ITAT Allows Section 54F Deduction Though Capital Gain Scheme Account Was Not Opened

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the deduction under section 54F though the capital gain scheme account was not opened.

The two-member bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) has observed that even though the assessee has not invested the sale proceeds in Capital Gain Account Scheme, but complied with the conditions under section 54F(1) by purchasing an independent house by executing a sale agreement.

Under Section 54F of the Income Tax Act, 1961, tax exemption is allowed on the long-term capital gains earned from selling any capital asset other than a house property.

The appellant/assessee filed his return of income for the assessment year 2016-17 declaring an income. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961. Thereafter, the case was selected for scrutiny under CASS, and notice under section 143(2) was issued on 04.08.2017 and duly served on the assessee. After following due procedure, the Assessing Officer has completed the assessment.

In the assessment order, the Assessing Officer has noted that the assessee has sold the property for a consideration of Rs.60,00,000 and also claimed sale expenses of Rs.9,220. The assessee had also received Rs.2,00,00,000 for the property of 2.09 acres. The assessee has claimed deduction under section 54F in respect of property purchased for consideration of 2,00,00,000.

After considering the explanations of the assessee against the show-cause notice, the Assessing Officer has denied the claim of deduction under section 54F as the assessee has not fulfilled the procedural requirement laid down by the law of depositing into the capital gain account scheme with a nationalized bank before the due date of furnishing of return. The Assessing Officer assessed the income by taking capital gains.

The CIT(A) confirmed the disallowance of the deduction claimed under section 54F.

The ITAT held that the provisions of section 54F of the Act are beneficial provisions and are to be considered liberally in the aspect of the limitation period. But the investment in residential property is a must, which the assessee has proved with evidence and complied before the lower authorities.

Case Title: T. Pandian Versus ITO

Citation: I.T.A. No.3107/Chny/2019

Date: 24.03.2023

Counsel For Appellant: D. Anand

Counsel For Respondent: D. Hema Bhupal

Click Here To Read The Order