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TMI Blog2023 (3) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the date of sale of the old flat and hence, the deduction u/s 54 was not allowable. 3] The learned A.O. I DRP failed to appreciate that a. The appellant had complied with the conditions of section 54 in that he had received possession of the new residential property within two months of sale of the old property and hence, the deduction u/s 54 was allowable to the appellant. b. The agreement for purchase of a new flat dated 21.12.2016 was only for booking of a new flat which was yet to be constructed at that time and therefore, it is not correct to hold that the appellant had purchased a new flat on the date of agreement i.e. 2l.12.20 16. c. As the appellant received possession of the new flat from the builder on 24.12.2018 which was within the prescribed time limit u/s 54 from the date of the sale of the old residential house which was 23.10.2018 and accordingly, the appellant satisfied the condition of section 54. d. Bombay H.C. decision in the case of Smt. Beena K. Jain [217 ITR 363] was supporting the appellant's claim when the Hon'ble H.C. has clearly held that the new property is deemed to be acquired only when it is ready, full consideration is paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his bungalow and a plot has earned long term capital gains of Rs.2, 10,71,915/-. The assessee claimed deduction' under Section 54 of the Act for investment in a residential flat to the extent of Rs.1,70,90,871/-. This deduction is being disallowed by the Ld. AO in the draft order on the ground that the assessee has purchased a new flat on December 21, 2016 while the capital gains arose on sale of the property on October 23, 2018. Thus, in the opinion of the Ld. A 0 the new residential flat was purchased by the assessee more than one year before the sale of the property. As per Section 54 of the Act, the deduction is available if a new residential property is purchased within a period of one year before or two years after the date on which the transfer took place or has within a period of three years from the date of transfer constructed one residential house in India. Accordingly, the Ld. AO has held that the assessee is not entitled to the deduction under Section 54 of the Act and the disallowance of Rs. 1, 70,90,871/- is being proposed in the draft order In this context, the assessee relies on his submissions made during the assessment proceedings. However, in addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly proves that on December 21, 2016, by the agreement with the developer, the assessee received a right to acquire a flat No. 302 after the building construction was completed. It is also to be noted that the agreement dated December 21, 2016 is an agreement for purchasing the flat by the assessee and not the sale deed. Had the flat been ready, the builder would have made a sale deed instead of the agreement for sale. The possession letter issued by the developer dated December 24, 2018 clearly states that the assessee received the possession of the new flat only on December 24, 2018 from the developer. Accordingly, when the flat was not at all ready on December 21, 2016, date of agreement with the developer, it cannot be held that the assessee purchased a flat on December 21, 2016. All that the assessee acquired as per this agreement is to get a flat No. 302 from the developer in the project after the construction was completed .. The assessee humbly submits that he has not purchased the new flat on December 21, 2016 but he purchased (acquired) it only when the possession was given by the developer and that is on December 24, 2018. The assessee has reproduced the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the new flat to the assessee by way of a Deed of Possession which was on December 24, 2018. Accordingly, the assessee submits that the new flat No. 302 in the project, Gayatree Grace is acquired by the assessee on 24.12.2018 when the developer has given the possession of the flat to the assessee as per the possession letter. Thus, the new flat is acquired by the assessee on December 24, 2018 which is within the time limit of two years from the date of sale of the bungalow along with the plot which was October 25, 2018 and therefore, the assessee satisfies the condition of section 54 and the deduction claimed under Section 54 of the Act may kindly be allowed. 4. The ld. D.R.P after considering the assessment order and the submissions of the assessee held as follows: We have perused the draft assessment order and the submissions of the assessee. The chronological sequence of events in this case are as under: Sr.No. Transaction Date 1. Date of agreement for the new flat No. 302 to be constructed in the project, „Gayatree Grace December 21, 2016 2. Supplementary agreement with the builder July 06, 2018 3. Date of transfer of the residential property inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of the consideration was paid in 2016 and .2017. In this case, the date of possession has no relevance as the agreement is .registered in December, 2016 and almost the entire payment was made around the same time. The assessee has not brought any evidence on record to prove his intention of selling the asset, the proceeds of which were to be invested in the new asset. The new asset was purchased effectively in 2016-17, when the agreement was registered { and almost entire payment was made. The supplementary deed is only a rectification deed and cannot take the place of the original deed. In view of the facts narrated above, we are of the view that the assessee is not eligible for deduction u/s.54 as he does not fulfill the conditions stipulated in the sub-section. The assessee has relied upon a few case laws to support his claim. But, we find that the facts of the cases relied upon by the assessee are on different set of facts. For example, in the case of CIT vs. T.N. Arvinda Reddy 120 ITR 0046 (1979) the Hon'ble apex court was dealing with the partition among four brothers of a HUF. In fact, the Hon'ble Supreme Court has explained the meaning of the word "purchase" w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted when the agreement of purchase was carried out or completed by payment of full consideration on 29.07.1988 and handing over of possession of the flat on the next date." It can be seen from the above, that the payment of full consideration is a crucial aspect to consider the issue of purchase in the instant case more than 95% of the consideration for the new asset has been paid by the assessee in 2016-17 which is beyond the margin allowed.:" 5. At the time of hearing before us, the ld. A.R for the assessee submitted that the assessee had complied with the conditions of section 54 of the Act and that the assessee received possession of the new residential property within two months of the sale of old property and hence deduction u/s 54 of the Act was allowable to the assessee. Further, it was contended that the agreement for purchase of a new flat dated 21-12-2016 was only for booking of the new flat which was yet to be constructed at that time and therefore, it was not correct to hold by the ld. D.R.P that the assessee had purchased the new flat on the date of agreement i.e. 21-12- 2016. The assessee had received possession of the new flat from the builder on 24-12-2018 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le if a new residential property is purchased within a period of one year before or two years after the date on which the transfer takes place or has, within a period of three years from the date of transfer, constructed one residential house in India. In this context on perusal of the agreement with the assessee and the builder i.e. M/s. Gayatree Skyscrapers India LLP dated 21-12- 2016 it is noted that the assessee entered into an agreement for acquiring flat No. 302 in the building which was under consideration. The contents of the agreement further states that the developer shall construct the building in which the assessee has acquired a right to get the flat No. 302 from the developer. Therefore, on 21-12-2016 when the agreement was entered into the flat was not ready and the building had to be constructed. Through this agreement, the assessee received the right to acquire flat No. 302 after the construction of the building was completed. The agreement dated 21-12-2016 is an agreement for purchasing the flat by the assessee and not the sale deed . If the flat was ready, there would have been a sale deed entered into between the builder and the assessee and not the agreement fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day. 3. In the premises, the application is dismissed and the rule is discharged with costs." 8. The principle therefore, emerges from the aforesaid decision is that the 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. The ld. D.R.P had tried to distinguish this binding judgment and refusing the claim of the assessee only on the ground as to when the substantial payment was made and it had not considered the essential element of possession of the new flat, which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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