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2016 (2) TMI 507 - AT - Income TaxDisallowance of exemption of Capital Gains u/s 54 - exemption with respect to advance received as per the agreement to sell - sale deed was executed during the subsequent year - Held that - We reject the conclusion of the ld. CIT (A) that agreement to sell is a mere start of the sale and cannot become the act of sale for section 54 of the Act. Moreover, it needs to be appreciated here that a hyper technical approach cannot be adopted to an incentive granting provision. Here is a case, where the assessee is a widow who has received advance in June 2005 against sale of her share and thereafter, purchased a residential property in August 2005, but yet exemption is not held eligible on the ground that the sale is in September 2006. According to the Revenue, had the sale deed be executed in August 2006, everything will be in order. We do not subscribe to such a pedantic application of the incentive provision. It was on account of such an approach, the Hon ble Apex Court in Sanjeev lal & Anr. Vs. CIT & Anr. (2014 (7) TMI 99 - SUPREME COURT ) has held as above. - Decided in favour of assessee Exemption claimed u/s 54 in respect of cost of construction of the new house in finishing the house - Held that - Having regard to the evidence and payment having been made to discharge the said bill, in the absence of any evidence to the contrary, there is no justification to restrict the claim to ₹ 4 lakhs on estimate basis. In Saleem Fazelhoy v. DCIT (2006 (6) TMI 139 - ITAT BOMBAY-G ), it was held that expenditure incurred on making house habitable is considered as investment in purchase of house, and hence deduction u/s 54F of the Act is allowable. In the another case in Mrs. Gulshanbanoo vs. JCIT (2002 (1) TMI 1296 - ITAT MUMBAI), it was held that cost of new house for the purpose of section 54, include not only cost of purchase of new house but also includes other necessary expenditure to make house habitable. Ld. Counsel also relied on the Order of the Ahmedabad Bench in the case of Shri Srinivasa R. Desai 2014 (1) TMI 883 - ITAT AHMEDABAD . The assessee after purchasing the flat has incurred further cost which are in the nature of cost of construction and it has been held that the cost so incurred will form an integral part of the qualifying investment under section 54 of the Act. In the light of the aforesaid case laws, the claim of the assessee stands allowed and we order accordingly. - Decided in favour of assessee
Issues Involved:
1. Legitimacy of the agreement to sell dated 16.04.2006. 2. Eligibility for exemption under Section 54 of the Income Tax Act for the investment in a new residential house. 3. Allowability of the cost of construction and renovation expenses under Section 54. Issue-Wise Detailed Analysis: 1. Legitimacy of the Agreement to Sell Dated 16.04.2006: The assessee contended that she had entered into an agreement to sell her 1/4th share in the property on 16.04.2006 and had handed over possession on the same date. The Revenue authorities, however, rejected this claim, terming the agreement as concocted. The Tribunal noted that the agreement was signed by all co-owners and the vendee, and was witnessed. The Tribunal found that substantial consideration was received by the assessee even 15 months prior to the agreement, and the possession of the property was indeed handed over on 16.04.2006, as supported by an affidavit from the vendee. Thus, the Tribunal concluded that the agreement to sell was genuine and the possession was transferred on 16.04.2006. 2. Eligibility for Exemption Under Section 54 of the Income Tax Act: The assessee claimed exemption under Section 54 for the investment in a new residential house purchased on 04.08.2005. The Revenue authorities disallowed the exemption on the ground that the purchase was made more than one year before the sale of the old house. The Tribunal, however, noted that the possession of the old house was transferred on 16.04.2006, and the sale deed was executed on 05.09.2006. Citing the Supreme Court's ruling in Sanjeev Lal & Anr. Vs. CIT & Anr., the Tribunal held that the date of transfer should be considered as 16.04.2006, when the possession was handed over. Therefore, the purchase of the new house on 04.08.2005 fell within the permissible period for claiming exemption under Section 54. 3. Allowability of Cost of Construction and Renovation Expenses Under Section 54: The assessee claimed an additional amount of Rs. 933,950/- for the cost of construction and renovation of the new house. The CIT(A) partially allowed the claim, disallowing Rs. 400,000/- on the ground that certain expenses were for betterment rather than making the house habitable. The Tribunal, however, noted that the expenses were necessary for making the house habitable and cited various case laws supporting the inclusion of such expenses under Section 54. Therefore, the Tribunal allowed the entire claim of Rs. 933,950/- for construction and renovation expenses. Conclusion: The Tribunal allowed the appeal of the assessee, granting exemption under Section 54 for the investment in the new residential house and the cost of construction and renovation expenses. The Tribunal emphasized a pragmatic approach to the incentive-granting provision, especially considering the factual circumstances and binding precedents. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in open court on 24.11.2015.
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