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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of
the Commissioner of Income Tax (Appeals) -4, Chennai, dated
19.09.2016 and pertains to assessment year 2013-14.
2 I.T.A. No.3353/Mds/16
The only issue arises for consideration is disallowance of exemption claimed by the assessee under Section 54 of the Income-tax Act, 1961 (in short 'the Act').
Shri D. Anand, the Ld.counsel for the assessee, submitted that the assessee sold a flat at Eastern Wing Block No.B, 5th floor, BBC Spring Field Apartments, Old No.5, EVK Sampath Road, Vepery, Chennai-7, for a total consideration of `72,00,000/-. In fact,
the entire sale consideration was received on 20.04.2012. However, the sale deed was registered only on 06.06.2012. The Ld.counsel further submitted that there was agreement for sale executed on 09.04.2012. As per this agreement, the physical possession of vacant flat was handed over to the purchaser. Therefore, under Section 2(47) of the Act, there was a transfer of property even though the registration of the document is essential pre-condition for transfer of immovable property the value of which is exceeding `100/- under the common law. The assessee has, in fact, invested on 23.04.2012 to the extent of `25,00,000/- and on 05.05.2012 another `25,00,000/- and a sum of `2,00,000/- was
invested on 03.08.2013 in a new flat. The Ld.counsel submitted that the Assessing Officer, after taking into consideration of the sale
3 I.T.A. No.3353/Mds/16
deed dated 06.06.2012, found that an investment was made by the
assessee for construction of a new house only after the sale of
existing property, therefore, he disallowed the claim of the
assessee.
Shri D. Anand, the Ld.counsel for the assessee, further
submitted that in view of agreement between the parties on
09.04.2012, there was a transfer of property as contemplated under
Section 2(47) of the Act read with Section 53A of the Transfer of
Property Act. According to the Ld. counsel, even though the
registration of sale deed took place only on 06.06.2012, the physical
possession was handed over to the assessee on 09.04.2012 itself.
Therefore, in view of judgment of Apex Court in Mysore Minerals
Ltd. v. CIT (239 ITR 775), the assessee has to be construed as
owner of property. In other words, according to the Ld. counsel, the
assessee continued to be in the possession of property as a
beneficial owner, therefore, the assessee is entitled for exemption
under Section 54 of the Act.
On the contrary, Shri Supriyo Pal, the Ld. Departmental
Representative, submitted that it is an admitted fact that the
assessee sold an immovable property for a total consideration of
4 I.T.A. No.3353/Mds/16
`72,00,000/-. The long term capital gain was worked to
`51,04,741/-. After claiming indexation of cost of acquisition, the
assessee claimed exemption under Section 54 of the Act on the
ground that he invested in the new asset. According to the Ld.
D.R., the property was, in fact, sold on 06.06.2012 and the
investment was made before the date of registration of sale deed.
Therefore, the Assessing Officer found that whatever investment
made by the assessee in the construction of new property before
the execution of sale deed cannot be allowed as deduction under
Section 54 of the Act. Therefore, according to the Ld. D.R., the investment made by the assessee to the extent of `50,00,000/-
cannot be allowed as deduction while computing taxable income
under Section 54 of the Act.
We have considered the rival submissions on either side and
perused the relevant material available on record. It is not in
dispute that the assessee executed a registered sale deed on
06.06.2012 in respect of transfer of flat at BBC Spring Field
Apartments at Old No.5, EVK Sampath Road, Vepery, Chennai-7.
Before execution of registered sale deed, the assessee had also
entered into an agreement for sale on 09.04.2012. Clause 3 of said
5 I.T.A. No.3353/Mds/16
agreement for sale clearly shows that the assessee handed over
the physical possession of property to the purchaser. Now the
question arises for consideration is when the assessee handed over
the physical possession of the property to the purchaser
consequent to the agreement for sale dated 09.04.2012, whether
the gain on transfer of property is exempted under Income-tax Act?
We have carefully gone through the provisions of Section
2(47) of the Act and Section 53A of Transfer of Property Act. When
there was an agreement for sale and physical possession of the
property was handed over to the purchaser and the purchaser is in
enjoyment of the property as his own, this Tribunal is of the
considered opinion that there was transfer of property under the
Income-tax Act. The Income-tax Act, being a special enactment,
the provisions of Section 2(47) of the Act for transfer of immovable
property cannot be ignored. We are conscious of the fact that under
the common law, for transfer of immovable property value of which is exceeding `100/-, a registered sale deed has to be executed.
However, in view of the special provisions of Section 2(47) of the
Act, such a requirement under the common law, may not be
applicable while interpreting Section 2(47) of the Act. Therefore,
6 I.T.A. No.3353/Mds/16
even though the assessee executed registered sale deed on
06.06.2012, this Tribunal is of the considered opinion that there was
a transfer of property within the meaning of Section 2(47) of the Act
on 09.04.2012 when the assessee entered in to an agreement for
sale and handed over the physical possession. If the transfer of
property took place on 09.04.2012, the payments were made on
23.04.02012 and 05.05.2012 are after the sale of the property.
Even otherwise Section 54 of the Act clearly says that if the
assessee, within a period of one year before or two years after the
date on which the transaction took place, purchased or within a
period of three years after that date, constructed a residential house
in India, then the assessee is eligible for deduction under Section 54
of the Act. In this case, the investment was admittedly made one
year before the date of sale of property. In view of language
employed by Parliament in Section 54 of the Act, it is not the
requirement that the sale consideration has to be invested in
purchase of property. It is immaterial whether the assessee
invested the sale consideration in purchasing of new flat on receipt
of the money after the date of sale or one year before the sale of
property. In this case, the assessee invested the sale consideration
7 I.T.A. No.3353/Mds/16
one year before the sale of property, therefore, the assessee is eligible for deduction under Section 54 of the Act. In view of the above, this Tribunal is unable to uphold the order of the lower authority. Accordingly, the orders of both the authorities below are set aside and the Assessing Officer is directed to allow the claim of the assessee under Section 54 of the Act while computing taxable income.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced on 31st May, 2017 at Chennai. sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member
चे�नई/Chennai, �दनांक/Dated, the 31st May, 2017.
Kri.
आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-4, Chennai-34 4. Pr. CIT-5, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.