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TMI Blog2024 (6) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed without affording an opportunity of personal hearing to your appellant though a request for personal hearing was sought in the written submission filed on 22.9.2023 in response to the notice dt. 16.9.2023. 3. Only issue in this appeal is pertaining to the assessee s claim of exemption u/s 54 of the Act. The brief facts of the case are as under: The assessee filed return of income on 31.07.2016 declaring total income of Rs. 82,38,850/-. In the return, the assessee claimed deduction u/s 54 of the Act of Rs. 2,69,38,332/-. The AO observed that the new asset was neither purchased within one year before the date of transfer of original asset nor constructed within three years from the date of transfer of original asset as required u/s 54 of the Act. It was, therefore, held that assessee was not eligible for deduction u/s 54 of the Act and the same was denied by the AO. In this regard, it is noted that while agreement to purchase the new asset was entered into on 21.06.2014 whereas the agreement of sale of the original asset was made on 22.07.2005 i.e. more than 1 year prior to sale of the original asset. However, the possession of new asset was handed over on 16.11.2015 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India... 5. It is clear from the above provision that what the section mandates is that an assessee must either purchase or construct a residential house in India (emphasis supplied) within the permissible period (i.e., one year prior or two years/three years after the date of sale, as the case may be). In the instant case, when the agreement to purchase the new asset was entered into on 21st June, 2014, the said asset was still under construction. On such date, the asset could not have been characterized as 'a residential house in India'. Therefore, the argument of the lower authorities that the purchase of the residential house for the purpose of section 54 had taken place on 21st June, 2014 is untenable. The Occupancy certificate was received only on 16th September, 2015 and the possession was granted on 16th November, 2015. Both dates fall within the permissible period under section 54. It is submitted that what is relevant for the purpose of the section is the date on which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over of possession of the flat on the next day. As held by the Hon'ble High Court, the relevant date is the date when the assessee pays the full consideration and obtains possession of the flat. Both these events, in the Appellant's case, have occurred in the permissible period, i.e., on 3rd November, 2015 and 16th November, 2015 respectively. II. Sanjay Vasant Jumde vs. ITO (2023) (200 ITD 285) (Pune) In this case also, the assessee sold the original asset on 23rd October, 2018, entered into an agreement for purchase of an under construction asset on 21st December, 2016 and eventually got the possession on 24th December, 2018. The Tribunal held that as the possession was received within the permissible period, the assessee was entitled to exemption u/s. 54 of the Act. The relevant extract of the decision is reproduced- 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. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefits of section 54, it is submitted that the said argument is not tenable in view of the clear language of the section which prescribes no time limit for initiating the construction of the new asset. This position has also been clarified in the following judgements, wherein it has been held that the fact that the construction of the new asset had begun prior to the date of sale of the original asset will not take away from the claim of deduction u/s. 54 of the Act- CIT Vs. HK Kapoor (1998) (234 ITR 753) (All) Mustansir 1 Tehsildar vs. ITO (2018) (168 ITD 523) (Mum) 9. As regards the AO's reliance on Circular no. 471 of 1986, it is submitted that the same only dealt with allotment of flats under the Self-Financing Scheme of Delhi Development Authority (DDA) and did not represent a general understanding of the CBDT's position on all cases of construction for the purpose of section 54. Subsequently, in Circular no. 672 of 1993, scope of the earlier circular was considered and it was clarified that the observations therein would apply even in respect of allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l (supra). It is submitted that the Supreme Court was dealing with a different question altogether. In that case, the agreement to sell the original asset was signed on 27th December 2002, and the same was executed on 24th September 2004. The agreement for the purchase of the new asset was signed on 30th April 2003. The question before the Hon'ble Supreme Court was regarding the date of sale of the original asset, i.e., whether the asset can be set to have been sold on 27th December 2002 or on 24th September 2004. If it is the former, then the purchase of the new asset on 30th April 2003 is within the prescribed period. On the other hand, if the sale is said to have taken place on 24th September 2004, the purchase of the new asset would be outside the prescribed period. It was held by the Court, that ordinarily one would have to consider the date of registration of the sale agreement as the date of sale of the original asset, however in the facts of that case, the parties were unable to register the agreement to sell in view of a stay granted by the Court. In such circumstances, it was held that the date of entering into the agreement to sell would be construed as the date of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Bombay High Court in the case of CIT v/s Smt. Beena K. Jain (1996) 217 ITR 363 (Bom.) has dealt with this issue. The facts of the case of Smt. Beena Jain are similar to the assessee s case and the Hon ble Bombay High Court case has 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. c. 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 dated 17.01.2019 of the co-ordinate Bench of Pune Tribunal in the case of Ayushi Patni v/s DCIT in ITA No. 1424/Pun/2016. In this case it has been observed as under: It is an un-rebutted fact that at the time of execution of agreement, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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