The assessee sold her residential house on 13.1.2006, for a sum of ` 45 lakh and purchased another property jointly with Mr. D. P. Azad, her father-in-law on 2.1.2007, for a consideration of ` 95 lakh. The due date of filing of return as per Section 139(1) of the IT Act was 3.7.2006. but the assessee filed her return on 28.3.2007 and that the extended due date of filing of return as per Section 139(4) was 31.3.2007
Section 54 of the IT 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 the provisions of subsection (1) of Section 54.
As per Section 54(2) of the IT Act, 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 Section 139, the amount would be deposited by him before furnishing such return not later than due date applicable in the case of the assessee for furnishing the return of income under subsection (1) of Section 139 in an account in any such bank or institution as may be specified. The question which arose was whether the return filed by the assessee before the expiry of the year ending with the assessment year was valid under Section 139(4) of the IT Act.
The counsel for the Revenue argued that the assessee was required to file return under Section 139(1) of the IT Act in terms of Section 54(2) of the IT Act. It was contended that sub-section (4) was not applicable in respect of the assessee so as to avoid payment of long-term capital gain.
On the other hand, the counsel for the assessee relied upon a Division Bench judgment of the Kamataka High Court reported as Fatima Bai v. ITO (2009) 32 DTR 243, where in somewhat similar circumstances, it was held that the time limit for deposit under the scheme or utilization could be made before the due date for filing of return under Section 139(4) of the IT Act. The assessee could file the return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year, whichever was earlier. Finally, it was held that the due date for furnishing the return of income as per Section 139(1) of the IT Act was subject to the extended period provided by taking note of the nature of expenses, namely cane development expenses, travelling expenses, interest charges, administrative expenses, lease rent, etc. which were all in the nature of revenue expenses and also the decisions in various cases that such expenses in- cuffed in setting up of a new unit do not amount to starting of a new business but only expansion or extension of the business which was being carried on by the assessee held that they were deductible as revenue expenditure. The CIT (Appeals) also placed reliance upon various judgments. It was further held by the CIT (Appeals) that the assessing authority should verify whether the entire expenses claimed were incuffed during the year and if so then to allow the claim in full.
Therefore, applying the various decisions, the High Court did not find any scope to interfere with the order impugned herein. The question was, therefore, answered in favour of the assessee and against the Revenue. The appeal of the Revenue failed and the same was dismissed.