TMI Blog2014 (7) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. In the case of Oxford University Press v. Commissioner of Income Tax [2001 (1) TMI 79 - SUPREME Court] this Court has observed that a purposive interpretation of the provisions of the Act should be given while considering a claim for exemption from tax. In view of the aforestated peculiar facts of the case and looking at the definition of the term ‘transfer” as defined under Section 2(47) of the Act, the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property and used for purchase of a new asset/residential house. - Decided in favor of assessee. - Civil Appeal Nos. 5899-5900 of 2014 (Arising out of SLP (c) Nos.16958-59 of 2013) - - - Dated:- 1-7-2014 - Anil R. Dave And Shiva Kirti Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd December, 2000 leaving behind him no legal heirs. The suit filed by him had been dismissed in May, 2004 as there was no representation on his behalf in the suit. 5. Due to the interim relief granted in the above stated suit, the appellants could not execute the sale deed till the suit came to be dismissed and the validity of the Will was upheld. Thus, the appellants executed the sale deed in 2004 and the same was registered on 24th September, 2004. 6. Upon transfer of the house property, long term capital gain had arisen, but as the appellants had purchased a new residential house and the amount of the capital gain had been used for purchase of the said new asset, believing that the long term capital gain was not chargeable to income tax as per the provisions of Section 54 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), the appellants did not disclose the said long term capital gain in their return of income filed for the Assessment Year 2005-2006. 7. In the assessment proceedings for the Assessment Year 2005-2006 under the Act, the Assessing Officer was of the view that the appellants were not entitled to any benefit under Section 54 of the Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 54 of the Act in respect of the long term capital gain can be availed only if a residential house i.e. a new asset is purchased within one year before or within two years after the date on which the transfer of the residential house/original asset takes place. In the instant case, the residential house had been transferred by the appellants-assessees on 24th September, 2004 whereas they had purchased another house on 30th April, 2003. Thus, the new asset was purchased more than one year prior to the date on which the transfer in respect of the residential house had been effected. 10. For the aforestated reasons, the Assessing Officer did not grant benefit under Section 54 of the Act and therefore, the assessment order had been challenged by the appellants before the Commissioner of Income Tax (Appeals). The appeal, so far as it pertained to the benefit under Section 54 of the Act was concerned, had been dismissed and therefore, the appellants had approached the Income Tax Appellate Tribunal. The Tribunal also upheld the orders passed by the Commissioner and therefore, the appellants had approached the High Court by filing appeals under Section 260 A of the Act, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he buyer of the property and certain right in respect of the residential house, which the appellants had, had been extinguished and therefore, 27th December, 2002 ought to have been considered as the date of transfer. 14. The learned counsel had also relied upon certain judgments delivered by different High Courts to support his submissions. 15. On the other hand, the learned counsel appearing for the Revenue Authorities had vehemently submitted that by mere execution of an agreement to sell, right of the vendor/transferor in respect of the property cannot be extinguished. According to him, no sale of the property in question had been effected, when the agreement to sell had been executed on 27th December, 2002. According to him, the appellants had sold the original asset on 24th September, 2004 and had purchased a new house/new asset on 30th April, 2003 i.e. one year before sale of the original asset and therefore, the benefit under Section 54 of the Act could not have been availed by the appellants and therefore, the Revenue Authorities as well as the High Court were absolutely correct by not granting the benefit claimed by the appellants. 16. We had heard the learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When such a right is created in favour of the vendee, the vendor is restrained from selling the said property to someone else because the vendee, in whose favour the right in personam is created, has a legitimate right to enforce specific performance of the agreement, if the vendor, for some reason is not executing the sale deed. Thus, by virtue of the agreement to sell some right is given by the vendor to the vendee. The question is whether the entire property can be said to have been sold at the time when an agreement to sell is entered into. In normal circumstances, the aforestated question has to be answered in the negative. However, looking at the provisions of Section 2(47) of the Act, which defines the word transfer in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred. Relevant portion of Section 2(47), defining the word transfer is as under: 2(47) transfer , in relation to a capital asset, includes,- (i) . (ii) the extinguishment of any rights therein; or 21. Now in the light of definition of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under Section 2(47) of the Act, even if looked at the provisions of Section 54 of the Act which gives relief to a person who has transferred his one residential house and is purchasing another residential house either before one year of the transfer or even two years after the transfer, the intention of the Legislature is to give him relief in the matter of payment of tax on the long term capital gain. If a person, who gets some excess amount upon transfer of his old residential premises and thereafter purchases or constructs a new premises within the time stipulated under Section 54 of the Act, the Legislature does not want him to be burdened with tax on the long term capital gain and therefore, relief has been given to him in respect of paying income tax on the long term capital gain. The intention of the Legislature or the purpose with which the said provision has been incorporated in the Act, is also very clear that the assessee should be given some relief. Though it has been very often said that common sense is a stranger and an incompatible partner to the Income Tax Act and it is also said that equity and tax are strangers to each other, still this Court has often observ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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