Loading judgment…
Facts
The assessee sold an old property on 03.06.2016 and claimed exemption under Section 54/54F of the Income Tax Act for reinvestment into a new residential house. The Assessing Officer and Ld. CIT(A) denied the claim because the agreement for the new property was entered into on 12.03.2014, which was more than one year before the sale of the old property, thus falling outside the statutory period for purchase. The assessee argued that actual payments for the new property were made within the allowed period, not merely based on the agreement date.
Held
The Tribunal, relying on various High Court and Supreme Court judgments, held that the relevant date for claiming exemption under Section 54/54F is not merely the agreement date but the date when substantial payment is made, possession is obtained, or construction is completed, indicating actual acquisition. Since the assessee's payments for the new property were made within the stipulated period, and the intent for reinvestment was clear, the Tribunal allowed the assessee's appeal.
Key Issues
Whether the date of agreement for purchasing a new property or the date of substantial payment/possession/completion should be considered for claiming exemption under Section 54/54F of the Income Tax Act.
Sections Cited
54, 54F, 2(47)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 12.08.2024 for the AY 2017-18.
The only issue raised by the assessee is against the order of ld. CIT (A) upholding the order of the ld. AO not allowing exemption u/s 54 of the Act, in respect of sale consideration received on sale of property which was invested in acquisition of new residential house property within the period allowed under the Act.
The facts in brief are that the assessee filed the return of income on 27.07.2017, declaring total income of ₹2,54,60,430/-. During the year under consideration, the assessee declared income under the head
In the appellate proceedings the ld. CIT (A) also dismissed the appeal by observing and holding as under:-
“In these grounds the appellant has contested the disallowance of deduction of Rs. 1,06,07,936/- claimed u/s 54 of the Act. I have carefully perused the submissions of the appellant in this regard. The Assessing Officer has given finding that the appellant transferred the old capital asset / property on 03.06.2016 where as the agreement for purchase of new property was entered into on 12.03.2014. As per sec 54 of the Act, the assessee was required to purchase the new property within one year before or after two years, or construct within three years after the date on which the transfer took place. In “20. According to section 54 deduction is allowable if assessee purchases the property. In this case by agreement dated 25/07/2009, assessee ‘acquired right to purchase’ a house which was under construction, on 2/2/2011, when house was handed over to the assessee, when it was inhabitable , assessee purchased house.
In principal commissioner of income tax &ors. Vs. Akshay sobti&ors. (2020) 423 ITR 0321 (Delhi)honourable Delhi high court held that the provision in question is a beneficial provision for assessees, who replace the original long- term capital asset with a new one. It was further held that booking of bare shell of a flat is a construction of house property and not purchase, therefore, the date of completion of construction is to be looked into which is as per provision of section 54 of the LT. Act.In this case also assessee has booked an under “9. The real issue in the present case is that new residential house has not been constructed within a period of three years from the date of the transfer of the residential property which resulted in the long-term capital gain. On this issue, the assessee's contention has been that inspite of having made payment for the plot, the Jaypee (Developer) failed to offer possession and execute sale deed even up till the expiry of three years from the date of sale of property by him, because of reasons beyond his control which cannot be disputed. This vital fact assumes great significance as assessee had taken all the steps to make the investment for the purchase of house, and also assessee had deposited Rs. 25,10,000/ in the capital gain account with PNB so as to construct the house. This unequivocally demonstrate that assessee really intended to construct the new residential house thereon. It was based on this bonafide intention assessee had claimed exemption under section 54 of the Act. Without the purchase of land, house could not have been constructed. The first step was to purchase the land, which was done. Thereafter the developer was to handover the plot, so that assessee could have constructed the house within time allowed of 2 years. However, no step could be put forward thereafter because possession of land was not given by the Developer, for reasons beyond the control of the assessee. If an assessee sells his house property and utilises the money for acquiring a plot for the construction of the house and if facts and circumstances point out that assessee intended to construct the house, which has been found so, then it is clear that he wants to avail exemption as provided under the law. Now if the developerafter receiving the money could not fulfill the obligation within time, then can assessee be held responsible for not complying the law.
The Hon’ble Supreme Court in the case of Sanjeev Lal Vs. CIT [2014] 365 ITR 389 (SC) has laid down the purposive interpretation of section 54 to give a liberal approach to the assessee who clearly intended to claim benefit of section 54. Their Lordships held that section 54 is a beneficial provision and is to be construed keeping in view the intention of the Legislature to give relief in the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21.01.2025.