2014 (6) TMI 559 - AT - Income Tax

Claim of exemption u/s 54 of the Act Deletion of disallowance of payment - Investment in the new house/apartment Held that - CIT(A) rightly was of the view that the assessee started making payments w.e.f. 7.11.2004 though the eligible time period starts from 19.10.2005 i.e. one year before the date of transfer - the period of two years after the date of transfer of house ends on 19.10.2008 - The property has been constructed / purchased within two years after the date of transfer - the assessee is entitled to exemption u/s 54 having met the condition of making the investment within two years from the date of transfer - the main purpose of section 54 is to give relief in respect of profits on the sale of a residential house. The amount of capital gain has been invested by the assessee in new house property - the payment had started from November, 2004 and were paid in installments up to August, 2008 - the payments were made in view of the agreement entered into by the assessee with the developer in November, 2004 whereas the possession of the house was handed over to the assessee in January, 2008 and property was registered in the name of the assessee in May, 2008 - as per section 54, the assessee was required to invest in the new house property between the period 19.10.2005 to 19.10.2008 - The AO in view of the date of agreement being before 19.10.2005 disregarded the claim of assessee ignoring the fact that actual conveyance deed was executed between this period of 19.10.2005 & 19.10.208 - the claim of the assessee cannot be rejected simply because of the fact that certain payments were made before the period 19.10.2005 - CIT(A) though has considered the investment in the house as eligible investment u/s 54 but has excluded the payments made by the assessee before 19.10.2005 - CIT(A) was justified in doing so and there is no reason to interfere in the order of CIT(A) Decided against Revenue.

Summary

Issues:
1. Disallowance under section 54 of the Income Tax Act, 1961.
2. Eligibility of exemption under section 54 based on the timing of property purchase.
3. Permission to add, delete, or amend grounds of appeal.

Issue 1: Disallowance under section 54 of the Income Tax Act, 1961:
The appellant, in this case, appealed against the disallowance made by the Assessing Officer under section 54 of the Income Tax Act, 1961. The Assessing Officer disallowed the exemption wrongly claimed by the assessee, stating that the investment in the new house was not made within the stipulated period as per section 54. The appellant argued that the payments for the new house were made over a period of time and the exemption should not be denied based on payments made before the specified period.

Issue 2: Eligibility of exemption under section 54 based on the timing of property purchase:
The main contention revolved around whether the assessee qualified for exemption under section 54 by investing in a new house property within the prescribed time frame. The Assessing Officer observed that the investment was not in accordance with section 54 as the agreement for the new property was dated before the specified period. However, the Ld CIT(A) allowed the appeal partly, considering the actual payments and possession dates. The Ld CIT(A) emphasized that the purpose of section 54 is to provide relief on the sale of a residential house, and if the conditions are met, the exemption cannot be denied. The Tribunal upheld the Ld CIT(A)'s decision, stating that the payments made before the specified period should not disqualify the assessee from claiming exemption under section 54.

Issue 3: Permission to add, delete, or amend grounds of appeal:
The appellant sought permission to add, delete, or amend the grounds of appeal before or at the time of the hearing. However, the judgment did not provide further details or rulings on this issue.

In conclusion, the judgment addressed the disallowance under section 54 of the Income Tax Act, 1961, the eligibility of exemption based on the timing of property purchase, and the request for permission to modify grounds of appeal. The decision favored the assessee, allowing the exemption under section 54 despite payments made before the specified period, emphasizing the purpose and conditions of the section.