SURUCHI JENA,JHARPADA vs. ACIT, CIRCLE 3(1), PRATYAKHA BHAWAN

The solitary ground taken by the assessee is with regard to disallowance of deduction claimed u/s.54F of the Act at Rs.1,95,76,997/- towards investment made in the acquisition of new house property out of the sale consideration received from the sale of capital assets.

Brief facts of the case are that during the year under consideration the assessee has sold four pieces of land for a total consideration of Rs.1,97,00,000/- and claimed exemption u/s.54F of the Act for the investment made in the acquisition of house property out of such sale consideration. The AO has disallowed the said deduction claimed by the assessee for the reason that the assessee has purchased residential house beyond the period of two years from the date on which the transfer took place and further by observing that the assessee that purchased more than one residential house, since the assessee has purchased four flats.

Before us, the ld. AR of the assessee submitted that during the year under consideration the assessee has executed four sale deeds in the month of February-March, 2015 and has received sale consideration of Rs.1,97,00,000/-. The sale consideration was invested by the assessee for acquisition of four flats in a project namely “Khushi Classic” at Laxmi Sagar, Bhubaneswar bearing Flat Nos.B-401,B-402,B-403 & B-404, respectively. The payments for acquisition of the said flats were made on different dates from 04.02.2015 to 02.03.2015 totalling to Rs.2,02,00,000/- The assessee has entered into agreement to sale towards the purchase of these flats with the builder in the year 2015 only, however, the final sale deed was got executed in the year 2019. Therefore, the AO has disallowed the claim of the assessee by holding that the said flats were purchased by the assessee after two years from the date of sale. In support of the claim of the assessee that the flats were allotted to it in the year 2015, he drew our attention to paper book page 10, which is a letter of allotment issued by the builder, namely, M/s Khushi Realcon Pvt. Ltd., according to which the assessee was allotted four flats having total area of 5075 sq.ft. for a total cost of Rs.1,97,00,000/- on turnkey basis in the Khushi Classic at Laxmi Sagar, Bhubaneswar. The ld. AR contended that the assessee had booked the flats as one unit and paid the entire sale consideration within the stipulated time period and due to the reason that the builder has not given the physical possession of the said flats within a period of two years, it was not possible for him to get those flats registered, however, he has fulfilled all the conditions enumerated u/s.54F of the Act in claiming the deduction such as payments were made within the prescribed time and the flats purchases were earmarked by the builder vide letter dated 05.01.2015. He further contended that though four flats were purchased, however, they were situated in a single floor of a building and are purchased as a single unit by the assessee as well as sold as one unit by the builder also, therefore, the same cannot be termed as four independent flats and, thus, the claim of deduction u/s.54F of the Act deserves to be allowed.

Per Contra, the ld. Sr. DR submitted that the assessee has purchased four different flats and the possession was given to her in the year 2019- i.e. after expiry of four years from the date of sale of the land, therefore, the lower authorities have rightly disallowed the claim of the assessee made u/s.54F of the Act. He prayed for confirmation of the order of the lower authorities.

We have heard the rival submissions and perused the material available on record. In the present case, it is undisputed fact that the entire sale consideration received by the assessee was invested in the acquisition of the four flats and the payments were made to the builder, February to March, 2015. It is also undisputed that the builder has allotted four flats to the assessee in the year 2015 itself vide allotment letter dated 05.01.2015. The claim over these flats of the assessee became final when it had made the payment of the sale consideration and the builder has earmarked the flats as allotted to the assessee. It is also a matter of fact that though there are four flats, however, the builder as well as the assessee have treated them as a single unit, which is evident from the allotment letter where the consolidated area of four flats as 5075 sq.ft. is mentioned in the allotment letter and no separate area of each separate areas is marked by the builder. It is also a fact that all the flats are situated at one floor and were used as a single residential unit which fact cannot be denied by the lower authorities. These four flats were got registered through a single sale deed where they have been treated as one unit. The sale deed is placed at page book pages 11-35. The AO while disallowing the claim of the assessee observed that the registration of the flats were made in the year 2019 i.e. after four years from the sale, however, he has failed to appreciate the fact that the flats were allotted to the assessee in the year 2015 itself i.e. the year when the capital assets were sold by the assessee against which the deduction u/s.54F of the Act is claimed. In this regard, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Sanjeev Lal Vs. CIT, reported in [2014] 365 ITR 389 (SC), wherein the Hon’ble Apex Court in para 21 has held as under :-

Now in the light of definition of "transfer" as defined under s. 2(47) of the Act, it is clear that when any right in respect of any capital asset is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforestated definition, let us look at the facts of the present case where an agreement to sell in respect of a capital asset had been executed on 27th Dec., 2002 for transferring the residential house/original asset in question and a sum of Rs. 15 lakhs had been received by way of earnest money. It is also not in dispute that the sale deed could not be executed because of pendency of the litigation between Shri Ranjeet Lal on one hand and the appellants on the other as Shri Ranjeet Lal had challenged the validity of the Will under which the property had devolved upon the appellants. By virtue of an order passed in the suit filed by Shri Ranjeet Lal, the appellants were restrained from dealing with the said residential house and a law-abiding citizen cannot be expected to violate the direction of a Court by executing a sale deed in favour of a third party while being restrained from doing so. In the circumstances, for a justifiable reason, which was not within the control of the appellants, they could not execute the sale deed and the sale deed had been registered only on 24th Sept., 2004, after the suit filed by Shri Ranjeet Lal, challenging the validity of the Will, had been dismissed. In the light of the aforestated facts and in view of the definition of the term "transfer", one can come to a conclusion that some right in respect of the capital asset in question had been transferred in favour of the vendee and therefore, some right which the appellants had, in respect of the capital asset in question, had been extinguished because after execution of the agreement to sell it was not open to the appellants to sell the property to someone else in accordance with law. A right in personam had been created in favour of the vendee, in whose favour the agreement to 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. (emphasis supplied) 7. As observed above, in the present case, the assessee’s rights have been created in the said four flats at the moment they were allotted to the assessee on the payment of consideration which falls within the stipulated time period prescribed u/s.54F of the Act, therefore, the allegation of the AO that the said flats are purchased by the assessee after the expiry of the four years does not hold water. Further, since all the four flats are constituted as single residential unit and allotted by the builder as one