2019 (9) TMI 659 - AT - Income Tax

Benefit u/s. 54F denied - investment in purchase of a new residential house - only objection of the department that the execution of sale deed and possession by the assessee is much beyond the stipulated period - HELD THAT - Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit. In the present case, this is not in dispute that the assessee has made investment of ₹ 1 Crore for purchase of residential house and only the registered deed was executed after more than 4 years and the possession was also taken after more than 4 years but as per the judgment of H SAMBANDAM UDAYKUMAR 2012 (3) TMI 80 - KARNATAKA HIGH COURT the assessee will not disentitled from claiming deduction u/s. 54F of the IT Act. Respectfully following this judgment of Hon'ble Karnataka High Court, we hold that assessee should be allowed deduction u/s. 54F as claimed by the assessee because investment in purchase of a new residential house made by the assessee is of ₹ 1 Crore and it was made by the assessee on 30.06.2012 whereas the transfer of the original asset took placed on 19.09.2011. There is no dispute on these factual aspects because the same are noted by the AO and there is no observation of the AO that these facts are not correct. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the appellate order dated 30-11-2018.
2. Entitlement for deduction under Section 54F of the Income Tax Act concerning the purchase of a new residential house.
3. Validity of the unregistered sale agreement dated 30-06-2012 for claiming deduction under Section 54F.
4. Impact of property mortgage on the appellant's claim for deduction under Section 54F.
5. Consideration of the Mortgage Discharge Certificate dated 07-06-2016.
6. Delay in purchasing the property and its effect on the deduction claim.
7. Non-disclosure of advance payment for the new property in the statement to the Investigation Authority.

Issue-wise Detailed Analysis:

1. Legality of the Appellate Order:
The appellant contended that the appellate order dated 30-11-2018 was opposed to law, facts, and circumstances of the case. The tribunal did not specifically adjudicate this ground as it was general in nature.

2. Entitlement for Deduction under Section 54F:
The appellant argued that they were entitled to a deduction under Section 54F despite the new residential house being purchased through a registered sale deed dated 24-06-2016, which was beyond the due date prescribed under the Act. The tribunal noted that the key issue was the timing of the investment in the new asset. The tribunal referred to the judgment of the Karnataka High Court in CIT & Another Vs. Sambandam Udaykumar, which stated that if the capital gain is invested in a residential house, the benefit of Section 54F cannot be denied merely because the registered deed was executed later. Consequently, the tribunal allowed the deduction under Section 54F.

3. Validity of the Unregistered Sale Agreement:
The appellant claimed that the unregistered sale agreement dated 30-06-2012 should be considered for the deduction under Section 54F, as they had paid an advance of ?1,00,00,000 before the due date for filing the return of income. The tribunal found that the agreement did not convey the property to the appellant or give them possession. The tribunal upheld that the transfer took place only on 24-06-2016 when the sale deed was registered, and possession was handed over.

4. Impact of Property Mortgage:
The appellant argued that the delay in purchasing the property was due to it being mortgaged to Bharath Co-operative Bank Ltd, and the redemption of the mortgage was beyond their control. The tribunal noted that the mortgage amount was ?15 lakhs, and there was no reason for the vendor to delay obtaining the discharge note from the bank for nearly five years. The tribunal found this argument unconvincing.

5. Consideration of the Mortgage Discharge Certificate:
The appellant contended that the Mortgage Discharge Certificate was issued on 07-06-2016, and the sale deed was executed immediately thereafter on 24-06-2016. The tribunal reiterated that the transfer of the property and the execution of the sale deed occurred much later than the prescribed period, which was the main objection of the department.

6. Delay in Purchasing the Property:
The appellant argued that the delay in purchasing the property was beyond their control. The tribunal found that the delay was not justified and that the purchase of the new asset was completed only on 24-06-2016, well beyond the time stipulated for claiming the deduction under Section 54F.

7. Non-disclosure of Advance Payment:
The appellant claimed that they were not aware of the statement recorded by the Investigation Authority and that the advance payment of ?1,00,00,000 was not mentioned in the statement. The tribunal noted that the appellant had admitted the purchase of the new asset was completed only on 24-06-2016, which was beyond the stipulated time for claiming the deduction.

Conclusion:
The tribunal, after considering the rival submissions and the facts of the case, concluded that the judgment of the Karnataka High Court in CIT & Another Vs. Sambandam Udaykumar was applicable. It held that the appellant should be allowed the deduction under Section 54F to the extent of ?70,84,063, as the investment in the purchase of a new residential house was made on 30-06-2012. The tribunal allowed the appeal filed by the assessee and deleted the disallowance of the deduction claimed under Section 54F.