2023 (1) TMI 772 - AT - Income Tax

Deduction u/s 54/54F - capital gain on sale of property in Bangalore - capital gain has not been invested within the time period Specified u/s 54 - new house at Gurgaon was purchased in June 2010, where as the Plot at Bangalore was sold in September 2013 and Flat at Dwarka was sold in March 2014, A.O. was of the opinion that the condition to claim u/s 54/54Fwas not satisfied since the purchase of property (Apartment in Gurgaon) was not within the period of one year before the date of transfer of plot at Bangalore and Flat at Dwarka HELD THAT - It is not in dispute that the assessee has entered into an agreement with M/s IREO Victory Valley Pvt. Ltd. on 05/07/2011 to purchase house in Gurgaon. The agreement clearly highlights that as on the date of the agreement, the builder was in a possession of the land and construction was to be made in phases in future. The assessee made payments for the said property starting from Financial Year 2011-12 to 2014-15. Therefore, the decision of the A.O. to treat the investment in property at Gurgaon as an instance of purchase in June, 2010 is a debatable issue which cannot be decided u/s 154 of the Act. Therefore, the Ld. A.O. has committed an error in invoking Section 154. As admittedly the last payment for the apartment has been made on 21/05/2014 and the possession has been handed over upon receipt of occupation certificate dated 25/07/2016 and 28/09/2017. Thus, it is clear that even the possession has been handed over within three years of the date of transfer of property. Therefore, we do not find any error or legal infirmity in the order of the Ld.CIT(A). Appeal filed by the Revenue is dismissed.

Summary

Issues involved:
- Disallowance of deduction u/s 54/54F of the Income Tax Act
- Validity of rectification order by the Assessing Officer
- Interpretation of purchase of property in Gurgaon as per Section 154 of the Act

Disallowance of deduction u/s 54/54F of the Income Tax Act:
The case involved the disallowance of the claim of deduction u/s 54/54F of the Act by the Assessing Officer (AO). The AO disallowed the claim on the grounds that the conditions to claim the deduction were not satisfied, as the purchase of the property in Gurgaon was not within the specified time frame in relation to the sale of properties in Bangalore and Dwarka. However, the Commissioner of Income Tax (Appeals) allowed the appeal filed by the assessee and deleted the addition made in the rectification order. The Commissioner held that the decision of the AO to treat the investment in the Gurgaon property as a purchase in June 2010 was debatable. The Commissioner also noted that the possession of the property was handed over within three years of the date of transfer, thereby satisfying the condition of construction within the specified period. The Tribunal found no error or legal infirmity in the Commissioner's order and dismissed the appeal filed by the Revenue.

Validity of rectification order by the Assessing Officer:
The Assessing Officer issued a rectification order disallowing the deduction u/s 54/54F of the Act based on the grounds that the conditions for claiming the deduction were not met. The AO observed that the purchase of the property in Gurgaon did not align with the specified time frame concerning the sale of properties in Bangalore and Dwarka. The Commissioner of Income Tax (Appeals) allowed the appeal filed by the assessee and deleted the addition made in the rectification order. The Commissioner held that the issue of whether the appellant had purchased the house in 2010 in Gurgaon or a right in an apartment to be constructed was debatable. The Tribunal concurred with the Commissioner's findings, stating that the AO's decision to treat the investment in the Gurgaon property as a purchase in June 2010 was a debatable issue and could not be decided under Section 154 of the Act. The Tribunal upheld the Commissioner's decision, emphasizing that the possession of the property was handed over within three years of the date of transfer, meeting the construction condition.

Interpretation of purchase of property in Gurgaon as per Section 154 of the Act:
The Assessing Officer interpreted the purchase of the property in Gurgaon as falling outside the specified time frame for claiming deduction u/s 54/54F of the Act concerning the sale of properties in Bangalore and Dwarka. However, the Commissioner of Income Tax (Appeals) found the issue to be debatable, considering the nature of the agreement between the assessee and the builder for the Gurgaon property. The Commissioner highlighted that the possession of the property was handed over within three years of the date of transfer, satisfying the construction condition. The Tribunal agreed with the Commissioner's analysis, stating that the AO's decision to treat the Gurgaon property investment as a purchase in June 2010 was debatable and could not be resolved under Section 154 of the Act. The Tribunal upheld the Commissioner's decision, emphasizing the timely possession of the property within the specified period.