2022 (12) TMI 796 - AT - Income Tax

Exemption u/s 54 - Payment made for the Purchase of the new property - Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house - whether deduction u/s 54 should be allowed to assessee even if the investment in new asset under builder construction agreement made before transfer of asset? - HELD THAT - The agreement for sale was signed on 08.08.2014 and the payments have been completed by 08.10.2014. Since, the amount equivalent to the capital gains has been utilized for acquisition of new house, the assessee be permitted to avail the benefit allowable u/s 54 of the Act. Appeal of the assessee is allowed.

Summary

Issues:
1. Deduction claim under Section 54 of the Income Tax Act.
2. Consideration of documentary evidence.
3. Interpretation of Section 54F regarding the timeline for property purchase.

Analysis:
1. The appellant challenged the order of the ld. CIT(A)-1, Gurgaon dated 18.06.2019, raising grounds of appeal related to the deduction claim under Section 54. The Assessing Officer noted the deduction claimed under Section 54 of Rs.1,13,88,413/- during the assessment proceedings. The appellant had made payments towards a new property before and after the sale of the original property, meeting the conditions of Section 54F of the Income Tax Act.

2. The appellant argued that the Assessing Officer did not consider the documentary evidence submitted regarding the delay in the handover of the new property by the builder. The appellant contended that the legal complaint lodged against the builder supported their claim for deduction under Section 54. The tribunal considered this evidence and found it sufficient to support the appellant's claim.

3. Section 54F of the Income Tax Act provides conditions for claiming exemption on capital gains from the transfer of a property. The tribunal noted that the agreement for sale was signed on 08.08.2014, and payments were completed by 08.10.2014. The tribunal interpreted that since the amount equivalent to the capital gains was utilized for the acquisition of the new house within the specified timeline, the appellant was eligible to avail the benefit under Section 54 of the Act. Consequently, the tribunal allowed the appeal of the assessee based on the interpretation of Section 54F and the timeline for property purchase.

In conclusion, the tribunal upheld the appellant's claim for deduction under Section 54, considering the timely payments made for the new property and the documentary evidence submitted regarding the delay in possession by the builder. The tribunal's decision was based on the interpretation of Section 54F and the fulfillment of conditions outlined in the Income Tax Act.