2019 (1) TMI 1337 - AT - Income Tax

Deduction u/s. 54F - mandate of investing of money for acquiring new asset (residential property) within a year from the sale of the original asset - Held that - CIT(A) is clear that the assessee had bought new property beyond one year prior to the sale of original asset against which the assessee wanted to take deduction u/s. 54F. The language of the Act is very clear that the assessee should purchase/invest in new house within one year prior to the date of sale of original asset. The assessee has sold the property on 30.05.2011 on the date the sale deed was executed and purchased property at CB-6A, Munirka on 09.04.2010 which is beyond one year as prescribed u/s. 54F for getting deduction u/s. 54F. Therefore, the lower authorities are justified in rejecting the claim of assessee. - Decided against assessee.

Summary

Issues:
1. Interpretation of the provisions of section 54F of the Income Tax Act regarding the timeline for claiming exemption.
2. Determination of whether the advance money received by the assessee for the sale of property can be considered as advance sale consideration.
3. Application of the one-year period for investment in a new asset under section 54F in relation to the financial year of the transactions.

Issue 1: Interpretation of Section 54F Timeline:
The case involved a dispute regarding the timeline for claiming exemption under section 54F of the Income Tax Act. The Assessing Officer disallowed the claim as the new property was purchased beyond the prescribed period. The appellant argued that the limitation for purchasing the new property should be calculated from the date of receiving a security deposit, not the sale deed execution date. The appellant cited a Supreme Court decision to support the argument. However, the lower authorities upheld the disallowance, emphasizing that the purchase should have been made within one year from the sale deed execution date, as per the Act's clear language. The Tribunal agreed with the lower authorities, dismissing the appeal.

Issue 2: Advance Money as Sale Consideration:
Another point of contention was whether the advance money received by the assessee should be considered as advance sale consideration. The appellant argued that the money received was a security deposit against the property sale, justifying the claim for exemption under section 54F. However, the authorities disagreed, stating that the money was not an advance sale consideration but a security deposit from a broker, not the eventual purchaser. The Tribunal concurred with the authorities, emphasizing that the money received did not fulfill the conditions for being considered advance sale consideration, thus rejecting the appellant's claim.

Issue 3: Application of One-Year Period:
The appellant also raised the issue of the one-year period for investment in a new asset under section 54F, contending that the purchase date of the new property fell within one year prior to the sale of the original asset. However, the authorities pointed out that the actual sale deed date determined the timeline for claiming the deduction. The Tribunal noted that the appellant purchased the new property beyond the one-year period prescribed by the Act, leading to the rejection of the claim. The decision highlighted the importance of adhering to the statutory timeline for availing deductions under section 54F.

In conclusion, the judgment clarified the interpretation of section 54F provisions, the treatment of advance money, and the application of the one-year period for investment in a new asset. The Tribunal upheld the lower authorities' decision to disallow the appellant's claim for exemption under section 54F, emphasizing compliance with the statutory timeline as a crucial factor in determining eligibility for deductions.