1988 (4) TMI 107 - AT - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to claim exemption under section 54 of the Income Tax Act for capital gains arising from the sale of a residential property.
2. Whether the notional income from a new residential property can be assessed as "Income from house property."

Detailed Analysis:
1. The judgment addresses the issue of whether the assessee, an individual, is entitled to claim exemption under section 54 of the Income Tax Act for capital gains arising from the sale of a residential property. The assessee sold his 1/3rd share in a residential property and purportedly purchased a new residential flat. The Income Tax Officer (ITO) held that the new flat was only agreed to be sold and not legally transferred to the assessee, thus denying the exemption under section 54. However, the Appellate Assistant Commissioner (AAC) allowed the deduction under section 54, considering that the assessee had made the payment and was in possession of the new flat. The Tribunal analyzed the relevant provisions of section 54 and held that the absence of a registered sale deed for the new property meant the assessee was not entitled to the exemption. The Tribunal also discussed the concept of part performance under the Transfer of Property Act, emphasizing that possession alone does not establish ownership. The Tribunal upheld the ITO's decision, denying the exemption under section 54.

2. The judgment also delves into the issue of whether the notional income from the new residential property can be assessed as "Income from house property." The AAC had ruled that the notional income should be assessed as "Income from house property" based on a Special Bench decision. However, the Tribunal disagreed, citing previous court decisions that emphasized the necessity of a registered sale deed to establish ownership. The Tribunal held that in the absence of a registered sale deed, the notional income could not be assessed as "Income from house property." Therefore, the Tribunal upheld the ITO's decision on this issue as well, reversing the AAC's ruling.

In conclusion, the Tribunal allowed the appeal filed by the Department, upholding the decisions of the ITO and reversing the rulings of the AAC on both issues.