2016 (4) TMI 342 - AT - Income Tax

Eligibility for exemption U/s 54 on unregistered property purchased from son of the assessee - Seller has stated that this was only settlement- CIT(A) allowed the claim - Held that - The assessee had entered into an agreement for purchase of house at B-37, New Lite Colony, Tonk Road, Jaipur on 29/4/2009. The transferee had paid the said consideration of ₹ 75 lacs and is willing to fulfill other conditions and has taken over possession of the same on 29/4/2009. Therefore, the transferee gets the right over the property and has become the owner of the property, therefore, for the purpose of deduction U/s 54 read with Section 2(47)(V) of the Act, the property has been transferred to him The assessee has taken possession of that house from the son and paid the consideration and as per Section 2(47)(v) of the Act, the transfer as per Income Tax Act, has been completed by the assessee. It is undisputed fact that the new property purchased from his son has not registered before the stamp authority. The son also has disclosed the capital gain on sale of residential immovable property to his father in the income tax return and paid the tax on capital gain. These facts have not been controverted by the ld DR, therefore, we uphold the order of the ld CIT(A). - Decided in favour of assessee

Summary

Issues:
- Deduction under Section 54 of the Income Tax Act on unregistered property purchased from son.

Analysis:
1. The revenue appealed against the order allowing deduction under Section 54 of the Income Tax Act on unregistered property purchased from the assessee's son. The Assessing Officer noted that the assessee had shown long term capital gain from the sale of a property and claimed deduction under Section 54 for purchasing a new house. However, the property purchased was unregistered, leading the Assessing Officer to deny the deduction based on the Supreme Court's decision regarding the necessity of a registered deed for property transfer.

2. The assessee challenged the Assessing Officer's decision before the CIT(A), who ruled in favor of the assessee. The CIT(A) observed that the property was transferred via an unregistered Agreement to Sale Deed between the son and the assessee. The son declared capital gains and paid tax on the transaction. The CIT(A) deemed the transaction covered under Section 2(47)(v) of the Income Tax Act, recognizing such agreements under Section 53A of the Transfer of Property Act. The CIT(A) deleted the disallowance of the deduction claimed under Section 54.

3. The revenue further appealed the CIT(A)'s decision. The revenue contended that the assessee failed to prove part performance under the Transfer of Property Act and Section 53A, and the transfer as per Section 2(47) was not established due to lack of property registration. The assessee argued that the unregistered sale agreement with his son constituted a transfer under Section 2(47)(v) and fulfilled the requirements for deduction under Section 54. The Tribunal upheld the CIT(A)'s decision, emphasizing that the son disclosed capital gains and paid tax, confirming the transfer.

4. The Tribunal agreed that the assessee's purchase of the property from his son, though unregistered, constituted a transfer as per Section 2(47)(v) of the Income Tax Act. The Tribunal noted that the son's declaration of capital gains and tax payment further supported the validity of the transaction. As the revenue did not contest these facts, the Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 54.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the allowance of the deduction under Section 54 for the unregistered property purchased from the assessee's son.