Capital gains–Deduction under section 54F–Amount not invested in Capital Gains Account Scheme within period under section 139(1)

Bolishetty Venkatesh v. ITO

Decision:    Partly in assessee’s favour.

Facts:

Reassessment proceedings were initiated to restrict the claim of deduction under section 54F to the expenditure incurred upto the due date of filing return of income. AO held that, as assessee was required to deposit the unutilized net consideration into any bank account, in its absence, the claim of deduction was restricted to the expenditure incurred till the prescribed date. Assessee contended that as the entire capital gain for construction of a new house was invested within the period of three years from the date of sale of original asset, therefore, it should be allowed the deduction under section 54F.

Held:

Reference to section 139 in section 54F, is also to the period under sub-section (4) of section 139, and therefore, section 54F deduction should be allowed to the assessee on the investment made up to the period under section 139(4). Thus, as assessee had not deposited any amount in to any bank account, it was eligible for deduction under section 54F, only on the amount invested up to the time available under section 139(4) or the date when return was filed, whichever was earlier. Hence, AO was justified in restricting the claim of deduction under section 54F to the expenditure incurred upto the due date of filing return of income.