2017 (8) TMI 1735 - AT - Income Tax

Denial of Exemption u/s 54F - AO held that transaction as short term capital gains and not entitled for deduction and assessee has not furnished any evidence for acquiring the new property - HELD THAT - When the assessee has made the full payment and taken possession of the house in the interest of justice the deduction should be allowed. A.R. further submitted that when the full payment was made if the deduction is not granted, it would cause injury to justice and the assessee would be placed with undue hardship. D.R. did not produce any evidence to controvert the submission made by the assessee. Since the assessee has paid the complete consideration to the vendor of the land, which is duly acknowledged by the vendor, merely because of the registration is pending we are of the view that deduction allowable u/s 54 of the Act should not be rejected. This view is upheld by case of Balraj 2001 (12) TMI 51 - DELHI HIGH COURT . Therefore, we direct the AO to allow the deduction u/s 54F of the Act. Accordingly, the appeal of the assessee is allowed.

Summary

Issues:
Assessment of capital gains on sale of gifted property, eligibility for deduction u/s 54F of the Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2009-10. The assessee sold a property received as a gift and did not declare the capital gains. The Assessing Officer treated the sale as short term capital gains and brought Rs. 34,79,400 to tax. The assessee claimed exemption u/s 54F of the Act, but the AO declined it due to lack of evidence for acquiring a new property. The CIT(A) decided in favor of the assessee regarding the nature of capital gains but against the deduction u/s 54F. The AR argued that the assessee acquired a new property through a sale agreement and was entitled to the deduction. The DR contended that ownership does not transfer until registration and since the property was not purchased within one year, the deduction was not permissible.

The ITAT considered the evidence presented by the assessee, including a sale agreement and full payment for the new property. The AR argued that possession was taken, but registration was pending due to disputes. The ITAT noted that the full payment was made, and the assessee was residing in the new property. Citing the decision in Balraj Vs. CIT, the ITAT held that the deduction u/s 54F should not be denied solely based on pending registration. The ITAT directed the AO to allow the deduction, emphasizing that justice should prevail when full payment has been made. The decision was in line with the principles established by the Delhi High Court in a similar case. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 18th Aug'17.