Capital Gain Exemption: Due date for furnishing the return of income u/s 139(1) is subject to the extended period provided u/s 139(4)

Loading

Capital Gain Exemption: Due date for furnishing the return of income u/s 139(1) is subject to the extended period provided u/s 139(4)

 

P & H High Court in the case of  CIT vs. MS. JagritiAggarwal 339 ITR 610 (P&H)  as held as under:

  1. As per sub-s. (2) of s. 54, 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 s. 139, the amount shall be deposited by him before furnishing such return not later than due date applicable in the case of assessee for furnishing the return of income under sub-s. (1) of s. 139 in an account in any such bank or institution as may be specified.
  2. Sub-s. (4) of s. 139 is, in fact, a proviso to sub-s. (1) of s. 139. Sec. 139 fixes the different dates for filing the returns for different assessees. In the case of assessee it is 31st day of July of the assessment year in terms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 whereas sub-s. (4) of s. 139 provides for extension in period of due date in certain circumstances. A reading of sub-s. (4) would show that if a person has not furnished the return of the previous year within the time allowed under sub-s. (1) i.e., before 31st day of July of the assessment year, the assessee can file return before the expiry of one year from the end of the relevant assessment year.
  3. The sale of the asset having been taken place on 13th Jan., 2006, falling in the asst. yr. 2006-07, the return could be filed before the end of relevant asst. yr. 2006-07 i.e. 31st March, 2007. Sub-s. (4) of s. 139 provides extended period of limitation as an exception to sub-s. (1) of s. 139. Sub-s. (4) is in relation to the time allowed to an assessee under sub-s. (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-s. (1) of s. 139. Therefore, such sub-s. (4) has to be read along with sub-s. (1). In view of the above, due date for furnishing the return of income as per s. 139(1) is subject to the extended period provided under sub-s. (4) of s. 139.
  4. In the facts and circumstances of the case and in law the Tribunal was justified in allowing the benefit of exemption under s. 54.—Fathima Bai vs. ITO (2009) 32 DTR (Kar) 243 and CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau) concurred with.
  5. Sub-s. (4) of s. 139 is in fact, a proviso to sub-s. (1) and provides for extension of period of due date for filing the return in certain circumstances and, therefore, exemption under s. 54 was allowable where the assessee had purchased new property before the extended due date of filing of return as per s. 139(4) and filed return within such extended time.

 

The copy of the order is as under:

COMMISSIONER OF INCOME TAX vs. MS. JAGRITI AGGARWAL

HIGH COURT OF PUNJAB & HARYANA

Hemant Gupta & G.S. Sandhawalia, JJ.

IT Appeal No. 176 of 2011

30th October, 2011

(2011) 79 CCH 0761 PHHC

(2011) 245 CTR 0629 : (2011) 64 DTR 0333 : (2011) 339 ITR 0610 : (2011) 203 TAXMAN 0203

Legislation Referred to

Section 54

Case pertains to

Asst. Year 2006-07

Decision in favour of:

Assessee

In favour of :

Assessee

Counsel appeared:

Ms. Urvashi Dhugga, for the Revenue : Ms. Radhika Suri, for the Assessee

HEMANT GUPTA, J.

Judgment

Revenue is in appeal aggrieved against an order passed by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short ‘the Tribunal’) on 13th Aug., 2010 in respect of asst. yr. 2006-07.

  1. The Revenue has claimed the following substantial question of law, as arisen from the order of the Tribunal :

“Whether in the facts and circumstances of the case and in law the Tribunal was justified in allowing the benefit of exemption under s. 54 of the IT Act by wrongly interpreting s. 54 of the IT Act in which the due date for furnishing the return of income is mentioned as per s. 139(1) and not as per s. 139(4) of the Act ?”

  1. The assessee sold her house property for Rs. 45 lacs and claimed deduction under s. 54 of the IT Act, 1961 (for short ‘the Act’). The assessee was served with a notice under s. 142(1) of the 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 capital gain account scheme and also failed to purchase house property before the due date of filing the return of income. The assessee contested the claim of the Revenue and asserted that she is not liable to deposit the amount in capital gain deposit scheme and that the due date of filing the return of income-tax is not as specified in s. 139(1) but as specified in s. 139(4) of the Act. The AO declined the claim of the assessee and returned finding that the assessee has concealed her particulars of income and initiated proceedings for penalty as well.
  2. The appeal against the said order was accepted by the CIT(A). It was found that the appellant has purchased new residential property on 2nd Jan., 2007 and the due date as per s. 139(4) is 31st March, 2007 and thus, the assessee has complied with the provisions of s. 54 of the Act. It was held that s. 139 includes sub-s. (4) as well. The said order of the CIT(A) has been affirmed in appeal as well.
  3. It may be noticed that the assessee sold her residential house on 13th Jan., 2006 for a sum of Rs. 45 lacs and purchased another property jointly with Mr. D.P. Azad, her father-in-law on 2nd Jan., 2007 for a consideration of Rs. 95 lacs. The due date of filing of return as per s. 139(1) of the Act was 31st July, 2006, but the assessee filed her return on 28th March, 2007 and that extended due date of filing of return as per s. 139(4) is 31st March, 2007.
  4. Sec. 54 of the 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 provisions of sub-s. (1) of s. 54. As per sub-s. (2), 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 utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 139, the amount shall be deposited by him before furnishing such return not later than due date applicable in the case of assessee for furnishing the return of income under sub-s. (1) of s. 139 in an account in any such bank or institution as may be specified. Relevant sub-s. (2) of s. 54 of the Act reads as under :

“(2) The amount of the capital gain 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 utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under s. 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-s. (1) of s. 139 in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazettee, frame in this behalf and such return shall be accompanied by proof of such deposit, and for the purposes of sub-s. (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 :

Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in sub-s. (1), then,—

(i) the amount not so utilised shall be charged under s. 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.”

  1. The question which arises is; whether the return filed by the assessee before the expiry of the year ending with the assessment year is valid under s. 139(4) of the Act ?
  2. Learned counsel for the Revenue has argued that the assessee was required to file return under sub-s. (1) of s. 139 of the Act in terms of sub-s. (2) of s. 54 of the Act. It is contended that sub-s. (4) is not applicable in respect of the assessee so as to avoid payment of long-term capital gain.
  3. On the other hand, learned counsel for the respondent relies upon a Division Bench judgment of Karnataka High Court in Fathima Bai vs. ITO(2009) 32 DTR (Kar) 243 where in somewhat similar circumstances, it has been held that time-limit for deposit under scheme or utilisation can be made before the due date for filing of return under s. 139(4) of the Act. Learned counsel for the respondent also relies upon a Division Bench judgment of Gauhati High Court in CIT vs. Rajesh Kumar Jalan (2006) 206 CTR (Gau) 361 : (2006) 286 ITR 274 (Gau).
  4. Having heard learned counsel for the parties, we are of the opinion that sub-s. (4) of s. 139 of the Act is, in fact, a proviso to sub-s. (1) of s. 139 of the Act. Sec. 139 of the Act fixes the different dates for filing the returns for different assessees. In the case of assessee as the respondent, it is 31st day of July of the assessment year in terms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 of the Act, whereas sub-s. (4) of s. 139 provides for extension in period of due date in certain circumstances. It reads as under :

“(4) Any person who has not furnished a return within the time allowed to him under sub-s. (1), or within the time allowed under a notice issued under sub-s. (1) of s. 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 whichever is earlier :

Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.”

  1. A reading of the aforesaid sub-section would show that if a person has not furnished the return of the previous year within the time allowed under sub-s. (1) i.e., before 31st day of July of the assessment year, the assessee can file return before the expiry of one year from the end of the relevant assessment year.
  2. The sale of the asset having taken place on 13th Jan., 2006, falling in the previous (sic—assessment) year 2006-07, the return could be filed before the end of relevant asst. yr. 2007-08 (sic—2006-07) i.e. 31st March, 2007. Thus, sub-s. (4) of s. 139 provides extended period of limitation as an exception to sub-s. (1) of s. 139 of the Act. Sub-s. (4) is in relation to the time allowed to an assessee under sub-s. (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-s. (1) of s. 139. Therefore, such sub-s. (4) has to be read along with sub-s. (1). Similar is the view taken by the Division Bench of Karnataka and Gauhati High Courts in Fatima Bai and Rajesh Kumar Jalan cases (supra) respectively.
  3. In view of the above, we find that due date for furnishing the return of income as per s. 139(1) of the Act is subject to the extended period provided under sub-s. (4) of s. 139 of the Act.
  4. Consequently, the question of law is answered against the Revenue and in favour of the assessee. Thus, the present appeal is dismissed.

Income Tax Act on Your Mobile Now Android Application For Income Tax Act – 1961 with Cost Inflation Index and other tools on Mobile now at following link:

 

Whatsapp Group at                                                    

 

Menu