

The assessee had substantially complied with the provisions of Section 54 of the Act by actually reinvesting in the new house property within the prescribed time thereon. While this is so, the assessee should not be denied exemption under Section 54 of the Act for a mere procedural irregularity of not routing the funds for making reinvestment through the "Capital Gains Accounts Scheme". The appeal of the assessee is allowed.

Tags : Exemption Benefit Provision

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