2018 (5) TMI 1014 - AT - Income Tax

Benefit of deduction u/s. 54 - major amount was invested 3 years prior to present sale and purchase agreement was also registered at that time and thus the condition of prior purchase within one year of sale was not fulfilled - whether the date of purchase of property completed on 13.12.2011 falls within a period of one year from the date of sale is covered under the provision of section 54? - Held that - An identical issue came up for hearing in the case of the CIT vs. Smt. Beena K. Jain (1993 (11) TMI 7 - BOMBAY High Court) wherein has held that the Tribunal is justified in granting exemption to the assessee on the basis of date of possession of the flat when the balance consideration was paid. Thus the relevant date for the purpose of section 54 of the Act was 13.12.2011 when the petitioner paid final consideration amount on the flat and the possession was taken. - Decided against revenue

Summary

Issues:
- Appeal against granting deduction under section 54 of the Act
- Interpretation of conditions for claiming deduction under section 54

Analysis:
1. Deduction under Section 54 of the Act:
- The Revenue appealed against the grant of deduction under section 54 by the CIT(A) due to the investment in property made prior to three years from the sale date.
- The AO disallowed the exemption claimed under section 54, stating that substantial payments were made beyond three years from the sale date.
- The CIT(A) allowed the claim, considering that the property was completed and possession was taken within the required timeframe.
- The Revenue argued that substantial payment was made before the sale date, violating the provision of section 54.
- The assessee defended the claim, emphasizing completion and possession dates as per the conditions of section 54.

2. Detailed Facts and Arguments:
- The assessee sold property for Rs. 1,55,00,000 and claimed deduction under section 54, investing in a property completed on 13.12.2011.
- The AO noted payments made before the sale date and issued a show cause notice, rejecting the claim.
- The CIT(A) allowed the claim, considering completion and possession dates, and the assessee's compliance with section 54.
- The Revenue contended that substantial payment made before the sale date violated section 54 conditions.
- The assessee relied on legal precedents and argued for exemption based on completion and possession dates.

3. Judgment and Decision:
- The Tribunal upheld the CIT(A)'s decision, following a similar case precedent where exemption was granted based on possession and completion dates.
- The Tribunal emphasized that the relevant date for section 54 compliance was the completion date of the property, aligning with legal interpretations and precedents.
- The appeal of the Revenue was dismissed, affirming the allowance of deduction under section 54 by the CIT(A).

This detailed analysis covers the issues raised in the appeal regarding the interpretation and application of section 54 of the Act, providing a comprehensive overview of the judgment and the arguments presented by both parties.