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2015 (8) TMI 1204 - ITAT MUMBAI

2015 (8) TMI 1204 - ITAT MUMBAI - TMI - Claim of exemption under section 54 denied - no purchase deed was executed by the builder and that there was only an allotment letter issued - Held that:- As per the Revenue the advance could be returned at any time and, therefore, the assessee may lose the exemption under section 54 of the Act. In our considered opinion, the aforesaid does not militate against assessee’s claim for exemption in the instant assessment year, as there is no evidence that the .....

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stify the action of the Assessing Officer in denying the claim of exemption under section 54 in the instant assessment year.

The assessee can be said to have complied with the requirement of section 54 of the Act; and, the exemption has been incorrectly denied by the lower authorities. As a matter of passing, we may also mention here the reliance placed by Ld. Representative of the assessee on the decision of our Coordinate Bench in the case of Shri Khemchand Fagwani vs. ITO, [2015 (8 .....

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preferred by the assessee and is directed against the impugned appellate order dated 21/11/2013 passed by Ld. CIT(A)-31, Mumbai pertaining to the assessment year 2010-11, with reference to the assessment order dated 03/01/2013, passed in terms of section 143(3) of the Income Tax Act, 1961(the Act). 2. In this appeal although assessee has raised multiple grounds of appeal, but essentially the grievance of the assessee is against the stand of the income-tax authorities in denying the claim of exem .....

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-. The relevant capital gain was claimed as exempt under section 54 of the Act on the strength of having acquired a new residential house being Flat Nos. 1 & 2 on 4th Floor in C-Wing, Ramniwas Building, Malad (E). The investment in acquisition of the new residential house was claimed by the assessee based on an advance of ₹ 1.00 crore given to the builder as booking advance through a cheque dated 6/2/2010. The assessee produced a copy of receipt of payment and allotment letter dated 15 .....

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e, even after two years of the date of transfer of old house the construction of the new property was not completed and that assessee had not gained possession of the new premises also. He, therefore, held that assessee did not comply with the requirements of section 54 of the Act in as much as it could not be said that assessee had purchased a new residential house within the period prescribed therein. The Assessing Officer was of the view that giving of advance could not be treated as equivale .....

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iving of advance . Furthermore, CIT(A) observed that though assessee had parted with money, but he did not acquire possession or domain over the new residential house and, therefore, the denial of the claim of exemption under section 54 of the Act was affirmed. 5. In the above background, Ld. Representative for the assessee vehemently pointed out that the claim of the assessee has been unjustly denied by the lower authorities. It has been pointed out that assessee had duly invested the amount in .....

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nt alongwith proof of payment clearly established that assessee had invested towards acquisition of a new residential house. In the course of hearing, reliance has been placed on the following decisions:- 1. CIT vs. Mrs. Hilla J. B. Wadia , 216 ITR 376(Bom) 2. CIT vs. R.L. Sood, 245 ITR 727 (Del) 3. CIT vs. Kuldeep Singh, 270 CTR 561 (Del). 5.1 It was also contended that the Chandigarh Bench of the Tribunal in the case of Smt. Ranjeet Sandhu vs. DCIT, 49 SOT 7 (Chandigargh) held that completion .....

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cer and CIT(A) to deny the claim have already been noted by us in the earlier para and the same are not being repeated for the sake of brevity. 7. We have carefully considered the rival submissions. The crux of the controversy before us relates to the understanding of the expression purchase contained in section 54 of the Act. Notably, an assessee is entitled to the benefits of section 54 of the Act, if he has purchased the new property within a period of one year before the date of transfer of .....

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thin two years from such date, which the assessee was found not to have complied with. The Assessing Officer also noted that assessee had not constructed a new residential house within a period of three years from 8/12/2009. On the other hand, the claim of the assessee is that it has fulfilled the requirements of section 54 of the Act because he has paid ₹ 1.00 crore to the builder for acquisition of flat and the builder has issued an allotment letter in respect of the specific Flat being, .....

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ssed or transferred to the assessee within the specified period and it is also quite apparent that the new property was still under construction. So however, the allotment letter by the builder mentions the flat number and gives specific details of the property. 7.2 In this context, the Hon ble Delhi High Court in the case of Kuldeep Singh (supra) has explained the meaning of the expression purchased in the context of section 54 of the Act in following words:- 8. The word 'purchase' can .....

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nd it was held that the payment made for execution of release deed by the brother thereby joint ownership became separate ownership for price paid would be covered by the word 'purchase'. It was observed 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 argument that purchase primarily meant acquisition for money paid and not .....

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the conditions of Section 54, you were exempt. The purpose was plain; the symmetry was simple; the language was plain. 9. Recently Supreme Court in Civil Appeal Nos. 5899-5900/2014 titled Sanjeev Lal v. CIT [2014] 46 taxmann. Com 300 again examined Section 54 in a case where the assessee had entered into an agreement to sell a house to a third party on 27th December, 2002 and had received ₹ 15 lacs by way of earnest money and subsequently received the balance sale consideration of Rs.l.17 .....

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Court allowing the appeal noticed that the agreement to sell was executed on 27th December, 2002 but the sale deed could not be executed because of inter-se litigation between the legal heirs, as one of them had challenged the will under which the assessee had inherited the property. The agreement to sell, it was held had given some rights to the vendor and reduced or extinguished rights of the assessee. This, it was observed was sufficient the purpose of Section 2(47), which defines the term tr .....

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n while on the amount spent, relief should be granted. Principle of purposive interpretation should be applied to subserve the object and more particularly when one was concerned with exemption from payment of tax. The assessee, therefore, succeeded. The observations made in the said decision are also relevant on the question whether the payments made by the assessee to the person with whom he had entered. Into. An earlier agreement to sell should be allowed to be set off as expenses incurred in .....

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the Act. As per the Hon ble High Court, the basic purpose behind section 54 of the Act is to ensure that the assessee is not taxed on the capital gain, if he replaces his house and spend money earned on the capital gain within the stipulated period. The parity of reasoning explained by the Hon ble Delhi High Court in the case of Kuldeep Singh (supra) squarely covers the controversy in the present case in favour of the assertions made by the assessee. Therefore, we are inclined to uphold the plea .....

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