INCOME TAX ACT, 1961

Section 54

Exemption under section 54 - Residential house property constructed in Banglore as well as acquired in USA - Claim of reinvestment benefit on overseas property after due date of filing return under section 139(1) -

Assessee had a capital gains of Rs. 10.18 crores, out of which he had invested Rs. 7.59 crores in a new residential property before due date of filing return under section 139(1). The balance of Rs. 2.59 which apparently had to be invested in the Capital Gains Account Scheme was not invested within the due date of filing return. The plea of the assessee was as under: Section 54 refers to due date of filing return of income. This would mean that they were eligible for the due date applicable for section 139(4) [belated return] as well. That due to withholding of taxes on the consideration he could not deposit the balance amount Rs. 2.59 crores in the capital gains account scheme. Further, he be allowed reinvestment benefit of purchase of a residential house outside India in Chicago, USA under section 54 within the time stipulated under section 139(4), and the intent of the section is reinvestment in a new house as long as this was done to deny the reinvestment benefit under section 54 citing that the balance consideration was not deposited in the Capital Gains Account Scheme was incorrect. On appeal, the CIT(A) sustained the additions made by AO who held that since the balance consideration was not invested in the Capital Gains Account Scheme the capital gains of Rs. 2.59 crores were held to be taxable. The due date would be reckoned as per section 139(1), and not as per section 139(4). Held: In the case of assessee the deduction claimed should be examined in the parameters of section 54F of the Act in the light of decision rendered by coordinate Bench in ITO v. Arshia Basith 2018 Taxpub (DT) 5650 (Bang-Trib). The assessee was eligible for the reinvestment benefit on property in USA. The AO was directed to apply the ratio laid down in the aforesaid decision and allow the claim of deduction of assessee in accordance with the law, after affording assessee opportunity of being heard. However, it was made clear that assessee would furnish necessary evidences of construction or purchase of new residential property in Chicago, USA. It was also confirmed that the due date would be reckoned as per section 139(1), and not as per section 139(4).

Applied:ITO(/T), Ward 1(1), Bangalore v. Arshia Basith. IT(IT)A No. 2768/Bang/2017 AY 2014-15, order dated 14-8-2018; ACIT v. Jai Kumar Gupta HUF, ITA No. 5303/Mum/2017 AY 2013-14, order dated 28-2-2019 Mumbai ITAT; Mrs. Suma v. ITO, ITA No. 568/Bang/2018 for AY 2006-07, order dated 20-7-2018 Bangalore ITAT and Leena J. Shah v. Assts. (2006) 6 SOT 721 (Ahd.)

REFERRED :

FAVOUR : In assessee favour's.

A.Y. :

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