2024 (6) TMI 522 - AT - Income Tax

LTCG - deduction u/s 54F - agreement to purchase cannot be construed as purchase deed within the meaning of provision of section 54F - HELD THAT - The assessee has sold the land and purchased the property as stated by the ld. AR vide agreement to sale - assessee is in possession of the said residential flat which has been purchased by the assessee. The title of the land has been disputed but the construction of 72 flats has not been disputed as per records. The decision of Suraj Lamp Industries Pvt. Ltd. 2011 (10) TMI 8 - SUPREME COURT held that it is well-settled legal position that SA/GPA/WILL transactions are not transfers' or sales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale, but nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. If they are entered before this specific purpose day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities u/s 53A of the Transfer of Property Act. Thus, in the present case, though the possession is in the hands of the assessee, the very basis of the title is challenged between the parties from whom the assessee has not completed the sale deed which was non-executed at the threshold. Thus, the observation made in case of Suraj Lamp Industries Pvt. Ltd. (supra) will not be helpful in assessee s case. The observation made by the CIT(A) as well as the Assessing Officer is right in the context that the assessee failed to get the documents registered for purchase of residential house being flat, and hence the condition laid down in Section 54F remained unfulfilled. The exemption u/s 54F of the Act will be granted only if all the conditions given under the said provisions are followed/fulfilled by the assessee who claims the exemptions; but in the present case, the same has not been fulfilled. Hence, the appeal of the assessee is dismissed.

Summary

Issues involved:
The appeal involves the disallowance of claim u/s 54F of the Income-tax Act, 1961 by the Assessing Officer and the Commissioner of Income-tax (Appeals) for the Assessment Year 2015-16.

Issue 1: Disallowance of claim u/s 54F:
The Assessing Officer disallowed the claim u/s 54F amounting to Rs. 82,64,245/- as the registered purchase deed for a residential house was not executed within the stipulated time period of two years after the transfer took place. The Assessing Officer held that the exemption under Section 54F is allowable only if the purchase is completed within the specified timeframe.

Issue 2: Appeal before CIT(A):
The assessee filed an appeal before the CIT(A) challenging the assessment order. However, the CIT(A) dismissed the appeal, upholding the decision of the Assessing Officer to disallow the claim u/s 54F.

Issue 3: Arguments of the Appellant:
The Appellant submitted that despite entering into an agreement for sale and making the full sale consideration, the registered conveyance deed could not be executed due to ongoing litigation regarding the title of the land. The Appellant argued that the possession of the property had been assumed, and the rights in the property had been transferred as per the agreement to sale.

Issue 4: Arguments of the Respondent:
The Respondent contended that the purchase of the flat had not been finalized within the required timeframe of three years from the sale of the land. The Respondent emphasized that the basic title of the purchase was still under dispute and pending before the court, thus justifying the denial of the exemption claimed u/s 54F.

Issue 5: Tribunal's Decision:
After considering the arguments of both parties, the Tribunal noted that while the possession of the property was with the assessee, the title of the land was disputed, and the sale deed had not been executed. Referring to legal precedents, the Tribunal concluded that the conditions under Section 54F had not been fulfilled by the assessee, as the registered purchase deed for the residential house was not completed. Therefore, the Tribunal dismissed the appeal of the assessee.

In conclusion, the Tribunal upheld the decision to disallow the claim u/s 54F, emphasizing the importance of fulfilling all conditions stipulated under the Act for claiming exemptions.