Case Law Details
Sanjeev Lal Etc Vs CIT (Supreme Court of India)
Introduction: In a significant ruling, the Supreme Court of India has provided clarity on the treatment of capital gains and Section 54/54F exemptions in the case of Sanjeev Lal and others versus the Commissioner of Income Tax (CIT). This judgment addresses the critical issue of the agreement date’s relevance in capital gains taxation and its impact on Section 54/54F exemptions.
Background: The case revolves around a residential property in Chandigarh, House No. 267, Sector 9-C, originally owned by Shri Amrit Lal. After his demise, the property’s ownership was vested in his wife and subsequently in the appellants. The appellants intended to sell this property, entered into an agreement to sell on December 27, 2002, and received earnest money. Simultaneously, they purchased another residential property on April 30, 2003.
Legal Dispute: The primary issue was whether the date of the agreement to sell (December 27, 2002) could be considered the date of transfer for the purpose of claiming Section 54/54F exemptions, even though the actual sale deed was executed on September 24, 2004.
Section 54 of the Income Tax Act: Section 54 provides a capital gains exemption to individuals or Hindu Undivided Families (HUFs) on the sale of a long-term capital asset (e.g., residential property) if they purchase or construct another residential property within specific timeframes.
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