Astha Chandra ORDER
Inturi Rama Rao, Member (A)
1. This is an appeal filed by the appellant society directed against the order of CIT(A), Pune-11 dated 16.06.2022 for the assessment year 2016-17.
2. The assessee raised the following grounds of appeal :
"1. The learned CIT-A erred in confirming disallowance of exemption u/s 54F by A.O. amounting to Rs.98,97,654/- by denying 31st March 2015 as possession date of the New Asset i.e house property. The addition hence, may be deleted entirely.
2. The learned CIT-A erred in confirming disallowance of exemption u/s.54 by A.O. amounting to Rs.63,60,146/- by denying 31st March 2015 as possession date of the New Asset i.e house property. The addition hence, may be deleted entirely.
3. Ld. CIT(A) erred in considering two relevant dates while denying deduction/ exemptions u/s. 54 and 54F of Income Tax Act for same transaction.
4. Ld. CIT(A) ought to have considered submission of the appellant that deductions u/s. 54 and 54F of Income Tax Act can be claimed simultaneously.
5. Ld. CIT(A) ought to have considered submission of the appellant that amount of Rs. 90,00,000/- paid in cash is eligible for exemption u/s. 54 and 54F of the Income Tax Act as the same was allowed to be capitalized by Income Tax Settlement Commission.
6. Ld. CIT(A) ought to have considered submission of appellant that flats which were not in existence as on the date of transfer of Original Asset No.1 forms part of sales consideration under Joint Development Agreement and the same should not be treated as investments in flats."
3. Brief facts of the case are that the appellant is an individual, filed the Return of Income for the A.Y. 2016-17 on 07.03.2017 declaring total income of Rs.96,55,810/-. Against the said return of income, the assessment was completed by the Assessing Officer (AO) vide order dated 28.12.2018 passed u/s.143(3) of the Act at a total income of Rs.2,59,13,610/-. While doing so, the AO disallowed the claim for deduction of income u/s.54F of Rs.98,7,654/- and deduction u/s.54 of Rs.63,60,146/-.
4. The factual background of the issue is as under :
During the previous year relevant to the assessment year under consideration, the appellant sold the following two properties, details of which are as under :
The appellant had claimed deduction u/s.54/54F in respect of the capital gains arising on sale of the above assets, in view of purchase of new residential bungalow at 36A/26, C-1, Atharva Siddhi Apartment, E-Ward, Tarabai Park, Kolhapur - 416 003 from one Mr. Krishna N. Lad for sale consideration of Rs.3,06,00,000/-. The possession of said property was taken over on 31.03.2015 in terms of the agreement entered into between him and the owner of the property. The sale consideration for purchase of the above new residential house was paid during the period 20.05.2014 to 02.12.2014 of Rs.1,30,00,000/- as extracted by the AO on page 2/3 of the assessment order and a further sum of Rs.90,00,000/- was paid in cash in 2014 as per MOU dated 19.05.2014. The said claim was denied by the AO by holding that (1) deduction u/s.54/54F cannot be claimed simultaneously in respect of the same asset; and (2) payment for purchase of new house was made prior to one year before the sale of the original asset.
5. Being aggrieved by the above disallowance of claim of exemption u/s.54/54F, an appeal was filed before the CIT(A), who vide impugned order confirmed the action of the AO in disallowing the claim for deduction u/s.54/54F by holding that the possession agreement dated 31.03.2015 is a fabricated document in view of the statement made by him u/s.132(4) of the Act on 19.12.2014 that the new residential property is in his possession.
6. Being aggrieved, the appellant is in appeal before us in the present appeal.
7. The ld. Authorized representative submits that the possession of the new property was taken on 31.03.2015 and he was not in possession of the said bungalow before 31.03.2015. Therefore, the contention that property was purchased prior to one year before the date of sale of the original asset has no basis. He also drawn our attention to the covenants of the sale deed according to which the possession of the property was taken on 31.03.2015 since the full consideration was paid before the date of sale of the original asset, the appellant is entitled for deduction u/s.54 of the Act. He further submits that there is no bar under law to claim deductions 54/54F simultaneously in respect of one new residential property.
8. On the other hand, the ld. CIT-DR filed submissions placing reliance on the decision of Hon'ble Bombay High Court in the case of Beena Jain Vs. CIT MANU/MH/0276/1993 : 217 ITR 363 (Bom.), submits that the construction of Bungalow was already done and completion certificate was obtained from Kolhapur Municipal Corporation on 28.02.2014. He further submits that substantial payment of Rs.90,00,000/- in cash was made on 19.12.2014. He further submits that in view of the statement u/s.132(4), goes to prove that the property was purchased prior to one year before the sale of the original asset. Thus, he submits that the appellant is not entitled for deduction u/s.54/54F of the Act.
9. We heard the rival submissions and perused the material on record. The solitary issue in the present appeal revolves round the entitlement of assessee for deduction u/s.54/54F of the Income-tax Act, 1961. From the perusal of the assessment order, it would reveal that the AO had denied the claim for deduction u/s.54/54F, firstly on the ground that no deduction u/s.54F/54F can be claimed simultaneously in respect of the new residential house and secondly, the new residential property was purchased before one year prior to the sale of original asset. Admittedly, the sale consideration was paid prior to the one year before the sale of original asset. There is no bar under law to claim deduction simultaneously u/s,.54 and u/s.54F in respect of the same asset. The crucial fact which needs to be determined in the present case is the date of purchase of the new residential property. It is settled position of law that the crucial date for the purpose of determination is when the property is purchased for the purpose of section 54 and the date when the possession and control of the property is given to the purchaser's hands. Reliance can be made to the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Shahzada begum MANU/AP/0061/1988 : (1988) 173 ITR 397 and also the decision of Hon'ble Bombay High Court in the case of CIT Vs. Dr. Laxmichand Narpal Nagda (deceased) MANU/MH/0262/1991 : 211 ITR 804 wherein the Hon'ble High Court after referring to the decision of Hon'ble Supreme Court in the case of CIT Vs. T.N. Aravinda Reddy MANU/SC/0302/1979 : (1979) 120 ITR 46 and the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Mrs. Shahzada Begum MANU/AP/0061/1988 : (1988) 173 ITR 397 held that the term "purchase" employed in sub-section (2) of section 54, is not used in the sense of legal transfer and therefore, the holding of a legal title within a period of one year is not a condition precedent for availing deduction u/s.54. The relevant paragraph of the judgment is reproduced below :
"6. Taking into consideration the letter as well as the spirit of section 54 and the word "towards" used before the word "purchase" in sub-section (2) of section 54, it seems to us that the said word is not used in the sense of legal transfer and, therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting section 54. In the instant case, the whole consideration was paid, possession of the flat was obtained and it was actually put to use for dwelling within four months, as a result exemption contemplated under section 54 was clearly attracted.
7. Our pointed attention was drawn by the Revenue to the decision of the Supreme Court in the case of Alapati Venkataramiah v. CIT wherein the word "transfer" as found in section 12(b) of the Indian Income-tax Act, 1922, is interpreted as meaning "passing of title". Since the word interpreted as well as its context are different, the ratio of that decision will have no application to the instant case."
10. Applying the above principle in the present case, the recital of the sale deed clearly says that possession of the property was taken on 31.03.2015 which is within the period of one year before the date of sale of original asset. The covenants in the sale deed executed and registered are conclusive in the absence of any evidence to the contrary. The finding of the ld. CIT(A) that it is a fabricated document is a mere bald allegation and cannot be sustained in the eyes of law.
11. In the light of above discussion, we are of the considered opinion that the appellant is entitled for deduction us/.54/54F as claimed by the assessee.
12. Since we have allowed the appeal of the assessee, the additional grounds raised by the assessee becomes redundant.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 07th day of August, 2024.
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