1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 9TH DAY OF OCTOBER, 2019 PRESENT HON BLE MR.ABHAY S. OKA, CHIEF JUSTICE AND HON BLE MR.JUSTICE S.R.KRISHNA KUMAR WRIT APPEAL NO. 3031 OF 2019 (T-IT) BETWEEN: PROF. P.N. SHETTY AGED 80 YEARS, 204-B, SAI RADHA PALACE BRAHMAGIRI UDUPI-576103 APPELLANT (BY SHRI P N SHETTY, PARTY-IN-PERSON) AND: OFFICE OF INCOME TAX OFFICER WARD 1 AYAKAR BHAVAN ADI UDUPI AMBALPADY UDUPI-576 103 REPRESENTED BY INCOME TAX OFFICER, WARD-1 RESPONDENT (BY SHRI K.V. ARAVIND ADVOCATE A/W SHRI DILIP M., ADVOCATE) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA HIGH COURT ACT, 1961, PRAYING TO SET ASIDE ORDER MADE IN WRIT PETITION NO.13541/2018 DATED 18.07.2019 AND ETC. 2 THIS APPEAL COMING ON FOR PRELIMINARY HEARING THIS DAY, CHIEF JUSTICE DELIVERED FOLLOWING: JUDGMENT appellant appearing in person has challenged judgment and order dated 18th July, 2019 passed by learned Single Judge by which writ petition filed by him has been rejected by learned Single Judge. 2. appellant who is writ petitioner, filed his return of income in respect of assessment year 2016- 17. show-cause notice under sub-section (3) of Section 142 of Income Tax Act, 1961 (for short, said Act ) was issued to appellant. said show-cause notice was based on admitted facts. appellant sold immovable property held by him and out of sale consideration received by him, he deposited sum of Rs.1,15,00,000/- in Capital Gain Account Scheme, 1988. return of income for assessment year 2013-14 was filed on 14th July, 2013 by claiming exemption under Section 54F of said Act. 3. appellant purchased premises for price of Rs.21,32,470/- on 20th August, 2013 which was before 3 expiry of three years from date of transfer of capital assets. notice which was subject matter of challenge in writ petition filed by appellant was issued with view to bring unutilized capital gains to tax as per sub-section (4) of Section 54F of said Act. effect of impugned notice was that unutilized amount (Rs.1,15,00,000/- minus Rs.21,32,470/-) after expiry of three years from date of transfer of original capital asset was proposed to be subjected to tax under Section 45 of said Act. 4. learned Single Judge after consideration of provisions of Sections 45 and 54F of said Act, and in particular sub-section (4) of Section 54F of said Act, held that appellant was entitled to withdraw amount deposited in Capital Gains Account subject to deduction of tax applicable to case in hand. 5. first submission of appellant-petitioner-in- person is that Department never filed objections before learned Single Judge and therefore, writ petition filed by him ought to have been allowed. He invited our attention to sub-section (1) of Section 45 and Section 54F 4 of said Act. He submitted that as he has utilized amount partly by acquiring another premises at cost of Rs.21,32,470/-, remaining amount deposited in Capital Gain Account Scheme should be refunded to him in its entirety. His main contention is that proviso to sub- section (1) of Section 54F of said Act uses words not utilized wholly or in part. Therefore, if amount is utilized in part, remaining amount cannot be subjected to tax under Section 45 of said Act. 6. We have heard learned counsel appearing for respondent. We have considered submissions. 7. Sub-section (4) of Section 54F of said Act reads thus: 54F Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. (1) (2) (3) (4) amount of net consideration which is not appropriated by assessee towards purchase of new asset made within one year before date on which transfer of original asset took place, or which is not utilized by him for purchase or construction of new asset before date of furnishing return of income under 5 Section 139, shall be deposited by him before furnishing such return (such deposit being made in any case not later than due date applicable in case of assessee for furnishing return of income under sub- section (1) of Section 139) in account in any such bank or institution as may be specified in, and utilized in accordance with any scheme which Central Government may, by notification in Official Gazette, framed in this behalf and such return shall be accompanied by proof of such deposit; and, for purpose of sub-section (1), amount, if any, already utilized by assessee for purchase or construction of new asset together with amount deposited shall be deemed to be cost of new asset; Provided that if amount deposited under this sub-section is not utilized wholly or partly for purchase or construction of new asset within period specified in sub- section (1), then,- (i) amount by which- (a) amount of capital gain arising from transfer of original asset not charged under Section 45 on basis of cost of new asset as provided in clause (a) or, as case may be, clause (b) of sub-section (1), exceeds (b) amount that would not have been so charged had amount actually utilized by assessee for purchase or construction of new asset within period specified in sub-section (1) been cost of new asset, 6 shall be charged under Section 45 as income of previous year in which period of three years from date of transfer of original asset expires; and (ii) assessee shall be entitled to withdraw unutilized amount in accordance with scheme aforesaid. Under said provision, amount of net consideration which is not appropriated by assessee towards purchase of new asset made within one year before date on which transfer of original asset took place, or which is not utilized by him for purchase or construction of new asset before date of furnishing return of income under Section 139, shall be deposited by him before furnishing such return in account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which Central Government may, by notification, frame in that behalf. 8. By virtue of sub-section (1) of Section 45 of said Act, amount deposited will be chargeable to income tax under head Capital Gains and shall be deemed to be income of previous year in which transfer took place. proviso to sub-section (4) of Section 54F carves 7 out exception to sub-section (4) of Section 54F of said Act which deals with two contingencies - (i) where amount deposited in Capital Gain Scheme Account is wholly utilized for purchase or construction of new asset within period specified in sub-section (1) of Section 54F of said Act; and (ii) where only part of said amount is utilized for purchase or construction of new asset. next part of proviso itself lays down that when amount deposited in Scheme is utilized only partly for purchase or construction of new asset, amount by which amount of Capital Gains arising from transfer of original asset not charged under Section 45 on basis of cost of new asset as provided in clause (a), or as case may be, of clause (b) of sub-section (1), exceeds amount that would not have been so charged, had amount been actually utilized by assessee for purchase or construction of new asset within period specified in sub-section (1) of Section 54F of said Act been cost of new asset, shall be chargeable under Section 45 as income of 8 previous year in which period of three years from date of transfer of original asset expires. 9. Thus, it is very clear that if only part of amount deposited in Capital Gains Account Scheme is utilized for construction or purchase of new asset within specified time, income tax is chargeable on unutilized amount. That is why learned Single Judge, by impugned order, has directed that appellant is entitled for withdrawal of amount deposited under sub-section (4) of Section 54F of said Act subject to deduction of tax applicable. 10. We find no error in view taken by learned Single Judge as, on its plain reading, interpretation of proviso to sub-section (4) of Section 54F of said Act made by learned Single Judge is correct. writ appeal is accordingly dismissed. Sd/- CHIEF JUSTICE Sd/- JUDGE vgh* P. N. Shetty v. Office of Income-tax Officer Ward 1, Income-tax Officer Ward 1