2020 (7) TMI 686 - AT - Income Tax

Exemption of capital gain u/s 54EC being investment made in National High way Authority of India (NHAI) bonds - AO disallowed the exemption as investment in Long Term Specified Asset should be made within six month from the date of transfer of asset - when the transaction of transfer of asset was completed and if the assessee invested the capital gain within six months from the date of transfer of capital asset? - CIT(A) affirmed the action of assessing by taking the view that the transfer deed of the asset is in Guajarati and not readable and thus assessee has not proved - HELD THAT - In view of the provisions of Registration Act and TP Act, the transfer of immoveable property is complete only when the registration of sale is completed. Though, as per section 47 of Registration Act it may relate back from the date of execution of document. In the present case, initially the document was executed on 8.10.2012, though; it was ultimately registered on 16.01.2013. The date of registration is not disputed by lower authorities. The lower authority denied the claim of assessee on the ground that the document was initially executed on 8.10.2012. No investigation was conducted by the assessing officer to disbelieve the contention of the assessee that finally transaction of transfer of asset was completed only on 16.01.2013. There is no distinction between the transfer of title and the completion of sale; and the title passes only when the document is registered under the Registration Act. The mere fact that such transfer operates from the date of execution is not sufficient to conclude that the title itself passes on the date of execution. Consequently, the transfer in the instant case could not be deemed to have been expected on the date of execution of the document. As we have already held that the sale of the immovable property is complete only on registration of transfer deed as mandated under section 54 of the Transfer of Property Act. There is no dispute that the assessee has invested ₹ 25,00,000/- on 31.05.2013 and ₹ 25,00,000/- on 31.07.2013. Therefore, in view of the aforesaid discussion we are in agreement with the contention of the ld. AR for the assessee that the assessee invested the LTCG in NHAI bond within six month of transfer of asset and is eligible for exemption under section 54EC. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of exemption under section 54EC for Long Term Capital Gain (LTCG) on sale of land.
2. Determination of the date of completion of the transaction of transfer of asset.
3. Interpretation of the provisions of the Registration Act and Transfer of Property Act regarding the completion of the sale of immovable property.

Analysis:
1. The appeal was filed against the order disallowing the claim for exemption under section 54EC for the LTCG on the sale of land. The Assessing Officer considered the date of transfer as 8.10.2012, while the assessee claimed it to be 16.01.2013. The Assessing Officer disallowed the exemption, which was upheld by the CIT(A). The Tribunal analyzed the registration process and held that the transfer of immovable property is complete only upon registration. The assessee invested the capital gain within six months of the registration date, making them eligible for the exemption under section 54EC.

2. The main dispute revolved around determining the date of completion of the transaction of transfer of the asset. The Assessing Officer and CIT(A) considered the initial execution date of 8.10.2012 as the transfer date, while the assessee argued that the registration on 16.01.2013 finalized the transaction. The Tribunal examined the registration process, highlighting that the registration of the sale deed was completed only on 16.01.2013, making this the relevant date for the transfer of the asset.

3. The Tribunal delved into the provisions of the Registration Act and Transfer of Property Act to ascertain the completion of the sale of immovable property. It emphasized that the transfer is only complete upon registration, as mandated by the Transfer of Property Act. Referring to legal precedents, including a decision by the Bombay High Court, the Tribunal concluded that the assessee's investment within six months of the registration date qualified for the exemption under section 54EC. Consequently, the Tribunal directed the Assessing Officer to allow the exemption of LTCG to the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of the registration date in determining the completion of the transaction and eligibility for the exemption under section 54EC. The detailed analysis of the registration process and legal interpretations supported the decision in favor of the assessee.