1991 (7) TMI 119 - AT - Income Tax

Summary

Issues:
1. Deduction under section 54 of the Income Tax Act allowed or not.
2. Fair market value of the old property on 1st Jan., 1964 for computation of capital gains.

Analysis:

Issue 1:
The appeal by the Department challenges the allowance of a deduction of Rs. 69,999 under section 54 of the Income Tax Act, 1961. The assessee sold a residential house and invested the sale proceeds in a new property. The Department contended that since the registered sale deed for the new property was executed after the prescribed one-year limit under section 54, the deduction should not be allowed. The Dy. CIT(A) accepted the assessee's submission that the full purchase price was paid within the time limit, and possession was obtained promptly. The Department argued that legal ownership only passes upon execution of the registered sale deed. However, the Tribunal interpreted section 54 liberally, focusing on the actual purchase and possession rather than legal title acquisition. The delay in executing the sale deed due to external factors did not negate the purchase. The Tribunal cited a relevant case and noted that the assessee had control and dominion over the property, justifying the deduction under section 54.

Issue 2:
The cross objection raised by the assessee concerned the fair market value of the old property on 1st Jan., 1964, for capital gains computation. The assessee failed to provide evidence of the property's value, leading the ITO to estimate it at Rs. 37,000. The Dy. CIT(A) found this estimation reasonable, and the assessee did not present any new evidence before the Tribunal. Consequently, the Tribunal upheld the valuation, and no interference was deemed necessary.

In conclusion, both the Department's appeal and the assessee's cross objection were dismissed by the Tribunal, affirming the allowance of the deduction under section 54 and the valuation of the old property for capital gains computation.