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2014 (8) TMI 463 - HC - Income TaxBenefit u/s 54 – Second property not purchased within two years of sale of first property – Whether amount paid for cancellation of the earlier agreement for sale of the original property and amount paid as brokerage, could be allowed to set off from the sale consideration received – Held that:- The payments cannot be challenged on the ground that they were not genuine or were not made – the payments were not directly relatable to the transaction for sale which had resulted in income by way of capital gains - the tribunal has rightly held that the expenditure was incurred and was wholly connected with the sale transaction - By cancelling earlier transaction and ensuring that the rights created by the earlier agreement to sell do not obstruct the sale transaction, payments of ₹ 5,00,000/- to Ashok Singhal and ₹ 2,50,000/- to Rajat Kapur, have been made. Whether the assessee had “purchased” the second property and the payment made was entitled to exemption u/s 54 of the Act – Held that:- The word “purchase” used in Section 54 of the Act should be interpreted pragmatically in a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion - the assessee to deposit unspent amount not utilized by the assessee for purchase or construction of a new asset before the date of furnishing of return, in a specified account - the amount, if already utilized for purchase or construction of the new asset with the amount so deposited will be deemed to be cost of a new asset subject to the proviso - The word “purchase” is used in sub-section (2) and indicates that the word is not restricted or confined to registered sale deed or even possession but has a wider connotation. The proviso supports the interpretation and stipulates that the amount deposited but not utilized wholly or partly for purchase or construction of new asset within the specified period will be charged to tax u/s 45 in the previous year in which the period of three years from the date of transfer of original asset expired - The period of three years is stipulated as this is the longer period specified in the sub-section (1) to Section 54 - It is only the balance amount which is not utilized which is to be brought and charged to tax - The entire amount of sale consideration or the capital gains is not to be brought to tax, but the unspent amount/figure is taxed - Decided against revenue.
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