2019 (11) TMI 929 - AT - Income Tax

Disallowance of deduction claimed u/s 54F deduction u/s 54 - as argued assessee had invested the long term capital gain on purchase of residential plot and remain invested for more than three years - HELD THAT - It is an undisputed fact that, firstly, the assessee has earned capital gain and has invested the same in purchase of a residential plot; secondly, the assessee has made a total investment of ₹ 63,03,005/- which is more than the exemption of ₹ 52,90,424/- claimed by her; and lastly, the assessee made this investment within the prescribed period. This payment was made to the developer Omaxe Chandigarh Extension Developers Pvt. Ltd. Consequent to that, the developer issued allotment letter and also entered into an agreement dated 05.07.2011. As per the agreement the developer was supposed to hand over the possession of plot within 18 months from the date of allotment letter - developer did not deliver the possession. Hence, the assessee could not complete the construction within the prescribed period of 3 years. This delay in construction was not attributable to the assessee. AO and the CIT (A) have denied the exemption in view of the provision of section 54 and 54F. The AO and the CIT (A) both have ignored the fact that the assessee has made a full payment to the developer and such payment was more than the amount of the deduction claimed by the assessee. Since, the delay was not on the part of the assessee but on the part of the developer and thus it was beyond the control of the assessee. In such circumstances, we are of the view that benefit of deduction cannot be denied to the assessee. Case followed SHRI VARUN SETH VERSUS ACIT, CIR-47 (1) , NEW DELHI 2019 (7) TMI 1410 - ITAT DELHI - Decided in favour of assessee

Summary

Issues involved:
Denial of deduction under sections 54 and 54F of the Income Tax Act for the assessment year 2013-14.

Comprehensive Analysis:

Issue 1: Denial of deduction under sections 54 and 54F
The appellant challenged the order of the Ld. CIT (A) regarding the disallowance of deductions claimed under sections 54 and 54F of the Income Tax Act. The appellant invested the entire capital gain in a residential plot within the stipulated time frame. However, the possession of the plot was delayed by the developer, leading to the inability to complete construction within the prescribed period. The Assessing Officer and CIT (A) denied the exemption based on the failure to complete construction within three years. The appellant contended that the delay was beyond their control, as evidenced by the full payment made to the developer. The appellant cited precedents where delays due to reasons beyond the assessee's control were considered valid for claiming exemptions under similar circumstances.

Issue 2: Judicial Interpretation
The Tribunal analyzed the facts and legal precedents, emphasizing the intention of the assessee to avail the benefits under sections 54 and 54F. Citing the judgment in the case of Varun Seth vs. ACIT, the Tribunal highlighted that the delay in construction due to external factors should not penalize the assessee. Referring to the Supreme Court's decision in Sanjeev Lal Vs. CIT, the Tribunal emphasized the purposive interpretation of section 54 to provide relief to taxpayers intending to claim exemptions on long-term capital gains. The Tribunal concluded that the appellant's investment in land should be considered as invested in the purchase or construction of a residential house, satisfying the statutory intention of sections 54 and 54F.

Final Decision:
Relying on legal precedents and the factual circumstances of the case, the Tribunal allowed the appeal, directing the Assessing Officer to delete the disallowance of deductions claimed by the assessee under sections 54 and 54F of the Income Tax Act for the assessment year 2013-14. The Tribunal held that the delay in construction beyond the assessee's control should not hinder the rightful entitlement to exemptions under the Act.