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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
O R D E R
PER C.N. PRASAD, JM:
This appeal is filed by the assessee against the order of the Ld. CIT(A)-31, Mumbai dated 26.2.2010 pertaining to assessment year 2005-06.
The only issue in the appeal of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of claim u/s. 54 of the I.T. Act.
Brief facts are that the assessee filed return of income on 14.11.2005 declaring total income of Rs. 1,00,820/-. The assessment was completed u/s. 143(3) of the Act on 31.12.2007 determining the income at Rs. 19,02,620/-. While completing the assessment, the Assessing Officer denied deduction claimed by the assessee u/s. 54 of the Act on the ground that the assessee purchased new flat on 14.12.2002 and it was duly registered on 18.12.2002, the old house was sold on 25.11.2004 and since the new house was not purchased prior to one year before the date of sale of old house, the assessee is not entitled for deduction u/s. 54 of the Act. According to the AO though the possession of the new flat was given on 11.12.2003 and occupation certificate was received on 17.11.2003, the transfer took place when the purchase agreement was entered into on 14.12.2002 and therefore new house was not purchased prior to one year of sale of old house.
On appeal, Ld. CIT(A) agreed with the contention of the AO that the transfer took place on 18.12.2002 and all the formalities required by the law are completed, the legal and valid title over the property is passed on to the purchaser through the registration of the sale deed, therefore the Ld. CIT(A) held that AO is justified in considering the date of acquisition of new house as the date of registration of the new flat purchased by the assessee i.e. 18.12.2002 but not the date when possession of new flat was given on 11.12.2003.
The Ld. Counsel for the assessee submits that though the purchase agreement for the new flat was entered into on 11.12.2002, registration of sale deed happened on 18.12.2002, the occupation certificate received on 17.11.2003 and possession of the new flat was given on 11.12.2003, he submits that since the possession was taken on 11.12.2003 which is within one year from the date of sale of old house, the deduction u/s. 54 of the Act has to be allowed. Placing reliance on the decision of the Jurisdictional High Court in the case of CIT Vs Smt. Beena K. Jain ( 217 ITR 363) Ld. Counsel submits that the Jurisdictional High Court affirmed the order of the Tribunal in holding that the assessee was entitled the benefit of exemption u/s. 54F of the Act as the relevant date was the day when the assessee paid the full consideration on the flat becoming ready for occupation and obtained possession of the flat. Therefore, he submits that since in this case ,the possession of the flat was taken on 11.12.2003 which is within one year from the sale of the old house on 25.11.2004, the deduction u/s. 54 of the Act is to be allowed.
The Ld. Departmental Representative vehemently supports the orders of the lower authorities.
Heard both sides, perused the orders of the lower authorities and the case law relied on by the assessee. During this assessment year, the assessee claimed deduction u/s. 54 of the Act on the sale proceeds invested by her in purchase of new flat. The AO denied the deduction observing that deduction u/s. 54 is allowable when the assessee purchases within two years from the sale of property or prior to one year of the sale of the property. According to the AO, the assessee purchased new flat by entering into agreement of sale on 11.12.2002 and the sale deed was registered on 18.12.2002, the old house was sold on 25.11.2004 and therefore, the assessee has not purchased within one year prior to the sale of old house, deduction was denied. The Ld. CIT(A) sustained the order of the AO. Almost an identical issue come up before the Hon’ble Jurisdictional High Court in the case of CIT Vs Smt. Beena K. Jain ( 217 ITR 363) wherein the High Court held as under:
“The Department has made this application under section 256(2) of the Income-tax Act for raising the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing exemption of Rs. 11,04,423 under section 54F of the Income-tax Act, 1961, considering the date of possession of the new residential premises instead of the date of sale agreement and the date of registration?"
Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long- term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The Department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in the long-term capital gains. According to the Department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence, the petitioner is not entitled to the benefit under section 54F. In our view, the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day. In the premises, the application is dismissed and the rule is discharged with costs”. 7.1. As it could be seen from the above judgement, the Hon’ble Court affirmed the order of the Tribunal in holding that the date of possession of the new residential premises should be considered as the date of purchase for the purpose of computing the period of purchase while allowing the benefit u/s. 54 of the Act.
7.2. In this case, since the possession of the flat was given on 11.12.2003, though the flat was registered on 18.12.2002 and the old flat was sold on 25.11.2004, in view of the decision of the Hon’ble Jurisdictional High Court (supra), taking the date of possession is the date of purchase as the assessee purchased new flat prior to one year from the date of sale, she is entitled for deduction u/s. 54 of the Act. Respectfully following the said decision, we allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.