NITIN RADHESHYAM AGARWAL,MUMBAI vs. ASST CIT 21(2),

We have heard the ld. Authorized Representative (AR) of assessee and ld. Departmental Representative (DR) for Revenue and perused the material available on record. Ld. AR of the assessee argued that in the return of income, assessee claimed deduction u/s 54 of the Act of Rs. 1,98,14,275/-. During the assessment, the AO asked the assessee to furnish the details and the copy of sale-deed in support of various claims made in the computation of income. The assessee furnished the details required by AO. The ld. AR for assessee further argued that the assessee along with his wife entered into agreement to sale on 23.05.2008 with Bombay Dyeing Manufacturing Co. Ltd. for purchase of residential flat for a consideration of Rs. 4,20,56,656/-. As per sale agreement, the assessee is having 2/3 share in the said property. The assessee paid the consideration in installment as per the terms of agreement. The possession of the flat was handed over to the assessee on 28.01.2012. During the assessment year, the assessee sold a residential house by way of agreement to sale dated 07.05.2012 for a consideration of Rs. 3.61 Lakhs. The assessee computed Capital Gain on sale of old flat amounting to Rs. 1,98,14,275/-. The assessee claimed exemption u/s 54 of the Act for his share of consideration paid for purchase of new flat against the capital gain, so earned. It was further argued that the exemption u/s 54 of the Act was claimed as new flat can be said to have been transferred to the assessee only on the date of transfer of possession of property on 28.01.2012 which falls within the prescribed time limit in the section 54. The assessee made the installment of new residential house of Rs. 29,30,458/- between 07.05.2011 and 20.10.2011 within one year of the sale of the earlier house. The claim of assessee was qualified as assessee purchased a new residential house within one year before the date of transfer of the old flat which was sold on 07.05.2012. The Ld. AR of the assessee argued that date of possession is to be considered as the date on which the assessee paid full consideration of flat being ready for occupation and obtained the possession. In support of his submission, the ld. AR of the assessee - Nitin Radheshyam Agarwal relied upon the decision of CIT vs. Smt. Beena K. Jain 217 ITR 363 (Bom. High Court), V.M. Dujodwala vs. ITO 36 ITD 130 (Bom.), Purushootam Govind Bhatt vs. FITO 13 ITD 393 (Bom.), Bastimal K. Jain vs. ITO (ITA No. 2896/M/2014 dated 08.06.2016), Sandeep N. Panchamia vs. ITO (ITA No. 5281/M/2013 dated 17.12.2014), Sunil Datwani vs. ITO (ITA No. 1775/M/2008 dated 22.09.2010), ITO vs. Zebun A. Rangawala (ITA No. 2090/M/2013 dated 21.11.2014) & ITO vs. Sri. Rajiv Bholanath Gupta (ITA No. 1698/M/2013). On the other hand, ld. DR for the Revenue supported the order of authorities below. Ld. DR for the Revenue further argued that the AO correctly distinguished the fact of case relied by assessee in CIT Vs. Smt. Beena K. Jain (supra).

We have considered the rival contention of the parties and have gone through the order of authorities below and the various decision and orders of authorities below including the Paper Book placed on record and the relevant decision relied by respective parties. The facts which are in dispute are that the assessee sold his residential flat by agreement dated 07.05.2012 and possession was handed over on the same date. The assessee entered into agreement to sale on 23.05.2008 with Bombay Dyeing Manufacturing Co. Ltd. As per the terms and condition of the agreement with M/s Bombay Dyeing Manufacturing Co. Ltd. in regular installment and possession of new flat was handed over to the assessee on 28.01.2012. The possession of new flat by assessee on 28.01.2012 is not in dispute according to AO. According to the AO till 20.10.2011, assessee had made the payment of Rs. 3,62,76,585/-. According to the assessee, the assessee entered into the transaction which is in the nature of purchase and the actual date of possession is to be taken as date of purchase for the purpose of determining eligibility of exemption u/s 54 of the Act. However, the AO concluded that the assessee entered into agreement to sale with Bombay Dyeing Manufacturing Co. Ltd. and the payment schedule was passed on completion of certain slabs (floors). Thus, the case of assessee is of construction and not of purchase. The assessee relied upon the decision of Hon’ble Bombay High Court in CIT Vs. Beena K. Jain reported in 271 ITR 363. The AO concluded that the said judgment is for the - Nitin Radheshyam Agarwal purchase of flat. However, the case of assessee is of construction. The ld. CIT(A) observed that as soon as the assessee entered into agreement with developer, the assessee gets valuable right in the flats under consideration all these rights are irrecoverable until conditions are not violated. The assessee entered into agreement with Bombay Dyeing Manufacturing Co. Ltd. on 23.05.2008. The ld. CIT(A) also tried to distinguish the facts of ld. CIT(A) vs. Beena K. Jain (supra) and held that the decision of ratio is not applicable on the facts of assessee’s case.

We have gone through the decision of Beena K. Jain (supra). As per our view the principle laid down in the said decision are squarely applicable on the facts of the present case. We may also refer certain fact of that case wherein the assessee’s office premises on 23.07.1987 which resulted into LTCG. Prior to the sale, the assessee entered into agreement for purpose of residential flat vide agreement dated 04.09.1985 on the date of agreement to sale shall paid some amount on account of earnest money. The agreement was registered on 27th October 1985, the construction of flat was finally completed in July 1988 and the possession of flat was given on 30th July 1988. Accordingly, she was granted exemption u/s 54 of the Act. The Tribunal held that the relevant date is 29th July 1988 when the assessee paid full value of consideration, when flat was ready for occupation. This date was taken by Tribunal as date of purchase. Thus, the department appeal raised on the ground that for claiming benefit u/s 54F, the date of possession of new residential premises was taken instead of date of agreement to sale and date of registration. Thus, as per our view the ratio of decision of Hon’ble jurisdictional High Court is in favour of assessee. Further, the Hon’ble jurisdictional High Court in CIT vs. Mrs. Hilla J. B. Wadia held that when substantial installment of new property and domain over it within the prescribed period, the sale of property as used for residence almost entire cost of construction was paid within the sale of original property, the assessee is entitled to the exemption u/s 54 of the Act. In a recent decision in ITO vs. Shri Narshivha Amrutrao Dhere (ITA No.1944/PN/2013) dated 18.03.2015 the coordinate bench of Pune Tribunal held that date of occupation is to be considered on which - Nitin Radheshyam Agarwal