No Exemption Denial for Delay Due to Staggered Sale Proceeds | ITAT

Case Details: Jobanji Thakor vs. Income-tax Officer - [2025] 175 taxmann.com 62 (Ahmedabad-Trib.)

Judiciary and Counsel Details

• T.R. Senthil Kumar, Judicial Member & Makarand V. Mahadeokar, Accountant Member
• Mehul K. Patel, AR for the Appellant.
• A.P. Singh, CIT-DR for the Respondent.

Facts of the Case

The assessee, an individual, along with five other co-owners, sold an immovable property. The Assessing Officer (AO) observed that the land sold by the assessee did not qualify as agricultural land but fell within the Municipality/AUDA/Corporation limits. Accordingly, the AO held that the land was a capital asset subject to capital gains tax.

The assessee computed long-term capital gains (LTCG) and claimed deductions under sections 54B and 54F aggregating to Rs. 1.12 crores. The Assessing Officer (AO) disallowed claim for exemption on ground that investment in new residential property was made beyond prescribed time limit.

ITAT Held

The Tribunal held that the assessee received the sale proceeds staggered over multiple years, from 2012 to 2016. Accordingly, the assessee reinvested the capital gains in a residential property and agricultural land as and when funds were available. The delay in reinvestment was not due to intentional non-compliance but was a consequence of the phased receipt of sale consideration, which directly influenced the timing of investments.

Given these circumstances, the delay in reinvestment was merely procedural and not substantive. The law’s intent and purpose were to encourage the reinvestment of capital gains into specified assets, which have been duly fulfilled.

Therefore, the assessee’s investment should not be disallowed merely on technical grounds of timing, particularly when the capital gains have ultimately been utilised for the intended purpose. Accordingly, the AO was directed to recompute the assessee’s taxable capital gains by allowing proportionate exemption under sections 54F and 54B for the investments made beyond the statutory time limits.

List of Cases Referred to

• Ramesh Narhari Jakhadi v. ITO [1992] 41 ITD 368 (Pune) (para 2.10)
• Mrs. Parveen P. Bharucha v. Dy, CIT [2012] 28 taxmann.com 274/212 Taxman 166/348 ITR 325 (Bombay) (para 7)
• Simran Bagga v. ACIT [2024] 158 taxmann.com 265/205 ITD 100 (Delhi – Trib.) (para 7.1)
• N. Ram Kumar v. Asstt. CIT [2012] 25 taxmann.com 337/138 ITD 317 (Hyderabad) (para 7.1)
• Krishnappa Jayaramaiah v. ITO [2021] 125 taxmann.com 110/189 ITD 15 (Bangalore – Trib.) (para 7.1).