Sompalsingh J. Kataria Vs ITO (ITAT Mumbai)
The case of Sompalsingh J. Kataria vs. ITO (ITAT Mumbai) sheds light on the pivotal role of the date of possession in determining eligibility for capital gains deduction under Section 54 of the Income Tax Act, 1961. This section stipulates the conditions under which a taxpayer can claim deductions on capital gains arising from the transfer of a residential property. The ITAT Mumbai’s decision emphasizes the importance of the possession date over the agreement date for computing the limitation period under Section 54, setting a significant precedent for similar cases.
The appeal by Sompalsingh J. Kataria pertains to the assessment year 2015-2016 and challenges the order of the CIT(A), Pune-11, which upheld the disallowance of the Section 54 deduction claim amounting to Rs. 1,69,47,407. The core issue revolves around the eligibility for the deduction based on the dates of agreement and possession of the new property.
Section 54 of the Income Tax Act provides for the deduction of capital gains arising from the transfer of a residential property if the taxpayer invests the gains in purchasing another residential property within one year before or two years after the transfer, or constructs a new residential property within three years from the transfer date.
