2019 (9) TMI 997 - AT - Income Tax

Disallowance of claim u/s 54 - non-submission of registered purchase deed for the reasons - CIT(A) confirmed the view of the AO by observing that the assessee could not furnish the break-up of each unit and there was no possession ensured within the prescribed limit - HELD THAT - There was a letter dated 01.11.2017 issued by builder/developer to the assessee stating that the residential flats are being handed over for internal decoration, colouring etc. to the respective flat owners sometime in May, 2017 onwards. The assessee must have got title deed registered in his favour by now, besides other evidences i.e. mutation in municipal records, property assessment, water assessment and electricity assessment etc. and we find no such documents before us showing his title on the said flat even till the year 2019. Therefore we agree with the objections raised by the AO in respect of non-submission of the title deed, even before all the authorities below including this Tribunal. In order to claim allowance u/s 54 of the Act, the proof of payment of consideration is complete when it is coupled with the above mentioned evidences to prove the title on property and consequently possession thereon. We deem it proper to remand the matter to the file of AO with a liberty to the assessee to file such documents showing transfer of right over such flat in respect of his claim u/s 54 by holding the assessee is entitled to get deduction u/s 54 subject to showing proof of sale deed etc. in favour of him relating to the said flat as reflected in the MOU dated 16.07.2012. AO shall examine the same and pass order in accordance with law. Thus Ground No.1 raised by the assessee is allowed for statistical purposes.

Summary

Issues:
Disallowance of claim u/s 54 of the Income Tax Act

Analysis:
The appellant, a doctor, filed an appeal against the Commissioner of Income Tax (Appeals) order confirming the disallowance of claim u/s 54 of the Act. The Assessing Officer denied the claim due to non-submission of a registered purchase deed, questioning the ownership status and pricing details. The CIT(A) upheld the denial stating lack of possession within the prescribed limit and absence of a detailed breakdown of each unit. The appellant argued that the capital gain was fully invested in new assets within the stipulated period. The appellant provided a breakdown of the two flats during the appeal, addressing the lack of information raised by the CIT(A). The completion certificate for the construction was received after a delay, indicating reasons beyond the builder's control. The appellant cited legal precedents supporting the deduction u/s 54 based on complete investment of capital gain. The Tribunal acknowledged the basic requirement of investing sale proceeds in residential construction. The appellant's investment in a flat exceeding the capital gain justified the deduction. However, the Tribunal noted the absence of title deed proof for the flat, remanding the matter to the Assessing Officer for verification of ownership documents.

This case highlights the importance of providing complete documentation to support claims under the Income Tax Act. While the appellant demonstrated substantial investment in a residential property, the lack of a registered purchase deed raised concerns about ownership. Legal precedents supported the appellant's entitlement to the deduction based on capital gain investment. The Tribunal emphasized the necessity of proving ownership through title deeds and related documents for claiming deductions under section 54 of the Act. The decision to remand the case for further verification underscores the significance of comprehensive documentation in tax matters.