Investment to claim exemption u/s 54 can be made till the date of filing belated return: ITAT
Fact and Issue of the case
Brief facts of the case are that assessee has filed her return of income on 28.07.2012 declaring total income of Rs. 3,19,812/-. The case was selected for scrutiny under CASS to examine large deduction claimed under section 54 of the Act. During the course of proceeding, it was observed by Assessing Officer (AO) that assessee has sold immovable property on 26.05.2011 for Rs. 1.7 Cr. and purchased a new property on 30.04.2013 for Rs. 1.66 Cr. t is also observed that assessee has failed to deposit the amount in Capital Gains Accounts Scheme (CGAS) and also failed to purchase House Property before the due date of filing of return as per section 139(1) of the Act i.e. 31.07.2012. Based on these observations, AO issued a show-cause that why Rs. 1, 19, 45,236/- should not be taxed under the head “Long Term Capital Gain (LTCG)”. During the course of hearing, assessee relied upon the judgment in the case of CIT Vs. Miss. Jagriti Aggarwal (2011) 339 ITR 610 (P&H) and CIT Vs. Rajesh Kumar Jalan (2006) 286 ITR 274 (Gau.) to substantiate its claim under section 54 of the Act. Whereas AO relied upon the literal interpretation of section 54 of the Act which speaks about section 139(1) only. AO was not convinced with the argument advanced by the assessee in her favour and disallowed the claim of the assessee. Being aggrieved, assessee preferred an appeal. The CIT also affirmed the view of AO. Against this order of Ld. CIT (A), assessee preferred this appeal before the ITAT.
Observation of the Court
Section 54(2) provides for an interesting proposition that the amount of capital gains which is not appropriated by the assessee for prescribed purposes within one year before; or on or before the due date of filing of return of income under section 139, shall be deposited in the capital gains account scheme. It needs to be emphasized that the literal reading of section 54(2) provides for the two dates i.e. the due date under section 139 and the due date under section 139(1). Pertinently, section 139 cannot be said to mean only section 139(1), but it means all sub-sections of section 139.
It may be noted that the aforesaid provision mandates that the period of utilization or appropriation of the capital gains in purchase or construction of the new residential house is to be considered till the due date under section 139 [which also covers sub-section (4) and (5) of section 139]. However, for the purpose of taking the benefit of Capital Gains Account Scheme, the time limit for making such deposit has been prescribed to be till the due date under section 139(1) [see the text of section 54(2) as contained in the parenthesis]. In other words, the sub-section (2) clearly provides a pigeonhole in the sense that the investment by way of purchase or construction, without resorting to the Capital Gains Account Scheme, can be made till the date of belated return under section 139(4) or revised return under section 139(5) as the wordings used in section 54(2) is “section 139”, and not section 139(1), which covers all subsections of section 139”. The Supreme Court, in the context of interpretation of provisions of 276CC, in Prakash Nath Khanna v. CIT  135 Taxman 327/264 ITR 1 (SC) had observed that “…Had the Legislature intended to cover sub-section (4) also, use expression “section 139″ alone would have sufficed.” Therefore, in terms of the decision of the Supreme Court, since the legislature in section 54(2) used the words “section 139” only, the interpretation as discussed above seems plausible.
Section 54(2) is a subject matter of extensive litigation. Further, the view of various High Courts and Tribunals of the country in the following cases clearly outlines that the judicial consensus is that the exemption to be allowed in regard to the amount invested in purchase or construction of the residential house under section 54 or 54F is to be considered till the date of filing return of income under section 139(4) of the Act.
The Tribunal hasdeliberated at length the issue under consideration i.e. the entitlement of the assessee’s claim of exemption under section 54. The Tribunal considered view in the backdrop of the facts of the case considered in the light of judicial pronouncements relied upon by the Revenue and by the assessee, particularly the ratio laid down by the Hon’ble Supreme Court of India in the matter of Xavier J. Pulikkal v. Dy. CIT  It can be safely be concluded that the assessee in the case before us is entitled to claim exemption under section 54 to the extent she had invested towards the purchase of new residential property under consideration upto the date of filing of belated return under section 139(4) i.e. 31.03.2014. In the case before us assessee purchased new property well before the deadline given in section 139(4) i.e. 30.04.2013 for Rs. 1,66,74,200/-. Which we find is much in excess of LTCG of Rs. 1,19,45,236/-. We therefore, in terms of our aforesaid observations set-aside the order of the CIT(A) and vacate the disallowance of the assessee’s claim of exemption under section 54 of Rs. 1,19,45,236/- as was sustained by him.
The tribunal was of the view that the sub-section (2) clearly provides a pigeonhole in the sense that the investment by way of purchase or construction, without resorting to the Capital Gains Account Scheme, can be made till the date of belated return under section 139(4) or revised return under section 139(5) as the wordings used in section 54(2) is “section 139”, and not section 139(1), which covers all subsections of section 139”. Hence, the Tribunal ruled in favour of the assessee.Dharmista-Mehta-Vs-ITO-ITAT-Mumbai