857. Payment of tax on self-assessment/regular assessment, in cases where capital gains have not been invested, for the purposes of availing exemption under sections 54, 54B and 54D, before filing return - Whether time therefor could be extended under the section
Circular No. 119 was issued by the Central Board of Direct Taxes on 26 September 1973. Its subject is 857. Payment of tax on self-assessment/regular assessment, in cases where capital gains have not been invested, for the purposes of availing exemption under sections 54, 54B and 54D, before filing return - Whether time therefor could be extended under the section.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Tells Income-tax Officers how to treat an assessee who has returned a capital gain but has not yet made the investment that will earn him exemption under section 54, 54B or 54D. Those sections allow two to three years for the investment in a house or land, so a person who cannot invest before filing must still disclose the gain in the return of the relevant year. Where he has received the sale proceeds, time for payment under sections 140A and 220 need not be extended, since he has the funds. Where the sale proceeds have not been received for any reason, the Officer is not to grant a formal extension either, but is not to impose penalty for non-payment, given the special circumstances preventing payment; once the proceeds come in, collection is to be enforced and failure to pay may then be visited with penalty.
The Board considered the question of payment of tax on self-assessment and on regular assessment where the capital gain had not been invested before the return was filed although the assessee proposed to invest later.
857. Payment of tax on self-assessment/regular assessment, in cases where capital gains have not been invested, for the purposes of availing exemption under sections 54, 54B and 54D, before filing return - Whether time therefor could be extended under the section
1. Section 45 provides for the taxation of capital gains arising on the transfer of capital assets. Sections 54, 54B and 54D grant exemption in respect of capital gains arising on transfer of property used for self-residence, land used for agricultural purposes and compulsory acquisition of lands and buildings under any law, provided the conditions laid down in the three sections are satisfied. These sections, inter alia, provide investment of the capital gains in the house building and land, as the case may be, within the stipulated period which is 2 to 3 years. If the assessee is able to do so between the date of the transfer and that of filing the return of income, there is no difficulty. But if he is not able to do so but wishes to avail of the exemption in the subsequent years, he will have to disclose the capital gain in the return of income of the relevant year.
2. The question of payment of the tax on self-assessment and regular assessment in cases where the capital gains have not been invested before filing the return, although assessee proposes to do so later, has been considered, and I am directed to convey the following instructions :
(a) in cases where the assessee has received the sale proceeds of the capital asset transferred, the time for payment of tax under sections 140A and 220 need not be extended as the assessee has the necessary funds to pay the taxes;
(b) in cases where sale proceeds of the asset transferred have not been received for any reason the Income-tax Officer may not formally extend time for payment under sections 140A and 220 but may not impose penalty for non-payment of the tax in view of the special circumstances due to which the assessee is prevented from paying the tax. However, as soon as the sale proceeds are received the collection may be enforced and failure to pay the taxes may be visited with penalty.
Circular : No. 119 [F. No. 207/5/73-IT (A-II)], dated 26-9-1973.
A penalty notice under section 221 for non-payment of self-assessment tax on a capital gain the assessee intends to reinvest, where the sale consideration is still outstanding.
Source: the Income Tax Department’s own published text — its page for this instrument.