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2014 (1) TMI 246 - HC - Income TaxExemption u/s 54EC - Held that - As per Transfer of Property Act, 1882 - Registration of sale deed alone completes the transfer - Four sale deeds came to be registered, on the consideration received for the purposes of Section 45 and Section 54EC of the Act, capital gains arising on the sale under those deeds would be considered only in the assessment for the assessment year 2003-2004 - As regards the sale deeds executed between the dates, 11.04.2003 and 23.03.2004 - There are at least 12 sale deeds executed on various dates - Sale Deed Nos.13 to 16 were executed on 23.03.2004 and on the same date, the assessee admits that the capital gains arising thereon not being invested in REC 54EC bonds from 30.04.2004 onwards - Sale deeds were executed on 11.04.2003 3 deeds ; 28.04.2003 2 deeds ; 14.05.2003 3 deeds ; the consideration in respect of these deeds not being invested within the time limit of six months from the date of transfer - The capital gains would fall itself within the scope of Section 54EC of the Income Tax Act, 1961 - The sale deeds executed on 23.03.2004 (4 deeds) alone would have the benefit of Section 54EC of the Income Tax Act, 1961 and not any other sale deed - For the purpose of re-computing the relief to the assessee to grant the relief in respect of the sale deeds executed on 23.03.2004 the issue was remanded back to the Assessing Officer to re-work the liability of the assessee Partly allowed in favour of assessee.
Issues Involved:
1. Determination of the correct assessment year for capital gains. 2. Validity of the Appellate Tribunal's conclusion on the date of capital gains arising. 3. Eligibility for deduction under Section 54EC of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Determination of the correct assessment year for capital gains The primary issue was whether the capital gains should be assessed for the year 2003-2004 or 2004-2005. The assessee entered into an agreement of sale on 07.12.1999, receiving the full sale consideration by 21.12.2002. The sale deeds were registered on various dates between 27.02.2003 and 23.03.2004, with possession handed over on 25.03.2004. The assessee argued that the capital gains should be assessed in 2004-2005 since possession was handed over in March 2004. However, the Assessing Officer determined that the capital gains should be split between the two assessment years based on the dates of the sale deeds. Issue 2: Validity of the Appellate Tribunal's conclusion on the date of capital gains arising The Appellate Tribunal concluded that the capital gains arose in the assessment year 2003-2004, based on the full consideration received on 21.12.2002 and the possession being deemed handed over on the same date. The Tribunal relied on Section 2(47)(v) of the Income Tax Act, 1961, and the decision in Shrimant Shamrao vs. Prahlad, determining that the transfer occurred on 21.12.2002. The Tribunal dismissed the affidavit and letter from the builder as self-serving documents. Issue 3: Eligibility for deduction under Section 54EC of the Income Tax Act, 1961 The assessee claimed deductions under Section 54EC by investing the sale consideration in specified bonds. The Assessing Officer rejected the claim for investments made beyond six months from the date of sale deeds. The Commissioner of Income Tax (Appeals) initially allowed the claim, but the Tribunal reversed this, holding that the capital gains arose in 2003-2004, thus denying the benefit for investments made later. Court's Findings: The Court analyzed the clauses of the sale agreement and the dates of the sale deeds. It concluded that the sale was completed when the sale deeds were registered, not when the consideration was received. The Court emphasized that the date of registration of the sale deeds should be the starting point for assessing capital gains and eligibility for Section 54EC benefits. Conclusion: The Court directed the Assessing Officer to re-compute the liability for the assessment years 2003-2004 and 2004-2005, granting relief only for the four sale deeds executed on 23.03.2004 under Section 54EC. The Court rejected the Tribunal's reasoning based on the individual sale deeds and emphasized the importance of the original agreement clauses. The appeals were disposed of with no costs, and the connected miscellaneous petition was closed.
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