2024 (6) TMI 534 - AT - Income Tax

LTCG - deduction claimed u/s 54 - relevant date for grant of deduction - claim denied as new asset was neither purchased within one year before the date of transfer of the original asset nor constructed within three years from the date of transfer of the original asset as required u/s 54 - It is the contention of the assessee that even though the new asset had been booked and the agreement to purchase was entered on 21.07.2014, the said asset was under construction and the occupancy certificate was received by the developer/builder only on 16.09.2015. The possession was given to the assessee on 16.11.2015 and both these dates fall within the prescribed period as above. HELD THAT - Hon ble Bombay High Court in the case of CIT v/s Smt. Beena K. Jain 1993 (11) TMI 7 - BOMBAY HIGH COURT has dealt with this issue as upheld the ITAT s order by holding that the relevant date of purchase for computation of deduction u/s 54 was the date when the assessee obtained possession of the flat. Looking at the totality of the transaction, it is clear that on the date of agreement to purchase i.e. 21.06.2014, there was no asset in existence which could be called a residential house. As the occupancy certificate was received by the Developer on 16.09.2015 and subsequently the possession was given to the assessee on 15.11.2015, the date of possession of the property should be regarded as date of actual purchase for the purpose of claiming exemption u/s 54F of the Act On this specific issue, the Ld. AR has also relied on the decision of Ayushi Patni 2019 (1) TMI 1130 - ITAT PUNE wherein as held as un-rebutted fact that at the time of execution of agreement, the residential property was not in existence. Therefore, taking into consideration facts of the case, the date of possession of flat is the date of actual purchase for the purpose of claiming exemption u/s 54F Thus it is held that the relevant date for grant of deduction u/s 54 in this case would be the date of possession i.e. 16.11.2015, which is well within the period of two years from the date of agreement to sell the original asset i.e. 22.07.2015. As such, the claim of the assessee for exemption u/s 54 of the Act is allowed. Decided in favour of assessee.

Issues Involved:
1. Disallowance of deduction claimed under Section 54 of the Income Tax Act, 1961.
2. Relevance of the date of possession versus the date of registration for claiming deduction under Section 54.
3. Interpretation of Section 54 as a beneficial provision.
4. Failure to provide an opportunity for a personal hearing.

Detailed Analysis:

1. Disallowance of Deduction Claimed Under Section 54:
The assessee filed a return of income declaring a total income of Rs. 82,38,850/- and claimed a deduction under Section 54 of the Income Tax Act, 1961, amounting to Rs. 2,69,38,332/-. The Assessing Officer (AO) observed that the new asset was neither purchased within one year before the date of transfer of the original asset nor constructed within three years from the date of transfer of the original asset, as required under Section 54. Consequently, the AO denied the deduction. The CIT(A) upheld this decision, leading the assessee to appeal.

2. Relevance of the Date of Possession Versus the Date of Registration:
The core issue is whether the date of possession or the date of registration is relevant for claiming deduction under Section 54. The lower authorities held that the agreement to purchase the new asset dated 21.06.2014 was more than one year before the sale of the original asset on 22.07.2015, thus disqualifying the deduction. However, the assessee argued that the new asset was under construction at the time of the agreement, and the occupancy certificate was received on 16.09.2015, with possession handed over on 16.11.2015. Both dates fall within the permissible period under Section 54.

3. Interpretation of Section 54 as a Beneficial Provision:
The assessee contended that Section 54 should be interpreted leniently in favor of the taxpayer. The section mandates that an assessee must either purchase or construct a residential house within the permissible period. The assessee cited several judicial decisions, including CIT vs. Smt. Beena K. Jain (1996) and Sanjay Vasant Jumde vs. ITO (2023), which held that the relevant date for claiming deduction under Section 54 is the date of possession, not the date of the agreement to purchase.

4. Failure to Provide an Opportunity for a Personal Hearing:
The assessee also argued that the CIT(A)'s order was void as it was passed without affording an opportunity for a personal hearing, despite a request for the same.

Tribunal's Conclusion:
- Date of Possession as the Relevant Date: The Tribunal agreed with the assessee that the relevant date for claiming deduction under Section 54 should be the date of possession, not the date of the agreement to purchase. The Tribunal cited the decision of the Hon'ble Bombay High Court in CIT vs. Smt. Beena K. Jain (1996) and the Pune Tribunal in Ayushi Patni vs. DCIT (2019), which held that the date of possession is the date of actual purchase for the purpose of claiming exemption under Section 54.
- Beneficial Interpretation: The Tribunal acknowledged that Section 54 is a beneficial provision and should be interpreted in favor of the taxpayer. The Tribunal noted that the occupancy certificate was received on 16.09.2015, and possession was granted on 16.11.2015, both within the permissible period.
- Personal Hearing: Although the issue of the personal hearing was raised, the Tribunal's decision focused on the substantive issue of the date of possession.

Final Judgment:
The Tribunal concluded that the relevant date for the grant of deduction under Section 54 is the date of possession, i.e., 16.11.2015, which is within the permissible period. Therefore, the assessee's claim for exemption under Section 54 was allowed, and the appeal was decided in favor of the assessee.

Order Pronounced:
The appeal filed by the assessee was allowed, and the order was pronounced in open court on 10.06.2024.

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