2021 (2) TMI 632 - AT - Income Tax

Exemption u/s 54 - exemption in respect of long term capital gains earned on sale of property at 80 Shanti Vihar, Delhi was disallowed -Whether exemption under section 54 is allowable to the assessee on purchase of residential house within one year before the date on which transfer of capital asset took place? - physical possession of the property in question transfer stage - revised computation of income acceptable or not by Commissioner of Appeals - HELD THAT - In the Supplementary Agreement it is specifically mentioned that the Seller First Party has taken back the physical possession of the property in question from the Assessee Second Party from Dated 19.02.2013 to 19.04.2013 for finishing and completion of the pending work of the above said property and after completion of the entire work First Party will handover the physical possession of the property to the assessee on or before 19.04.2013. It is also mentioned in the Supplementary Agreement that Sale Deed of the property was executed on 19.02.2013 because of the time binding of Sale Deed registration decided by the parties. Copy of the Sale Deed Dated 19.02.2013 is also filed with the photograph of the property in question is affixed which clearly reveal that property under sale was incomplete and renovation work was going on and as such it was not in habitable condition. Due to this fact, the Supplementary Agreement was executed for completion of the work by the Seller i.e., M/s. Mahalakshmi Buildcon. It would, therefore, strengthen the submissions of the Learned Counsel for the Assessee that physical possession of the property after completion of the entire work was handed-over to the assessee on 19.04.2013 and as such it would fall within one year before the date of transfer of property at 80, Shanti Vihar, Delhi. Thus, assessee would be entitled for deduction under section 54 of the I.T. Act, 1961. Since the assessee filed revised computation of income before A.O, therefore, there is no bar on the powers of the Commissioner of Appeals being the First Appellate Authority to consider the case of assessee. The assessee also filed copies of the bills to show renovation in the property. Considering the entire material on record in the light of above decisions of the Tribunal, we are of the view that assessee is entitled for deduction under section 54. In view of the above discussion, we set aside the Orders of the authorities below and delete the entire addition. Accordingly, appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Validity of the revised computation of capital gains without filing a revised return under section 139(5) of the I.T. Act.
2. Eligibility for exemption under section 54 of the I.T. Act for the purchase of a residential house.

Issue-wise Detailed Analysis:

1. Validity of the Revised Computation of Capital Gains Without Filing a Revised Return:

The Assessee filed a revised computation of capital gains during the assessment proceedings, but did not file a revised return under section 139(5) of the I.T. Act. The Assessing Officer (A.O.) rejected the revised computation by relying on the Supreme Court judgment in Goetz India P. Ltd. vs. Commissioner of Income Tax (284 ITR 323), which mandates that any claim for deduction must be made through a revised return. The A.O. did not consider the Delhi High Court's judgment in Commissioner of Income Tax vs. Jai Parabolic Springs Ltd. (306 ITR 42), which allows the appellate authority to consider such claims even if not made through a revised return.

The Tribunal acknowledged that while the A.O. is bound by the Supreme Court ruling, the appellate authorities are not restricted by the same. The Tribunal referred to the Delhi High Court's judgment in Jai Parabolic Springs Ltd., reinforcing that the appellate authority has the jurisdiction to entertain new claims for a just decision.

2. Eligibility for Exemption Under Section 54 of the I.T. Act:

The primary dispute was whether the Assessee was entitled to exemption under section 54 for the purchase of a residential house within one year before the transfer of the capital asset. The Assessee sold a property at 80 Shanti Vihar, Delhi, on 24.02.2014, and claimed exemption for a house purchased at D-50 Ground Floor, Kushambi, Ghaziabad, on 19.02.2013. The A.O. disallowed the exemption, stating that the purchase was made more than one year before the transfer of the capital asset.

The Assessee argued that although the sale deed for the Kushambi property was executed on 19.02.2013, the property was incomplete and possession was handed over only on 19.04.2013 after completion of construction. The Tribunal referred to multiple precedents, including ITAT Mumbai’s decision in Smt. Ramita Mahendra Mehta vs. ITO and ITAT Delhi’s decision in Rajiv Madhok vs. ACIT, which held that the date of possession, not the date of the agreement, should be considered for computing the exemption under section 54.

The Tribunal found that the Assessee took possession of the Kushambi property on 19.04.2013, which falls within one year before the transfer of the Shanti Vihar property. Therefore, the Assessee was entitled to the exemption under section 54.

Conclusion:

The Tribunal allowed the Assessee's appeal, setting aside the orders of the lower authorities. The Tribunal held that the Assessee was entitled to exemption under section 54 of the I.T. Act, considering the date of possession as the relevant date for computing the exemption. The Tribunal also emphasized that the appellate authority has the power to consider new claims for a just decision, even if not made through a revised return. The entire addition made by the A.O. was deleted, and the Assessee's appeal was allowed.