2023 (11) TMI 855 - AT - Income Tax

Computation of LTCG - Transfer u/s 2(47) - year of assessment - extinguishment of the owner s rights in the property - claim of exemption u/s. 54 - handing over of vacant possession of the property - HELD THAT - Legal position settled by the Hon ble Supreme Court in the case of Seshasayee Steels (P) Ltd. 2019 (12) TMI 702 - SUPREME COURT following the decision of Balbir Singh Maini, 2017 (10) TMI 323 - SUPREME COURT held that the transfer will complete in regard to property rights whenever owners rights have been extinguished. In the present case before us, the rights get extinguished on 19.07.2007 and not on the date of Agreement to sale i.e., 04.02.2006. As the issue is squarely covered by the decision of Hon ble Supreme Court in the case of Seshasayee Steels (P) Ltd., supra, and the fact in the present case is that the owner s right to property ger extinguished on the date of registration of sale deed i.e., 19.07.2007 and the assessment of capital gain can only be made in assessment year 2008-09 and not in this assessment year 2006-07. We quash the assessment on this sole issue. This issue of assessee s appeal is allowed.

Summary

Issues:
The judgment involves the computation of long-term capital gain and the disallowance of exemption under section 54 of the Income Tax Act.

Computation of Long Term Capital Gain:
The appellant sold a residential house in the financial year 2005-06 for Rs. 17.50 lakhs and invested the entire sale consideration in purchasing a plot at Tiruvanmiyur. The Assessing Officer (AO) denied the claim of deduction under section 54 of the Act, stating that the transfer took place in the assessment year 2006-07. The Commissioner of Income Tax (Appeals) upheld this decision, noting that the property was handed over to the purchaser in the relevant financial year based on documentary evidence. The Tribunal considered the sale deed executed on 19.07.2007, which indicated the final payment made on that date, supporting the appellant's claim that the transfer occurred in the subsequent assessment year. Referring to legal precedents, including the decision of the Hon'ble Supreme Court, the Tribunal concluded that the owner's rights to the property were extinguished on 19.07.2007, leading to the quashing of the assessment for the year 2006-07. Consequently, the appeal on this issue was allowed.

Exemption under Section 54:
The appellant's claim for exemption under section 54 of the Act was disallowed by the AO, leading to a series of appeals. The CIT(A) rejected the claim based on the date of transfer provided in the affidavit and sale agreement. However, the Tribunal analyzed the sale deed executed on 19.07.2007, which indicated the final payment made on that date. By aligning with legal principles established by the Hon'ble Supreme Court, the Tribunal determined that the transfer occurred in the subsequent assessment year, rendering the appellant eligible for the exemption under section 54. Consequently, the appeal on this issue was allowed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the assessment for the year 2006-07 based on the determination that the transfer of the property took place in the subsequent assessment year. The judgment was pronounced in open court on 18th October 2023 at Chennai.