2014 (11) TMI 727 - AT - Income Tax

Allowability of exemption against the sale of property u/s 54 Purchase agreement beyond one year before the date of sale or not Held that - The assessee had purchased a residential flat on 08.01.1981, which was sold on 07.02.2007 for a sale consideration of ₹ 1,25,00,000 revenue was of the view that firstly, the purchase agreement for new flat on was 28.12.2005, which is beyond the period of one year before the date of sale and secondly, the purchasing of undivided share in the flat from the son does not amount to purchase of a flat; and therefore on these two counts, exemption u/s 54 is not available to the assessee - CIT(A) rightly held that the payment of purchase consideration to the extent of ₹ 5 lakhs which was made on 16.05.2006, falls within the period of one year before the date of sale of original flat and hence this amount is eligible for exemption u/s 54 - The other part of the ₹ 5 lakhs paid on 13.10.2005 was denied by him, as it was beyond period of one year - the finding of the CIT(A) is upheld. Whether purchasing of share of the son who is co-sharer in the flat amounts to purchase or not Held that - In CIT Vs. T.N. Aravinda 1979 (10) TMI 1 - SUPREME Court it has been held that the word purchase in section 54(1) had to be given a common meaning, that is, buying for a price or equivalent of a price on by payment in kind or adjustment towards debt or for other monitory consideration - the elder brother would be entitled to relief u/s 54(1) CIT(A) rightly held that Shri Gurdeep Singh, son of the assessee had made the payment of ₹ 1,22,38,750/-, towards the purchase consideration for the flat, which was reflected in his books of account and in his balance sheet before the date of sale of undivided share in the flat to his mother - The purchase agreement did not specify the shares of co-owners, that is, they are 1/3rd each - When the assessee had made the payment of ₹ 1,10,00,000/- to her son for purchasing of undivided share, it tantamount purchase only - the reasoning and the conclusion drawn by the CIT(A) is legally correct Decided against revenue.

Summary

Issues:
1. Exemption claimed under section 54 of the Income Tax Act, 1961 for the property sold.
2. Eligibility for exemption based on the purchase of a new residential flat.
3. Interpretation of the term "purchase" in the context of section 54(1).

Analysis:

Issue 1: Exemption claimed under section 54
The appeal was against the order allowing exemption claimed under section 54 of the Income Tax Act, 1961 for a property sold. The Revenue contended that the exemption was erroneously granted by the Ld. CIT(A) and sought restoration of the Assessing Officer's order.

Issue 2: Eligibility for exemption based on new residential flat purchase
The case involved the sale of a residential flat and the subsequent purchase of a new flat jointly with the son and daughter-in-law. The Assessing Officer denied the exemption under section 54, stating that the purchase of the new flat was beyond the prescribed time limit. However, the Ld.CIT(A) allowed the exemption after detailed examination of the payment schedule and relevant agreements. The Ld.CIT(A) held that the purchase of the undivided share from the son qualified as a new property purchase, citing precedents from various High Courts.

Issue 3: Interpretation of the term "purchase"
The debate centered around whether the purchase of the son's share in the flat constituted a fresh purchase for exemption under section 54. The Ld.CIT(A) relied on legal precedents to establish that such transactions could be considered as purchases within the scope of the law. The Tribunal upheld the Ld.CIT(A)'s decision, emphasizing the common meaning of "purchase" and referencing Supreme Court and High Court judgments supporting the interpretation.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Ld.CIT(A)'s decision to grant exemption under section 54 for the purchase of the new residential flat. The judgment highlighted the legal principles governing the term "purchase" in the context of tax exemptions, providing a comprehensive analysis of the issues raised in the case.