Income Tax Act Doesn't Mandate That Specific Money Deposited In Capital Gain Account Scheme Shall Be Utilized Towards New Investment: Chennai ITAT
Pankaj Bajpai
3 May 2024 5:45 PM IST
The Chennai ITAT held that there is no requirement that specific money as deposited in capital gain account scheme should be utilized towards new investment, and the assessee may make investment from other funds as available with him and the same would not jeopardize the claim of the assessee. Referring to the decision of Sohanlal Mohanlal Bhandari vs. ACIT (104 Taxmann.com 161),...
The Chennai ITAT held that there is no requirement that specific money as deposited in capital gain account scheme should be utilized towards new investment, and the assessee may make investment from other funds as available with him and the same would not jeopardize the claim of the assessee.
Referring to the decision of Sohanlal Mohanlal Bhandari vs. ACIT (104 Taxmann.com 161), the 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 new residential house and it is nowhere provided that only sale proceeds of original asset should be utilized for this purpose”. (Para 7)
As per the brief facts of the case, the assessee has deposited the sale consideration in capital gain account scheme which was withdrawn. Later, the assessee purchased new asset (plot) and entered into 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 stipulated time period in terms of Sec. 54F. As against this, the investment was made in Urbanvile on 07-02-2011. The construction agreement was made on 19-01-2011 which was beyond one year prior to date of sale of original asset. The assessee did not purchase new asset within a period of one year prior nor constructed 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 has 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 has been made between 01-06-2011 to 14-06-2013 and the possession has been 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.
Hence, the ITAT answered in favour of assessee and directed the AO to grant deduction to the assessee.
Counsel for Appellant/ Assessee: Hema Muralikrishnan
Counsel for Respondent/ Revenue: D. Hema Bhupal
Case Title: Shri Ramasubramaniam Sridhar Paul verses ITO
Case Number: ITA No.973/Chny/2023
