My client has sold his house at 50 Lacs and now at this current year he has purchased new house on which bank has granted a loan of 25 lac for which 16 lacs is paid till 31/03/2013 and there after 9 lacs are still pending, becoz for builders there is some stage wise payment criteria as per the completion of the building.The 50 lacs reciept from the old house is utilized some other way.
The question is that whether what amount can I claim for Sec 54....?
To avail exemption u/s 54, one is required to invest in another residential property within 2 years. But he will have to file his return u/s 139(1) and must show that capital gain has been deposited in capital gain tax scheme.
So first find out the exact long term capital gain, and how much shall be payable to the builder at what interval.
The following points are noteworthy in this case:-
1. The first house which was sold must be a long term capital asset (more than 3 years). Then only exemption u/s 54 can be claimed.
2. New house property must be constructed within 3 years from transfer (even construction by a builder is treated as construction as decided by courts)
3. First please compute the amount of long term capital gain.
4. Sub section 2 of Section 54 states that the money in capital gains deposits scheme account within the due date of filing returns u/s 139(1), i.e. before the due date (September end or July end).
5. Therefore, if the payment was made after the due date for furnishing return, without depositing the same in the deposit scheme account, exemption might be lost.
6. There is no requirement that the new house must be bought out of the same money as held in ITO vs K.C. Gopalan (kerala high court) (2000).
7. If the payment to the builder is made within the due date for filing the returns and the capital gains is less than or equals Rs. 16 lakhs, there will be no capital gains tax.
8. Else in this case tax gets attracted.
I think there are 2 isses in this case
Pament is not the criteria for allowability of expemption u/s 54/54F.What has to be seen is that AGREEMENT has been made.The provison has used the word INVESTED,there are a few judgement on this issue
In your case you have mentioned that payment could not be made because of agreement, this proves thart you have entered into the agreement and for purpose of S.54/54F this suffices.
THE payment of instalments is only a follow-up action.
The second issue is regarding that S.139
Quoting the relevant part of the S.54F
"The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made 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, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset"
Commissioner of Income Tax v. Rajesh Kumar Jalan (2006) Gauhati HC [A GOOD READ]
From a plain reading of sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only section 139 of the Income-tax Act, 1961, is mentioned in section 54(2) in the context that the unutilized portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax under section 139 of the Income-tax Act. Section 139 of the Income- tax Act, 1961, cannot be meant only section 139(1), but it means all sub-sections of section 139 of the Income-tax Act, 1961. Under sub-section (4) of section 139 of the Income-tax Act any person who has not furnished a return within the time allowed to him under sub-section (1) of Section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier
So to conclude
If Full amount of cap gain is not invested within time limit u/s 139(1), but it is utilized within the time limit u/s 139(4) though nothing is deposited in the capital gain account within time limit u/s 139(1), exmeption u/s 54/54F would be allowed
View supported by CIT V shri Jagtar singh chawla (P&H) 2013 [A good read it took into consideration the earlier judgements which ALLOWED the claim]
Shri Nipun Mehrotra v. ACIT (2008) ITAT banglore
Fathima Bai v. ITO, ITA No.435 of 2004 (Karnataka HC)
Though however there has been a contrary judgement in Taran Birsingh Sahni (2006) itat delhi BUT HOWEVER SINCE MOST OF THE HIGH COURTS HAVE ALLOWED THE CLAIM the exemption should be allowed in higher courts.
IT MUST BE NOTED THAT BOTH S. 54 & 54F ARE FOR THE BENEFIT OF THE ASSESSE HENCE THESE PROVISIONS ARE MORE LIBERAL
CAclubindia
