Section 54 exemption if investment is done after the due date of Return u/s 139(1)
Exemption u/s. 54 will be allowable even if investment is done within the extended time limit of return u/s 139(4) and not before the due date of 139(1).
In case of Anita Ajay Shad vs. Income Tax Officer, ITAT held that Exemption u/s. 54 held to be allowable to assessee for investing capital gains in new residential property, though the investment is done within the extended time limit of return u/s 139(4) and not before the due date of 139(1).
- For AY 11-12, the assessee earned LTCG of 35.23 lakh on sale of property which was jointly held by assessee with husband, for a total consideration of R1.15 Cr. The assessee claimed that sale consideration attributable to her was 50% of beneficial ownership in co-ownership property held together with husband. The assessee claimed exemption on LTCG of u/s 54 on the ground that she had jointly purchased another new residential house on 30/03/2013 for a consideration of R35 lakh. Entire LTCG was deployed towards purchases of new residential house and the LTCG was thus computed at ‘NIL’ by the assessee and the return was filed on 25.08.2011. The due date of filing of return u/s 139(1) was 31.07.2017. The AO observed that full amount was not invested before the date of filing of return of income u/s. 139(1). The AO further observed that the assessee had not acquired the new property before filing of return of income. On appeal, CIT(A) granted partial claim of exemption to assessee u/s. 54.
- Aggrieved assessee filed an appeal befor Ahmedabad ITAT.
- ITAT analysed Section 54, and noted that Section 54(2) enjoins that the capital gain is required to be appropriated by the assessee towards purchase of new asset before furnishing of return of income u/s. 139 of the Act. Further time limit under Section 139(1) has been specified for deposit in the capital gain account scheme. ITAT noted that the distinction between the two different form of expression of time limit can yield different results. Section 139 encompasses both Section 139(1) and Section 139(4) of the Act. This distinction assumes significance for interpretation of beneficial provision.
- ITAT observed that a beneficial view may be taken to say that section 139 being omnibus would also cover extended time limit provided under Section 139(4) of the Act. Thus, when an assessee furnishes return subsequent to due date of filing return under Section 139(1) but within the extended time limit under Section 139(4), the benefit of investment made upto the date of furnishing return of income under Section 139(4) cannot be denied on such beneficial construction. However, any investment made after the furnishing of return of income but before extended date available u/s 139(4) would not receive beneficial construction in view of unambiguous and express provision of Section 54(2).
- With respect to the remaining payments towards the new property which were made after the return was furnished u/s. 139(4), ITAT held that once the return had been furnished, the subsequent payments made towards purchase, though within Section 139(4) due date extension, would not be eligible for exemption unless the same was first deposited in capital gain account scheme and utilised therefrom.
- Thus, ITAT remanded this issue back to the AO for the limited purpose of verification of extent of claim made by other joint-owner on payment towards purchase made out of joint Bank account.
- Hence, ITAT partly ruled in the favour of the assessee.