2019 (3) TMI 161 - AT - Income Tax

Exemption u/s 54 - assessee purchased the new residential house within the time period stipulated in Sec.54 - assessee after purchasing the property was either not put into the possession of the same by the seller or had not taken the possession of the same for any other reason - HELD THAT - We are unable to find ourselves in agreement with the observation of the A.O that in case where an assessee had purchased a residential house within the time period envisaged under Sec.54, but had not taken possession of the same within the said period, he would for the said reason stand disentitled for claim of exemption under the said statutory provision. We are of a strong conviction that as the assessee in the case before us had purchased the new residential house within the time period stipulated in Sec.54 i.e within a period of two years after the date on which the old residential hose had been transferred, thus she was duly entitled for claim of exemption under the said statutory provision. The mere fact that the assessee after purchasing the property was either not put into the possession of the same by the seller or had not taken the possession of the same for any other reason, would in no way adversely affect her entitlement towards claim of exemption under the said statutory provision. The fact that the assessee had purchased the new residential house vide registered agreement dated 06.06.2012 i.e within the stipulated period of 2 years from the date on which the old residential house was sold by her on 14.11.2011 is not in dispute before us - the assessee had duly complied with the requisite conditions contemplated in Sec.54 , hence her claim of exemption under the said statutory provision was well in order - Decided in favour of assessee.

Summary

Issues involved:
1. Exemption under Sec. 54 for not receiving possession of new residential flat within stipulated period.
2. Claim of exemption under Sec. 54 despite lack of evidence of possession after 5 years of sale.
3. Interpretation of "purchase" under Sec. 54 in the context of legal title transfer.

Issue 1: Exemption under Sec. 54 for not receiving possession of new residential flat within stipulated period:
The case involved an appeal by the revenue against the order of the CIT(A) granting exemption under Sec. 54 to the assessee despite not receiving possession of the new residential flat within the stipulated period of two years from the sale of the old flat. The A.O disallowed the exemption claim as possession was not obtained within the specified timeframe. The CIT(A) allowed the exemption, stating that possession was not a prerequisite for claiming exemption under Sec. 54. The A.O's contention was that lack of possession rendered the assessee ineligible for exemption. The ITAT held that as long as the assessee purchased the new residential house within the stipulated time period, she was entitled to claim exemption under Sec. 54, regardless of possession. The ITAT upheld the CIT(A)'s decision, emphasizing that compliance with the conditions of Sec. 54 was sufficient for claiming exemption.

Issue 2: Claim of exemption under Sec. 54 despite lack of evidence of possession after 5 years of sale:
The A.O disallowed the exemption claim under Sec. 54 as the assessee did not receive possession of the new residential flat even after 5 years from the sale of the old flat. The CIT(A) allowed the exemption, considering the wider interpretation of "purchase" under Sec. 54. The ITAT concurred with the CIT(A), stating that the word "purchase" in Sec. 54 was not limited to possession or registered sale deed. The ITAT emphasized that the assessee had made payments to the builder within the stipulated period for the purchase of the property, entitling her to claim exemption under Sec. 54. The delay in possession due to an internal dispute was beyond the assessee's control. The ITAT upheld the CIT(A)'s decision based on the legislative intent of Sec. 54 and relevant case laws.

Issue 3: Interpretation of "purchase" under Sec. 54 in the context of legal title transfer:
The key contention revolved around the interpretation of "purchase" under Sec. 54 concerning the transfer of legal title within the stipulated period. The CIT(A) and the ITAT held that the assessee's compliance with making payments to the builder within the prescribed time frame constituted a valid purchase under Sec. 54, irrespective of possession or legal title transfer. The ITAT emphasized that possession was not a mandatory condition for claiming exemption under Sec. 54, as long as the purchase was made within the specified timeframe. The decision was supported by relevant judicial pronouncements and legislative intent, concluding that the assessee was entitled to exemption under Sec. 54 despite the delay in possession due to external factors.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the reasoning behind the final decision rendered by the ITAT.