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TMI Blog2025 (1) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... the promised time. In the event, if the builders are not able to deliver the flats within the target period, and if, the assessee invested the requisite amounts in such projects within the prescribed time, benefit of Section 54/54F cannot be denied to thousands of such cases. The provisions of section 54 are beneficial sections and therefore, it is to be interpreted liberally. If the assessee has completed his part of the job, in that case he is entitled to the deduction if the other part has not been completed because of the situation beyond the control of the assessee. Thus, For claiming exemption u/s 54, it is not necessary that the Assessee should obtain possession of the new asset or become the owner of such new asset by way of registration of document within the time limit as specified therein as long as the Assessee has acquired substantial domain over the new asset and paid substantial amount of its cost within such specified time limits. Section 54 is a beneficial provision and it could never be the intention of the legislature to deny the benefit of such deduction in such bonafide deserving cases. Hon'ble Apex Court in the case of Sanjeev Lal [2014 (7) TMI 99 - SUPREME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain earned. There was no delay on the part of the assessee who deposited the full amount of capital gain but the possession was not handed over by the builder which is an admitted delay on the part of the builder and because of such default of the builder in not completing the construction and handing over possession to the assessee within the time prescribed benefit of Section 54 to 54F cannot be attributed to the assessee particularly when the assessee has complied with all the statutory conditions in order to claim benefit under Section 54F of the Act. Further that most of the builders generally failed to complete their purchase in stipulated period and hardly any builder could complete their project within the promised time. In the event, if the builders are not able to deliver the flats within the target period, and if, the assessee invested the requisite amounts in such projects within the prescribed time, benefit of Section 54/54F cannot be denied to thousands of such cases. 4. It is also the case of the assessee that Section 54 is a beneficial provision and it could never be the intention of the legislature to deny the benefit of such deduction in such bonafide des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to sell the house in question, they had also decided to purchase another residential house. • Accordingly, a new residential house was purchased on 30-4-2003 i.e. well within one year from the date on which the agreement to sell had been entered into by the assessee. • In the meantime the validity of the will had been questioned by another legal heir of assessee's grandfather. • The suit filed by him was finally dismissed in May, 2004. • Due to the interim relief granted in the above stated suit, the assessee could not execute the sale deed till the suit came to be dismissed and the validity of the will was upheld. Thus, the assessee executed the sale deed in 2004 and the same was registered on 24-9-2004. • In the assessment proceedings, the Assessing Officer was of the view that the assessee was not entitled to any benefit under section 54 for the reason that the transfer of the original asset, i.e. the residential house, had been effected on 24-9-2004 whereas the assessee had purchased another residential house on 30-4-2013 i.e. more than one year prior to the transfer of the asset. • Accordingly, the assessee was made liable to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to the benefit under the provisions of section 54 because long term capital gain earned by the assessees had been used for purchase of a new asset/residential house on 30-4-2003 i.e. well within one year from the date of transfer of the house which resulted into long term capital gain. [Para 19] • The question to be considered by this Court is whether the agreement to sell which had been executed on 27-12-2002 can be considered as a date on which the property i.e. the residential house had been transferred. In normal circumstances by executing an agreement to sell in respect of an immovable property, a right in personam is created in favour of the transferee/vendee. When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell had been executed and who had also paid Rs. 15 lakhs by way of earnest money. No doubt, such contractual right can be surrendered or neutralized by the parties through subsequent contract or conduct leading to no transfer of the property to the proposed vendee but that is not the case at hand. [Para 21] • In addition to the fact that the term "transfer" has been defined under section 2(47), even if looked at the provisions of section 54 of the Act which give relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. • If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. • ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opined that the assessee was entitled to relief under section 54 in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property and used for purchase of a new asset/residential house. [Para 25] • The appeal is therefore, allowed. The impugned judgments are quashed and set aside and the authorities are directed to reassess the income of the assessee for the assessment year 2005- 2006, after taking into account the fact that the assessee was entitled to the relief, subject to fulfilment of other conditions. [Para 26] 13. The appellant had brought before the notice of the Assessing Officer the following decisions according to which the claim of deduction u/s 54 could not be disallowed. i) Satish Chandra Gupta vs. Assessing Officer 54 ITD 508 (ITAT, Delhi Bench): The facts of this case were, the assessee had purchased a site and could not complete the construction of the house within the prescribed period of three years. However, the house was constructed and completed subsequently. Relief was given on the ground that the delay had occurred on account of reasons beyond the control of the assessee. ii) Smt. Raineet Sand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee within a period of two years from the date of sale of residential property. The flat was still under construction though the builder had entered into and executed the flat buyers agreement with the assessee. The said agreement mentions the apartment number and gives specific detail of the property. The payments were linked to stage of construction and that amount was payable within 21 months of booking. The consideration being paid by the assessee was nearly 9 times income by way of capital gains which was earned by the assessee. [Para 7), The basic purpose behind section 54 is to ensure that the assessee is not taxed on the capital gains, if he replaces his house with another house and spends money earned on the capital gains within the stipulated period. [Para 12]." 16. The Hon'ble Karnataka High Court in the case of Principal Commissioner of Income-tax, Bengaluru vs. Dilip Ranjrekar, [2019] 101 taxmann.com 114 (Karnataka) has held as under:- In the instant case, the investment is made in a new property. The construction was not completed within a period of three years as narrated in Section54 of the Act. The delay was not because of the assessee, but beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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