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2023 (3) TMI 1222 - AT - Income TaxDenying deduction u/s 54 - capital gains on sale of a residential property - As per AO property purchased is beyond one year preceding the year of sale, the assessee is not eligible for deduction - HELD THAT - As new property shall be deemed to have been acquired only when it is ready, full consideration has been paid and the possession is received by the assessee by the assessee. Substantial necessities are crucial for determining the issue for claim of deduction u/s 54 of the Act. Admittedly, in this case what the department is harping upon is merely the agreement dated 21-12-2016 when the building itself was not constructed and the assessee has only acquired his right to get a flat in the said building. When actually therefore, can it be said that the new property was purchased? It is only when the assessee received the possession through letter of possession on 24-12-2018. This is when all the three ingredients as enumerated in the decision of Hon ble Jurisdictional High Court 1993 (11) TMI 7 - BOMBAY HIGH COURT for claiming deduction u/s 54 had been complied with by the assessee. Thus, in view of the undisputed facts of the case and the decision rendered in the case of Smt. Beena K. Jain (supra) we hold that the assessee is eligible for claiming deduction u/s 54 of the Act. Consequently all the grounds of appeal of the assessee are allowed.
Issues Involved:
1. Denial of deduction under Section 54 of the Income-tax Act, 1961. 2. Interpretation of the date of purchase for the purpose of Section 54. 3. Relevance of possession date versus agreement date in determining eligibility for deduction under Section 54. Issue-wise Detailed Analysis: 1. Denial of Deduction under Section 54: The primary issue is whether the assessee is eligible for a deduction of Rs. 1,70,90,871/- under Section 54 of the Income-tax Act, 1961, from the capital gains on the sale of a residential property. The Assessing Officer (A.O.) denied this deduction on the grounds that the new property was purchased more than one year before the sale of the old property, which is beyond the permissible period under Section 54. 2. Interpretation of the Date of Purchase for Section 54: The A.O. and the Dispute Resolution Panel (D.R.P.) held that the new flat was purchased on 21-12-2016, which is beyond the one-year period before the sale of the old property on 23-10-2018. The assessee argued that the agreement dated 21-12-2016 was merely for booking the flat, which was under construction, and not for its purchase. The assessee received possession of the new flat on 24-12-2018, within two months of selling the old property, and hence claimed that the conditions of Section 54 were satisfied. 3. Relevance of Possession Date Versus Agreement Date: The D.R.P. and the A.O. emphasized that since more than 95% of the consideration was paid by 01-07-2017, the purchase was effectively made by then. They dismissed the supplementary agreement dated 06-07-2018 as a mere rectification deed. The assessee contended that the possession date is crucial, citing the Bombay High Court's decision in CIT v. Smt. Beena K. Jain, which held that the relevant date for Section 54 is when the property is ready, full consideration is paid, and possession is received. Tribunal's Findings: The Tribunal revisited the facts and emphasized that the flat was not ready on 21-12-2016, and the agreement was for acquiring a right to the flat upon completion of construction. The possession letter dated 24-12-2018 indicated that the flat was handed over to the assessee on that date, which falls within the two-year period post the sale of the old property. The Tribunal referred to the Bombay High Court's judgment in CIT v. Smt. Beena K. Jain, which supports the assessee's claim that the date of possession, when the flat is ready and full consideration is paid, is the relevant date for Section 54. The Tribunal also cited a similar decision by the Pune Tribunal, which considered the possession date as the date of purchase for claiming exemption under Section 54. Conclusion: The Tribunal concluded that the assessee is eligible for the deduction under Section 54, as the possession of the new flat was acquired within the stipulated period. The appeal of the assessee was allowed, and the grounds of appeal were upheld. Order Pronounced: The appeal was allowed, and the order was pronounced in the open court on 02nd February 2023.
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