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2022 (10) TMI 829 - AT - Income TaxDeduction u/s 54 - new asset was not acquired within the prescribed time - AO restricted the deduction - contention of the assessee is that the lower authorities have erroneously taken the date of purchasing new asset as the date when the assessee had paid the last instalment i.e. 27.03.2012 - what is the date of purchasing of new asset? - HELD THAT - Section 54 speaks about purchase of new asset within one year before the date on which transfer of the original asset took place. In our considered view the AO has misdirected himself by treating the date of initial payments made by the assessee as the date of purchase of the new asset. It is to be borne in mind that as per Section 2(47) of the Act, transfer in relation to a capital asset would also include any transaction allowing of any immovable property to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the Transfer of property Act, 1882. Date of purchase would be when possession is offered by the builder in the present case. Since the payments made to builder would construe part performance by the assessee. However, without possession he would not be entitled for claiming transfer in terms of Section 2(47) - There is no quarrel so far the mandate of law that in terms of Section 54, the assessee is required to appropriate the capital gain towards the purchase of new asset made within year. It is the purchase which should be made within one year and in the absence of possession there would not be any transfer of capital asset, hence no purchase of new asset in terms of Section 54 of the Act. Undisputedly, the AO gave part relief by treating last instalment paid by the assessee as the capital gain appropriated within one year. In our view this act is not as per the intent of the provision. The possession of new asset was given by the builder within one year of sale of original asset. The date of handing over of possession would be date of purchase, since right over the property passed on the day of handing over of possession. Respectfully following in the case of CIT Vs. Smt Bina K. Jain 1993 (11) TMI 7 - BOMBAY HIGH COURT , we hold that the assessee is entitled for deduction u/s 54 of the Act. We, therefore, direct the AO to grant deduction u/s 54 of the Act as claimed by the assessee and delete the impugned additions. The grounds raised in this appeal are allowed in terms indicated hereinabove. Appeal of assessee allowed.
Issues Involved:
1. Disallowance of deduction under section 54 of the Income Tax Act. 2. Determination of the date of purchase of the new asset for the purpose of claiming deduction under section 54. Detailed Analysis: 1. Disallowance of Deduction under Section 54: The primary issue in this appeal is the disallowance of the deduction claimed by the assessee under section 54 of the Income Tax Act, amounting to Rs. 1,10,60,730. The assessee had sold a property in Kolkata and computed long-term capital gains, claiming a deduction for reinvestment in a new apartment. The Assessing Officer (AO) partially allowed the deduction but restricted it to Rs. 8,42,028, leading to an assessed income of Rs. 1,19,03,130. The Commissioner of Income Tax (Appeals) upheld the AO's decision, prompting the assessee to appeal to the Tribunal. 2. Determination of the Date of Purchase of the New Asset: The crux of the dispute is the determination of the "date of purchase" of the new asset for the purpose of section 54. The assessee argued that the date of purchase should be considered as the date of possession, which was within one year before the sale of the original asset. The authorities below had taken the date of the last installment payment as the purchase date, which was outside the prescribed period. The Tribunal examined the relevant dates: - Buyer's agreement executed on 26.05.2010. - Installment payments made between 15.03.2011 and 27.03.2012. - Possession letter issued on 18.06.2012. - Original asset sold on 09.07.2012. - Conveyance deed executed on 22.09.2015. The Tribunal held that the AO misdirected by considering the date of installment payments as the purchase date. It emphasized that under section 2(47) of the Act, the transfer includes any transaction allowing possession in part performance of the contract. Thus, the date of possession (18.06.2012) should be considered as the date of purchase, as the right over the property passed on this date. The Tribunal supported its view by referencing the Bombay High Court's decision in CIT Vs. Smt. Beena K. Jain, which held that the relevant date for purchase is when the full consideration is paid, and possession is obtained. Conclusion: The Tribunal concluded that the assessee is entitled to the deduction under section 54, as the possession of the new asset was taken within one year before the sale of the original asset. The AO was directed to grant the deduction as claimed by the assessee, and the appeal was allowed. Order: The appeal by the assessee was allowed, and the AO was directed to delete the impugned additions and grant the deduction under section 54 as claimed. Pronouncement: The order was pronounced in open court on 18th October 2022.
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