TMI Blog2023 (3) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... h by the assessee. Thus, in view of the undisputed facts of the case and the decision rendered in the case of Smt. Beena K. Jain (supra) we hold that the assessee is eligible for claiming deduction u/s 54 of the Act. Consequently all the grounds of appeal of the assessee are allowed. - ITA No. 466/PUN/2022 - - - Dated:- 2-2-2023 - SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For the Appellant : Shri Nikhil Pathak For the Respondent : Shri Satyajit Mandal. CIT DR ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from order of the ld. D.R.P. dated 31-03-222 for A.Y. 2019-20 as per the following grounds of appeal. The following grounds are taken without prejudice to each other- On facts and in law, 1] The learned A.O.IDRP erred in denying deduction u/s 54 of Rs.1,70,90,871/- to the appellant from the capital gains on sale of a residential property. 2] The learned A.O. I DRP was not justified in holding that- Bombay H.C. decision in the case of CIT v. Smt. Beena K. Jain [217 ITR 363] was against the appellant as the appellant had paid full consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the assessee claimed deduction u/s 54 of the Act was purchased on 21-12-2016. The A.O held that as the property purchased is beyond one year preceding the year of sale, the assessee is not eligible for deduction u/s 54 of the Act. The assessee submitted that he entered into a supplementary agreement with the builder for purchase of the flat on 06-07-2018 and the date of possession of the flat by the assessee was 24-12-2018. Therefore, the assessee had claimed that he is eligible for deduction u/s 54 of the Act. The A.O however, observed that the supplementary deed was only a deed of rectification and cannot be taken cognizance of that the flat number, building name and the consideration value of the flat remained the same. Accordingly, the A.O held that the assessee was not eligible for deduction u/s 54 of the Act as the assessee had not purchased the new asset within the period of one year before the transfer took place. 3. Before the ld. D.R.P the assessee had submitted as follows: In this case, the assessee filed the return declaring total income of Rs. 8,70,970/- for the A. Y. 2019 - 20. As against this returned income, in the draft order the assessment is prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the transfer took place, it shall be dealt with in accordance with the following provisions of this section that is to say. The assessee is giving the following details of the dates of various transactions relevant in this regard Sr.No. Transaction Date 1. Date of transfer of the residential property including plot and the bungalow October 23, 2018 2. Date of agreement for the new flat No. 302 to be constructed in the project, Gayatree Grace December 21, 2016 3. Supplementary agreement with the builder July 06, 2018 4. Date of possession of the flat by the assessee December 24, 2018. The above chronological chart indicates the important relevant events which have to be considered for the purposes of allowing the deduction under Section 54 of the Act. It is to be noted that the assessee on December 21, 2016 entered into an agreement with the builder, M/s. . Gayatree Skyscrapers India LLP for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper, the assessee had not purchased the flat No. 302 but had only acquired a right to get it from the developer after the construction was complete. The assessee clarifies that an article I property is said to be purchased only when it is totally ready for sale. If the property is not ready, fully prepared constructed at the time of agreement, one cannot hold a view that it is purchased by the buyer on the date of the agreement. When an agreement is entered into for acquiring a property which is under preparation development construction, that agreement only gives a buyer a right to get that property from the seller and nothing else. In this case, the assessee has shown and proved that the new flat No. 302 in the project was not at all ready in 2016 when the agreement was entered into and thus, it is grossly incorrect to hold a view that the assessee purchased a new flat in December, 2016 and the condition of section 54 is not satisfied. The benchmark date for calculating the window of one year before to two years after sale of residential property is the date of execution of the Deed of Transfer of the sold property (i.e. bungalow at unit no. 8, Bulk Land-1, Sector26, Nigdi Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say As per the sub-section, the new property has to be purchased within the period of one year before or two years after the date on which the transfer took place. In this case, the purchase of new asset has happened almost two years before the date of transfer making the assessee ineligible for deduction u/s. 54. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effectively made the purchase by then. In the case of CIT v/s. J R Subramanya Bhatt 165 ITR 0571 (Kar.), relied upon by the assessee, the Hon'ble Karnataka High Court decided the issue in favour of the assessee but the issue involved in that case was construction of the property and not purchase of the property. In the said case, the construction was completed within 3 years of the transfer of the asset. But in the instant case, the issue involved is purchase and the purchase of the new asset happened more than one year prior to the transfer of the asset. In the case of M George Joseph Vs. DCIT 440 ITR 0589 (Kar), the Hon ble High Court had ruled that the assessee was eligible for deduction u/s 54F as the assessee has completed the construction of residential house within 3 years from the date of transfer of the original asset, As already discussed the facts of the instant case are different form this case. In the case of DCIT Vs. Dr. Chalasani Mallikarjuna Rao 161 ITO 0721 (Visakhapatnam Trib.), the Hon'ble IT AT held that the date of commencement of construction was immaterial and it was only the date of completion of construction which is relevant as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the new property shall be deemed to be acquired only when it is ready, full consideration is paid and the possession is received by the assessee. In the present case all these three conditions were fulfilled only on 24-12-2018 when the assessee received possession of the new flat and therefore, deduction was rightly allowable to the assessee. 6. Per contra, the ld. D.R supported the findings of the ld. D.R.P. and contended that the decision of Hon ble Jurisdictional High Court (supra) has been brought in light in correct perspective by the ld. D.R.P where the ld. D.R.P has looked into when the substantial consideration was paid and in this case more than 95% of the consideration for the new asset had been paid by the assessee in the year 2016-17 which is beyond the margin allowed under the said provision. 7. We have heard the submissions of the parties herein, considered the facts and circumstances and also the judicial pronouncements placed on record. For proper adjudication of the issue we will revisit the facts in this case. The assessee filed his return declaring total income of Rs. 8,70,970/- for A.Y. 2019-20. As against this returned income when the assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee received the possession of the new flat. These facts have not been refuted by the department. In the judgment of the Hon ble Bombay High court in the case of CIT Vs. Smt. Beena K. Jain (1994) 75 Taxman 145 Bombay) while interpreting the provision of section 54 of the Act on an appeal by the Revenue against the Tribunal s order it was held that the Tribunal was right in allowing the exemption under the said provision considering the date of possession of the new residential premises instead of date of sale of agreement and the date of registration. The Tribunal also held which was affirmed by the Hon ble Bombay High Court that the relevant date to be considered was when the assessee paid full consideration amount of the flat becoming ready for occupation and obtained possession of the flat. The relevant paras are as follows: 2. Under section 54F of the Income-tax Act, in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased a residential house, the capital gain shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the transaction had to be considered. The Hon ble Bombay High Court held that the substance of the transaction signifies when the new property is ready for possession, when the substantial or full payment had been made and when the actual possession was acquired by the assessee. These substantial necessities are crucial for determining the issue for claim of deduction u/s 54 of the Act. Admittedly, in this case what the department is harping upon is merely the agreement dated 21-12-2016 when the building itself was not constructed and the assessee has only acquired his right to get a flat in the said building. When actually therefore, can it be said that the new property was purchased? It is only when the assessee received the possession through letter of possession on 24-12-2018. This is when all the three ingredients as enumerated in the decision of Hon ble Jurisdictional High Court for claiming deduction u/s 54 had been complied with by the assessee. 9. In another decision of Pune Tribunal in ITA No. 1424/PUN/2016 and ITA No. 1707/PUN/2016, for A.Y. 2012-13, order dated 17-0-2019 identical facts were considered. It was observed by the Tribunal that it is an unabated f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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