Sat Paul Bansal Vs DCIT (ITAT Chandigarh)
Capital Gains Taxable in Earlier Year Since Property Rights Were Extinguished Before Sale Deed Registration; Section 54 Relief Granted After ITAT Recognises Effective Property Transfer Before Registered Conveyance; ITAT Holds Sale Consideration Receipt and Possession Transfer Sufficient for Capital Gains Taxability; Delay Due to Revenue Lien Cannot Defeat Section 54 Deduction.
In this case, the dispute before the ITAT Chandigarh concerned the taxation year of long-term capital gains arising from the sale of a residential property and the assessee’s eligibility for deduction under Section 54 of the Income Tax Act.
The assessee owned a 50% share in a property located at Sector 8-B, Chandigarh. An agreement to sell the property was executed on 21 October 2017, while the registered sale deed was ultimately executed on 6 April 2018. The assessee computed long-term capital gains in AY 2018-19 and claimed deduction under Section 54 on investment made in another residential property purchased on 3 November 2016.
During assessment proceedings, the Assessing Officer held that since the sale deed was registered on 6 April 2018, the transfer took place in FY 2018-19 relevant to AY 2019-20. On that basis, the deduction under Section 54 was denied because the purchase of the new property was considered beyond the permissible one-year period preceding the transfer.
