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Issues involved: Interpretation of exemption provisions u/s 54 of the Income-tax Act, 1961 for capital gains on sale of property and purchase of another for residential purposes.
Summary: 1. The assessee purchased a flat in 1971 and sold it in 1980, realizing a gain. He then made payments towards a new flat in a co-operative society, claiming exemption u/s 54. The claim was rejected, leading to the appeal. 2. The assessee argued that the date of allotment and possession of the new flat should be considered as the date of purchase, emphasizing the rules of the co-operative society. The department contended that the first payment date should be considered as the purchase date, citing a Tribunal decision. 3. The department maintained that the assessee did not purchase the flat within the time limit specified by section 54. The Tribunal's decision in another case was referenced to support this argument. 4. Section 54 aims to provide relief from capital gains for those who sell and purchase property for residential purposes within a specified period, promoting house construction and personal equity in residential accommodation. 5. The assessee made a profit on the sale, planned to acquire residential accommodation through a co-operative society, and made payments towards the new flat. The ownership rights and peculiar nature of ownership in a co-operative society were discussed. 6. Denying the benefit of section 54 to a flat owner in a co-operative society would go against the section's purpose. A reconciliation between section 54 and ownership flats in urban areas was deemed necessary to prevent the section from becoming redundant. 7. Extending the analogy of section 27(iii) to capital gains, treating the assessee as the owner of the flat, was suggested. The timing of purchase, allotment, and occupation of the flat were considered in determining eligibility for exemption u/s 54. 8. The Tribunal allowed the appeal, holding that the assessee satisfied the conditions of section 54 for exemption, despite the lack of a specific purchase date. End of Summary
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