2019 (1) TMI 399 - AT - Income Tax

Revision u/s 263 - claim for deduction u/s 54 denied - whether the assessee has purchased within one year before the date of transfer one residential house? - Held that - residential property sold on 24.08.2012. Although the agreement for the residential house at Andheri was entered on 22.07.2009, possession of the said house was given to the assessee on 27.08.2012 by the builder Kamla Landmarc Properties Pvt. Ltd. In the instant case, as mentioned earlier, the payments have been made before one year of the transfer of residential property sold on 24.08.2012. The possession of the said house was given to the assessee on 27.08.2012 by the builder Kamla Landmarc Properties Pvt. Ltd. We find that the ratio laid down in Smt. Beena K. Jain 1993 (11) TMI 7 - BOMBAY HIGH COURT by the Hon ble Bombay High Court squarely applies to the instant case. Following the same, we set aside the order u/s 263 - decided in favour of assessee

Summary

Issues:
1. Allowability of deduction u/s 54 of the Income Tax Act.
2. Interpretation of the date of purchase of a residential property for exemption under section 54F.

Issue 1: Allowability of deduction u/s 54 of the Income Tax Act:
The appellant filed an appeal against the order passed by the Principal Commissioner of Income Tax -24, Mumbai, under section 263 of the Income Tax Act, 1961. The appellant claimed deduction under section 54 of the Act for the assessment year 2013-14. The Principal Commissioner observed discrepancies in the dates of sale of properties and the purchase agreement of a new property. The appellant contended that the deduction under section 54 was valid as per the decision of the ITAT, Mumbai, in a specific case. However, the Principal Commissioner set aside the assessment order and directed a reassessment, emphasizing that the AO did not adequately examine the deduction claim under section 54.

Issue 2: Interpretation of the date of purchase for exemption under section 54F:
During the assessment proceedings, the appellant argued that the entire capital gains were exempt under section 54 as they invested in a new residential property before the sale of the old property. The appellant provided details of payments made for the new property and cited relevant case laws to support their claim. The Department, however, relied on a specific case law regarding the registration of the purchase agreement under the MOFA Act. The appellant highlighted that payments were made before the sale of the old property and possession of the new property was received before the sale. The Tribunal referred to a similar case before the Bombay High Court and ruled in favor of the appellant, stating that the purchase was substantially effected when full payment was made and possession was received. Consequently, the Tribunal set aside the order passed by the Principal Commissioner under section 263.

In conclusion, the Appellate Tribunal, ITAT Mumbai, allowed the appeal, emphasizing the validity of the deduction claimed under section 54 and the interpretation of the purchase date for exemption under section 54F. The Tribunal's decision was based on the principles established in relevant case laws and the factual circumstances of the case.