Arvinder Singh Sahni Vs DCIT (ITAT Mumbai)
In this case, the assessee earned long-term capital gains of ₹2.30 crore on sale of a residential property and claimed exemption under section 54 by investing in two adjoining flats at Trump Tower. The investment was made within one year prior to the date of transfer, thereby satisfying the statutory condition relating to timing of purchase. However, the Assessing Officer denied the exemption on the ground that possession of the new property was scheduled to be received beyond the prescribed period of three years. This view was also affirmed by the CIT(A).
The Tribunal, however, took a liberal and purposive interpretation of section 54 and held that the crucial requirement under the provision is the investment in a residential house within the stipulated time and not the receipt of possession. It emphasized that once the assessee has made the investment within the prescribed period, the benefit cannot be denied merely because the builder hands over possession at a later date, especially when such delay is often beyond the control of the assessee.
Relying on binding judicial precedents including the Bombay High Court decision in Vembu Vaidyanathan (affirmed by the Supreme Court), the Tribunal reiterated that the date of allotment or purchase is decisive, and possession is only a consequential event. It further noted that the expression “purchase” in section 54 carries a wider connotation and cannot be restricted to physical possession or registration alone. The Tribunal also referred to other High Court rulings which consistently hold that delay in completion or possession does not disentitle the assessee if the investment condition is satisfied.
Accordingly, the Tribunal concluded that the assessee had complied with the requirements of section 54 by investing within the prescribed time frame and that denial of exemption on the basis of delayed possession was unjustified. The addition made by the AO and sustained by the CIT(A) was therefore deleted and the exemption was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the Assessee against the order dated 29.08.2025, impugned herein, passed by National Faceless Appeal Centre (NFAC), Delhi/Ld. Commissioner of Income Tax (Appeals) [in short Ld. Commissioner] u/s 250 of the Income Tax Act, 1961, [in short ‘the Act’] for the A.Y. 2015 -16.
