IN THE ITAT, BANGALORE BENCH ‘B’
Nipun Mehrotra
v.
Assistant Commissioner of Income-tax, Circle 14(2),
Bangalore
P. MOHANARAJAN, JUDICIAL MEMBER
AND N L KALRA, ACCOUNTANT MEMBER
IT APPEAL NO. 1329 (BANG) OF 2005
[ASSESSMENT YEAR 2000-01]
March 29, 2007
Section 54 of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house - Assessment year 2000-01 - Assessee had earned long-term capital gain on sale of shares - it paid a sum of Rs. 22 lakhs between February 1999 and October 1999 to builder for purchase of flat - A sum of Rs. 9 lakhs was paid between February 2000 and June 2000 - Assessee claimed exemption under section 54F alleging that cost of new asset was more than capital gain chargeable - Assessing Officer, however, disallowed claim holding that as provisions of capital gains account scheme, assessee should have invested Rs. 2,10,833 in capital gains account scheme before due date for filing return of income - On appeal, Commissioner (Appeals) held that since amount of Rs. 2,10,833 was not utilized/invested within specified time, Assessing Officer was justified - Whether in view of decision of High Court in case of CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 (Gauhati), assessee was entitled to exemption of Rs. 2,10,833 under section 54F - Held, yes
Circulars and Notifications: Circular No. 495 dated 22-10-1987.
The assessee had earned long-term capital gain on sale of shares to the extent of Rs. 10,78,771. The assessee paid a sum of Rs. 22 lakhs between February, 1999 and October 1999 to the builder for purchase of the flat. A sum of Rs. 9 lakhs was paid between February, 2000 and June 2000. The assessee claimed exemption under section 54F alleging that the cost of the new asset was more than the capital gain chargeable. The Assessing Officer, however, disallowed the claim holding that as per the provisions of capital gains account scheme, the assessee should have invested Rs. 2,10,833 in the capital gains account scheme before the due date for filing the return of income. On appeal, the Commissioner (Appeals) held that since the amount of Rs. 2,10,833 was not utilized/invested within the specified time, the Assessing Officer was justified and it is a settled law that when the statute prescribes a particular thing to be done in a particular manner the same has to be done in that manner only, in the name of the liberal interpretation, the provisions cannot be circumvented.
On appeal:
HELD
Perusal of the section 54F(4) shows that the assessee has to utilize the amount for the purchase or construction of the new asset before the date of furnishing the return of income under section 139. There is no mention of any sub-section of section 139. Hence, one cannot interpret that section 139 mentioned should be read as section 139(1). Similar language is appearing in section 54(2). [Para 6]
The Gauhati High Court in the case of CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398 has held that section 139 mentioned will not only include section 139(1) but will also include all sub-sections of section 139. In the instant case, it was not disputed that sale consideration had been utilised before the date of filing of the return under section 139(4). The Gauhati High Court, while interpreting section 54(2) and holding section 139 mentioned therein will include all sub-sections, have taken into account the judgements of the Apex Court relating to the principle of construction of statutes. [Para 6.1]
Section 54(2) was substituted by the Finance Act, 1987. The scope and effect of amendments were elaborated vide Circular No. 495 dated 22-10-1987. Section 54(2) and 54F(4) were introduced to dispense with rectification of assessments in case the taxpayer fails to acquire the corresponding new asset. Hence, if the new asset is acquired before the date of filing of the return under section 139 then the assessee can file such return and there will be no need of rectification. Thus, the interpretation, which has been placed by the Gauhati High Court, is in accordance with the Legislation intend of introducing section 54(2) and 54F(4). [Para 6.2]
Resultantly, in view of the decision of the High Court in case of Rajesh Kumar Jalan (supra), the assessee was entitled to exemption of Rs. 2,10,833 under section 54F. [Para 6.3]