Section 54F relief allowed even in caseof belated return under sec. 139(4)

ORDER

Chandra Poojari, Accountant Member – This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-5, Chennai dated 17.12.2015 pertaining to assessment year 2011-12.

2. The grievance of the assessee in this appeal is with regard to non-granting of exemption u/s.54F of the Act on thereason that the return filed by the assessee u/s.139(4), as such the benefit u/s.54F is denied.

3. The facts of the case are that the assessee sold the properties situated at Nelankarai and Chenglepet and declared capital gains from these two properties at 77,15,927/-. The assessee claimed exemption u/s.54F of the Act on investment in a flat for `68,82,120/- and thereby declared net taxable capital gains at `8,33,807/-. The AO was of the opinion that the assessee has filed the return of income not u/s.139(1) of the Act and it was filed belatedly u/s.139(4) of the Act, as such the assessee is not entitled for exemption u/s.54F of the Act. Aggrieved, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) confirmed the same. Against the order of the Ld.CIT(A), the assessee is in appeal before us.

4. Before us, ld.A.R relied on the following judgments.

Further, ld.A.R submitted that the filing return u/s.139(4) does not disentitle the assessee to claim exemption u/s.54F of the Act. According to ld.A.R the due date for falling the return of income u/s.139(4) to be considered for granting exemption u/s.54F of the Act. According to him, the due date of filing the return of income extended to “due date” u/s.139(4) of the Act.

5. The ld.D.R relied on the order of Ld.CIT(A).

6. We have heard both the parties and perused the material on record. Admittedly, in this case the assessee filed the return of income on 11.08.2011 for assessment year 2011-12. There was no original return of income filed by the assessee for this assessment year. As per section 139(1) of the Act, the return for assessment year 2011-12 mus have filed on or before 31.07.2011. The AO denied the exemption u/s.54F of the Act on the reason that the return filed within the extended time limit available of filing of return of income u/s.139(4) cannot be considered. In our opinion the Karnataka High Court in the case of Fathima Bai (supra), Gauhati High Court in the case of Rajesh Kumar Jalan (supra) held that due date for the assessee to invest the amount of capital gains in purchase/construct of new residential asset or investment in capital gains scheme u/s.54F of the Act refers to the ‘extended due date” u/s.139(4) of the Act. So far as the time limit for assessee to invest in purchase of construction of residential asset, the time limit available u/s.139(4) is to be considered to that extent we are agreeing with the contention of the ld.A.R. However, during the intermediary period i.e. after the sale of capital asset till the date of investment, the fund has to be deposited in an account in any such bank or institution as may be specified in and utilized in accordance, any scheme with Central Government notified in official gazette framed in this behalf and the assessee shall file proof for such deposit. The AO in this case out rightly rejected the claim of assessee that the assessee is not utilized the capital gains on transfer of capital asset in investment in residential house as specified in section 54F(1) of the Act on the reason that the assessee has not filed the return of income within due date in term of sec.139(1) of the Act. He has not examined the other conditions in Sec.54F. Further, ld.A.R pleaded before us even if the assessee has not deemed deposited in the capital gains account scheme u/s.54F(4) , the assessee would be entitled for deduction u/s.54 of the Act by placing reliance on the judgement of Karanataka High Court in the case of R.Srinivas (supra). However, we came across the decision of same High Court in the case of K.Ramchandra Rao (supra) wherein held that as per sec.54F(4), in the event of the assessee not investing the capital gains either in purchasing the residential house or in constructing a residential house within the period stipulated in s. 54F(1), if the assessee wants the benefit of s. 54F, then he should deposit the said capital gains in an account which is duly notified by the Central Government. In other words, if he wants claim of exemption from payment of income-tax by retaining the cash, then the said amount is to be invested in the said account notified by Central Governfment on this behalf. If the intention is not to retain cash but to invest in construction or any purchase of the property and if such investment is made within the period stipulated therein i.e. Section 139(4), then section 54F(4) is not at all attracted and therefore, the contention that the assessee has not deposited the amount in the bank account as stipulated and therefore, he is not entitled to the benefit even though he has invested the money in construction is also not correct. This judgement was not at all considered by the Hon’ble High Court in the case of R.Srinivas (supra). The similar view was taken by the Kerala High Court in the case of Dr.Xavier J.Pullikal v. Dy. CIT [2014] 104 DTR 134.

6.1 In view of the above discussion, we are inclined to remit the issue to the file of AO to examine the fulfillment of the conditions u/s.54F of the Act through intermediary period that is from the date of sale of capital asset to the date of actual investment in residential house. Accordingly, the issue is remitted to the file of AO for fresh consideration after giving adequate opportunity of hearing to the assessee.

7. In the result, the appeal of the assessee is partly allowed for statistical purposes.