Viswanathan Padmanabhan Vs ITO (ITAT Bangalore)
U/s 54F Relief Allowed Despite Sale Deed After Two Years- ITAT Holds Flat Booking & Substantial Payment Satisfy the Law
The Bangalore ITAT granted deduction under Section 54F to an assessee who had sold a property on 07.01.2015 and invested the capital gains in a flat booked with a builder, even though the registered sale deed for the new flat was executed after the expiry of two years from the date of transfer. The Tribunal held that substantial investment and acquisition of rights in the property within the prescribed period are more important than the date of registration of the sale deed.
The assessee had sold an immovable property for ₹75.40 lakh and claimed deduction of ₹29.22 lakh under Section 54F. He had booked a flat, paid the booking amount and subsequently paid almost 90% of the total consideration in January 2015 itself, while the final sale deed was registered only on 06.03.2017. The Assessing Officer denied the exemption on the ground that the purchase was completed beyond the two-year period prescribed under Section 54F. The CIT(A) upheld the disallowance.
The Tribunal observed that where a flat is booked with a builder and payments are made in stages linked to construction, such transactions can be regarded as construction of a residential house rather than a simple purchase. Referring to CBDT Circular No. 471 dated 15.10.1986 and Circular No. 672 dated 16.12.1993, the ITAT held that such cases are to be treated as cases of construction for the purposes of Sections 54 and 54F, thereby making the three-year time limit applicable. Since the flat was registered within three years of the original transfer, the claim was eligible.
The Tribunal further held that even if the transaction were viewed as a purchase, the claim could not be denied merely because registration took place later. Relying on the Supreme Court decision in T.N. Aravinda Reddy and the Delhi High Court rulings in R.L. Sood and Balraj, the ITAT reiterated that the word “purchase” should receive a practical interpretation and that registration of the document is not imperative where substantial consideration has already been paid and the assessee has acquired effective domain over the property.
Accordingly, the Tribunal reversed the orders of the lower authorities and allowed the deduction under Section 54F.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 1187/Bang/2025 is filed by Viswanathan Padmanabhan (the assessee/appellant) against the appellate order passed by National Faceless Appeal Centre, Delhi (the learned CIT-A) on 27th March 2025 for assessment year 2015-16 wherein the appeal filed by the assessee against the re-assessment order passed under Section 147 read with Section 144B of the Income Tax Act, 1961 (the Act) dated 12th February 2024 passed by the National Faceless Assessment Centre, Delhi (the learned AO) , was dismissed. The assessee is aggrieved and is in appeal before us.
