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2022 (9) TMI 1246 - AT - Income TaxDisallowance of deduction u/s 54F - acquisition of new asset was not supported by registered deed of purchase - CIT-A deleted the addition - whether or not the CIT(A) was right in law and the facts of the case in allowing the assesse s claim of having purchased a new residential house on the basis of an unregistered purchase agreement and consequently accepting his claim for deduction u/s.54F ? - HELD THAT - As the assessee before us had vide an unregistered purchase agreement, dated 30.03.2015 purchased a residential house and, had made not only made the payment of the entire amount of purchase consideration to the seller amounting to Rs.2.91 Crore (approx.) out of his bank account with IDBI Bank, Branch Raipur on 31.03.2015 (after deducting TDS ) and had taken the possession of the property, therefore, it can safely be concluded that he had duly satisfied the requirement of having purchased a residential house within the stipulated time period contemplated in Section 54(1) - We, thus, in terms of our aforesaid observations concur with the view taken by the CIT(Appeals), who in our considered view had rightly vacated the disallowance of the assessee s claim for deduction u/s.54F uphold his order to the said extent. Thus, the Grounds of appeal No.(s) 1 to 3 raised by the revenue are dismissed in terms of our aforesaid observations. Whether CIT(Appeals) was right in allowing the assessee s claim of indexed cost of improvement, despite the fact that the same was not substantiated on the basis of supporting documentary evidence by the assessee before the lower authorities? - We finding no infirmity in the same are inclined to subscribe to the same. CIT(Appeals) in the backdrop of the ground realties i.e the purchase of sand, cement and incurring of labour expenses form part of an unorganized sector, had thus rightly observed that the fact that the assessee could not have obtained the purchase bills/receipts qua the incurring of the expenses could not be ruled out. As rightly observed by him that a conjoint perusal of the facts attending to the case of the assessee, viz. (i) that the assessee had vide a registered sale deed sold a double storied house; and (ii) that now when the assessee had placed on record the purchase bills of iron and steel, therefore, the fact of having incurred expenses towards purchase of other building material, viz. sand, cement and incurring of labour expenses could not be ruled out as otherwise the coming into existence of the double storeyed house would not have been possible. Accordingly, finding no infirmity in the view taken by the CIT(Appeals) who had rightly allowed the assessee s claim for deduction of indexed cost of improvement, we, thus, uphold his order to the said extent. Thus, the Ground of appeal No.4 raised by the revenue is dismissed in terms of our aforesaid observations.
Issues Involved:
1. Justification of deletion of disallowance of deduction under Section 54F. 2. Validity of the acquisition of a new asset supported by an unregistered sale agreement. 3. Eligibility for deduction under Section 54F without possession of the new asset. 4. Justification of deletion of disallowance of cost of improvement due to lack of satisfactory evidence. Detailed Analysis: 1. Justification of Deletion of Disallowance of Deduction under Section 54F: The primary contention of the revenue was whether the CIT(A) was justified in deleting the disallowance of deduction under Section 54F amounting to Rs. 2,59,08,966/-. The assessee claimed the deduction based on the purchase of a new residential property via an unregistered purchase agreement dated 30.03.2015. The Assessing Officer (A.O) disallowed the claim, arguing that a valid purchase required a registered deed. The A.O relied on amendments to Section 53A of the Transfer of Property Act, 1882, and the Indian Registration Act, which mandate registration for the transfer to be legally recognized. The CIT(A) overturned this disallowance, noting that the assessee had made full payment and taken possession of the property, fulfilling the conditions under Section 54F, which does not explicitly require a registered deed for claiming the deduction. 2. Validity of Acquisition of a New Asset Supported by an Unregistered Sale Agreement: The A.O contended that the unregistered sale agreement did not confer a valid title to the property, thus disqualifying the assessee from claiming the deduction under Section 54F. The CIT(A) disagreed, emphasizing that the payment of consideration and possession of the property sufficed for the transaction to be considered a purchase under Section 54F. The Tribunal concurred with the CIT(A), citing judicial precedents that the term "purchase" in Section 54F does not necessitate a registered deed but rather the completion of the transaction and possession of the property. 3. Eligibility for Deduction under Section 54F without Possession of the New Asset: The A.O also argued that the assessee did not take possession of the new asset, which is a requirement under Section 53A of the Transfer of Property Act. The CIT(A) found that the assessee had taken possession and made full payment, thus fulfilling the conditions under Section 54F. The Tribunal upheld this view, noting that the statutory provision of Section 54F requires the purchase of a residential house within the stipulated period, and possession and payment fulfill this requirement even if the registration is delayed. 4. Justification of Deletion of Disallowance of Cost of Improvement Due to Lack of Satisfactory Evidence: The A.O restricted the assessee's claim for the indexed cost of improvement to Rs. 12,84,784/- due to insufficient documentary evidence. The assessee had claimed expenses towards improvement over several years but could only substantiate part of the claim with bills for iron and steel purchases. The CIT(A) allowed the full claim, reasoning that the construction of a double-storied house implied other expenses like sand, cement, and labor, which might not have documented bills. The Tribunal agreed with the CIT(A), recognizing the practical difficulties in obtaining bills for all expenses in the unorganized sector and the corroborative evidence from the registered sale deed indicating the construction of a double-storied house. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under Section 54F and the full claim for the indexed cost of improvement. The Tribunal found no legal requirement for a registered deed under Section 54F and accepted the practical difficulties in documenting all construction expenses. The appeal was dismissed in its entirety.
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