Under
the Income-tax Act, 1961 exemption is available to an assessee under Section 54
of the IT Act in respect of capital gains where a new residential property
is purchased on or before the particular date, as provided under Section 54 of
the IT Act. The date for furnishing the return could also be date under Section
139(4) of the IT Act.
[ This has recently
been held by the Punjab and Haryana High Court in the case of CIT v.
Ms. Jagriti Aggarwal (2011) 339 ITR 610. As this is an important
judgment concerning the exemption of Long-term Capital Gains, the facts and the
judgment in this case are analysed in this tip below. ]
The assessee sold her house property for ` 45 lakh and claimed deduction under Section 54 of the IT Act. The assessee was served with a notice under Section 142(1) of the IT Act as to why the amount deducted be not added to her income as long-term capital gain, as the assessee failed to deposit the amount in the capital gain account scheme and also failed to purchase house property before the due date for filing the return of income. The assessee contested the claim of the Revenue and asserted that she was not liable to deposit the amount in the capital gain deposit scheme and that the due date of filing the return of income was not as specified in Section 139(1) but as specified in section 139(4) of the IT Act. The Assessing Officer declined the claim of the assessee and returned finding that the assessee had concealed her particulars of income and initiated proceedings for penalty as well.
The appeal against the said order was accepted by the CIT (Appeals). It was found that the assessee had purchased a new residential property on 2.1.2007, and the due date as per Section 139(4) was 31.3.2007, and thus the assessee had complied with the provisions of Section 54 of the IT Act. It was held that Section 139 included sub-section (4) as well. The said order of the CIT was affirmed in appeal as well.
The assessee sold her residential house on 13.1.2006, for a sum of ` 45 lakh and purchased another property jointly with Mr. D. P. Azad, her father-in-law on 2.1.2007, for a consideration of ` 95 lakh. The due date of filing of return as per Section 139(1) of the IT Act was 3.7.2006. but the assessee filed her return on 28.3.2007 and that the extended due date of filing of return as per Section 139(4) was 3 1.3.2007
Section 54 of the IT Act contemplates that the capital gain arises from the transfer of a long-term capital asset, but if the assessee within a period of one year before or two years after the date on which the transfer took place purchases residential house, then instead of the capital gain, the income would be charged in terms of the provisions of subsection (1) of Section 54.
As per Section 54(2) of the IT Act, if the
amount of capital gains is not appropriated by the assessee towards the
purchase of new asset within one year before the date on which the transfer of
the original asset took place or which is not utilised by him for the purchase
or construction of the new asset before the date of furnishing the return of
income under Section 139, the amount would be deposited by him before
furnishing such return not later than due date applicable in the case of the
assessee for furnishing the return of income under subsection (1) of Section
139 in an account in any such bank or institution as may be specified. The
question which arose was whether the return filed by the assessee before the
expiry of the year ending with the assessment year was valid under Section
139(4) of the IT Act.
The counsel for the Revenue argued that the assessee was required to file return under Section 139(1) of the IT Act in terms of Section 54(2) of the IT Act. It was contended that sub-section (4) was not applicable in respect of the assessee so as to avoid payment of long-term capital gain.
On the other hand, the counsel for the assessee relied upon a Division Bench judgment of the Kamataka High Court reported as Fatima Bai v. ITO (2009) 32 DTR 243, where in somewhat similar circumstances, it was held that the time limit for deposit under the scheme or utilization could be made before the due date for filing of return under Section 139(4) of the IT Act. The assessee could file the return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year, whichever was earlier. Finally, it was held that the due date for furnishing the return of income as per Section 139(1) of the IT Act was subject to the extended period provided by taking note of the nature of expenses, namely cane development expenses, travelling expenses, interest charges, administrative expenses, lease rent, etc. which were all in the nature of revenue expenses and also the decisions in various cases that such expenses in- cuffed in setting up of a new unit do not amount to starting of a new business but only expansion or extension of the business which was being carried on by the assessee held that they were deductible as revenue expenditure. The CIT (Appeals) also placed reliance upon various judgments. It was further held by the CIT (Appeals) that the assessing authority should verify whether the entire expenses claimed were incuffed during the year and if so then to allow the claim in full.
Therefore, applying the various decisions, the High Court did not find any scope to interfere with the order impugned herein. The question was, therefore, answered in favour of the assessee and against the Revenue. The appeal of the Revenue failed and the same was dismissed.