IN CASE OF PURCHASE OF NEW HOUSE WITHOUT NOC FROM AO WITHIN TWO YEARS, ITAT ALLOWS CAPITAL GAINS EXEMPTION

The Income Tax Appellate Tribunal, Delhi Bench in the case Ramesh Chander Nijhawan Versus ACIT observed and has held that the capital gains exemption is allowable even when the amount invested in a capital gain account is utilised within 2 years for the purchase of a new house without a NOC from AO.

The two-member bench comprising of Saktijit Dey (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member) observed and has allowed the expenditure incurred of Rs. 1,65,000, being the commission incurred for buying of a residential house and payment made for the deed writer.

On August 28, 2015, a return of income was filled by the appellant assessee, while declaring an income of Rs.63,35,840.

The assessee has derived income from house property, the capital gains, and income from other sources.

It was observed that AO disallowed the deduction under Section 54F of the Income Tax Act.

The AO observed that the capital gain account had been closed without the approval of the Assessing Officer.

However, filed to satisfy the mandatory requirement of closing the account with due approval of the AO. Thus, the CIT (A) concurred with the observation of the AO.

It was noted by the ITAT that an amount of Rs.40,00,000 has been invested in the specified bonds, in this case REC Bonds, and has purchased a house for Rs.82,50,000. However, the observation of CIT (A) that the assessee is not eligible for a claim of exemption under sections 54 and 54F is against the provisions of the Income Tax Act.

Accordingly, the appeal of the assessee was allowed by the tribunal.