434. Capital Gains Account Scheme, 1984 - No penalty/interest to be levied in cases where due date of filing return of income is 30th June and assessee makes deposit and furnishes return by 31-7-1988
Circular No. 520 was issued by the Central Board of Direct Taxes on 11 August 1988. Its subject is 434. Capital Gains Account Scheme, 1984 - No penalty/interest to be levied in cases where due date of filing return of income is 30th June and assessee makes deposit and furnishes return by 31-7-1988.
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.
Gives a one-time extension for the Capital Gains Accounts Scheme in its first year. Sections 54, 54B, 54D, 54F and 54G exempt long-term capital gains on conditions, and sub-sections inserted by the Finance Act, 1987 oblige a taxpayer to deposit the unutilised gain in a bank under a Central Government scheme; the Capital Gains Accounts Scheme, 1988 was notified only on 22nd June 1988. The deposit has to be made by the due date for the return under section 139(1), which for a large number of taxpayers was 30th June, leaving no time. So for taxpayers whose due date was 30th June, both the time for the deposit and the due date for the return are extended to 31st July 1988, and where the deposit is made and the return filed by that date no penalty or interest is to be levied, the deposit is treated as made in time, and the capital gains exemption is to be allowed.
Taxpayers whose returns were due by 30th June could not have deposited the unappropriated gains in time, the scheme having been notified only on 22nd June 1988.
434. Capital Gains Account Scheme, 1984 - No penalty/interest to be levied in cases where due date of filing return of income is 30th June and assessee makes deposit and furnishes return by 31-7-1988
1. Under sections 54, 54B, 54D, 54F and 54G, the capital gains earned by a taxpayer from the transfer of a long-term capital asset is exempt from tax if the taxpayer complies with certain conditions. Under section 54(1), the capital gains arising from the transfer of a residential house is exempt from tax if the taxpayer has within a period of one year before the date of transfer or two years after the date on which the transfer took place purchased or has within a period of three years after the date of transfer constructed a residential house. Where the amount of capital gains earned on the transfer is less than the cost of acquisition of the new property, full amount of capital gains is exempt. Where the amount of capital gains is more than the cost of the new asset, the exemption is given on a proportionate basis. The Finance Act, 1987 introduced a new sub-section (2) which makes it obligatory on the part of the taxpayer to deposit the amount of capital gains not yet utilised for the purpose of purchase or construction of a residential house, in any bank in accordance with a Scheme framed by the Central Government for this purpose. A provision similar to sub-section (2) of section 54 was incorporated in sections 54B, 54D, 54F and 54G of the Income-tax Act by the Finance Act, 1987. The Capital Gains Accounts Scheme, 1988 was notified in the Official Gazette on 22-6-1988. The Scheme applies to sections 54, 54B, 54D, 54F and 54G.
2. To avail of the exemption provided for in the abovementioned sections, taxpayers have to deposit the unappropriated amount of capital gains in the specified banks by the due date of furnishing the return of income laid down in section 139(1). For a large number of taxpayers the due date for furnishing the return of income is 30th of June. Taxpayers whose returns of income had to be filed by 30th of June and who intended to avail of the benefit of the capital gains tax exemption by depositing the capital gains in the specified banks may not have been in a position to do so. For the benefit of such taxpayers who had to furnish the return of income by 30th of June, the time limit for the deposit and the due date for the furnishing of the return of income has been extended up to the 31st of July, 1988. In cases, where the due date of furnishing the return of income is 30th of June and the taxpayer makes the deposit and furnishes the return of income by 31st July, 1988, no penalty and interest should be levied and the deposit itself will be treated as having been made in time and the concession in respect of tax on capital gains will be allowed.
Circular : No. 520, dated 11-8-1988.
In an old assessment for that year where a capital gains exemption was refused because the deposit was late, and in a penalty or interest proceeding for a return filed in July 1988.
Source: the Income Tax Department’s own published text — its page for this instrument.