Capital gain in a capital gain A/C scheme that remained unutilized after the statutory time was to be taxed: ITAT

During the assessment proceedings for the year 2012-13, it was discovered that the assessee had sold a flat in 2008-09 and earned long-term capital gain, which he deposited in a capital gain account, and out of this amount of capital gain, assessee had invested part of the amount in a new project within 36 months, and assessee had filed his return without offering unutilized capital gain to tax.

Assessee’s Argument

According to the taxpayer, Builder was required to hand over the unit to the him within 36 months of signing the contract with him. All of the builder’s instalments, totaling Rs.35.10 lakhs, were paid directly from the capital gain account. But, Because the builder failed to complete the flat on time and did not give possession, the remaining cash of Rs. 14.9 Lakh was withheld while the case was being heard by the Hon’ble Supreme Court. Taxpayer submitted that the amount of Rs.14,90,000/- was lying in the capital gain account. Referring to the provisions of sections 54 and 54F of the IT Act, 1961,he submitted that these provisions should be construed liberally. Referring to the following decisions, he submitted that merely because the assessee could not obtain the possession of the property within a period of 36 months due to defaults committed by the builder, the assessee should not be penalized and deduction u/s 54 should not be denied.

Judgment

• The advantage of section 54/54F was permitted in all decisions where there was a delay in handing over the apartments to the assessees concerned where full or significant payments were made and there was no non-payment from the capital gain account within the statutory term in none of the situations.
• In this situation, the assessee did not use the amount in the capital gain account within the statutory term and therefore the sum is subject to tax.