2017 (9) TMI 1292 - AT - Income Tax

Exemption under section 54 and 54F denied - amount invested for the purchase of residential plot and deposits made under capital gain in the Bank - Held that - When it is not in dispute that the assessee has paid an amount of ₹ 75,85,818/- which is 95% of the total sale consideration for purchase of the property to M/s. Unitech High-Tech Developer (Rs. 7,41,250/- on 20.1.2011 and ₹ 68,44,298/- on 23.3.2011) through banking channel and also deposited ₹ 25,00,000/- under capital gain the right in personam was created in favour of the assessee from the date of entering into an agreement dated 11.1.2011 in favour of the assessee. It does not matter if the registration of the sale deed has not been made in favour of the assessee because transfer of the property is to be taken from the date of agreement in favour of the assessee. Moreover the assessee has made frantic efforts to take the possession of the property from the developer by approaching Hon ble High Court of Allahabad as well as National Consumer Disputes Redressal Commission. Hon ble Delhi High Court in case cited as Balraj v. Commissioner of Income-Tax 2001 (12) TMI 51 - DELHI High Court held that for the purpose of attracting the provisions of section 54 of the Income-tax Act, it is not necessary that the assessee should become the owner of the property as registration of the document was not imperative. So once the assessee has paid substantial amount to purchase the property within a period of one year he has become entitled for exemption u/s 54 of the Act. - Decided in favour of the assessee

Summary

Issues Involved:
1. Computation of long term capital gain
2. Granting exemption under section 54 and 54F of the Income Tax Act
3. Consideration of provisions of section 54(2) and 54F
4. Taxation of unutilized amount after specified period
5. Legality of the Commissioner (Appeals) order

Issue 1: Computation of long term capital gain
The appellant sought to set aside the order passed by the Commissioner of Income-tax (Appeals) regarding the computation of long term capital gain. The Assessing Officer (A.O.) had calculated the long term capital gain at a specific amount, which the appellant contested. The A.O. rejected the appellant's claim for certain amounts related to the sale of property and jewelry, leading to a higher total income assessment for the appellant.

Issue 2: Granting exemption under section 54 and 54F
The appellant argued that the Commissioner (Appeals) erred in not granting exemption under section 54 and 54F of the Income Tax Act for the amounts invested in purchasing a residential plot and deposits made under the capital gain account scheme. The A.O. and Ld. CIT(A) denied the benefit of these sections to the appellant, citing failure to meet the specified timeframes for property purchase or construction.

Issue 3: Consideration of provisions of section 54(2) and 54F
The appellant contended that the authorities erred in not considering the provisions of section 54(2) and 54F of the Income Tax Act. The denial of benefits under these sections was a key point of contention in the appeal.

Issue 4: Taxation of unutilized amount after specified period
Another aspect raised was the taxation of the unutilized amount after the specified period mentioned in section 54 and 54F. The appellant challenged the decision to tax certain unutilized portions after a specific timeframe following the transfer of the original asset.

Issue 5: Legality of the Commissioner (Appeals) order
The legality of the Commissioner (Appeals) order was questioned by the appellant, stating that it was against the law and facts of the case. The appellant sought a favorable ruling from the Tribunal regarding the disputed issues.

The Tribunal analyzed the facts and arguments presented by both parties. It noted that the appellant had received a substantial amount from the sale of property and jewelry, leading to the computation of long term capital gain. The Tribunal deliberated on whether the A.O. and Ld. CIT(A) were correct in denying exemption under sections 54 and 54F due to alleged failures in property purchase or construction timelines.

Regarding the possession of the plot and efforts made by the appellant to secure it, the Tribunal considered documentary evidence, including agreements and correspondence. The Tribunal highlighted the importance of substantial payments made by the appellant for property purchase within the specified period, citing relevant case law to support the appellant's claim for exemption under section 54.

Ultimately, the Tribunal ruled in favor of the appellant, emphasizing that the appellant had fulfilled the necessary conditions for exemption under section 54. The unutilized amount deposited in the capital gain account was to be taxed as per the relevant provisions. The Tribunal allowed the appeal, overturning the decisions of the lower authorities and providing a detailed analysis to support its judgment.