Case Law Details
Smt. Ranjana R. Deshmukh Vs ITO (ITAT Mumbai)
Admittedly, though the assessee had entered into an agreement to purchase the new property viz. A-801, Lodha Luxuria on 29.01.2009, but then the possession of the same was delivered to her only as on 18.05.2012. We are persuaded to subscribe to the claim of the ld. A.R that the purchase of new residential property would be substantially effected on the date when the assessee had paid the full consideration on the flat becoming ready for occupation and had obtained possession of the same. In the backdrop of our aforesaid observations, we are of the considered view that as the possession of the new residential property was delivered to the assessee on 18.05.2012 i.e. within a period of one year prior to the transfer of the property under consideration, thus the purchase of the same could safely be held to have been substantially effected on the said date.
Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Beena K. Jain (1994) 75 Taxman 145 (Bom).
FULL TEXT OF THE ITAT JUDGMENT
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-2, Mumbai, dated 07.12.2016, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short ‘Act’), dated 30.11.2015. The assessee assailing the order of the CIT(A) has raised before us the following effective grounds of appeal:
“(1) AS REGARDS ASSESSMENT BEING NULL AND VOID
That the learned A.O. erred in passing an assessment order u/s.143(3) without assuming proper jurisdiction by having failed to issue statutory notice u/s. 143(2) of the I.T. Act before proceeding with assessment.
2) AS REGARDS DENIAL OF DEDUCTION U/S.54 OF THE I.T. ACT
a) That on the facts and circumstances of the case and in law the learned CIT(A) erred in denying the deduction u/s. 54 of the Act when the Appellant had complied with all the requirements of the said section.
b) That the learned CIT(A) failed to appreciate that the Appellant had purchased new asset (residential property) within the time line specified by the section 54 of the I.T. Act.
c) That the learned CIT (A) failed to realize that the Appellant had entered into in an agreement on 29-01-2009 by virtue of which, she acquired “vested rights to purchase residential property” in the proposed construction and not just “new property” as alleged by the learned CIT (A) when in fact on 29.01.2009 “the new property” was not in existence.
d) That the learned CIT (A) failed to appreciate that the Appellant got possession of new residential property on 18-05-2012 which is within the period of one year prior to the date of transfer (28-03-2013) of the old residential property.
(3) AS REGARDS NON OBSERVANCE OF PRINCIPLES OF NATURAL JUSTICE
a) That the learned CIT (A) dismissed the appeal of the Appellant relying on a precedent of Apex court which is distinguishable not only on facts but also in law and has no bearing in the case of the Appellant as the facts are totally different.
b) That the learned CIT (A) failed to give an opportunity to the Appellant to distinguish the precedent and unilaterally relied on the same and dismissed the appeal to the detriment of the Appellant resulting in miscarriage of justice.
(4) CONSEQUENTIAL RELIEFS
The Appellant prays that interest levied u/s.234A/ 234B/ 234C as charged by A.O., may be ordered to be deleted as consequential relief.”
2. Briefly stated, the assessee had e-filed her return of income for A.Y. 2013-14 on 01.08.2013, declaring income of Rs.4,65,538/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2) of the Act.
3. In the course of the assessment proceedings it was observed by the A.O that the assessee had sold an immovable property for a consideration of Rs.74 lac on 28.03.2013. The ‘Long Term Capital Gain’ (for short ‘LTCG’) of Rs.49,89,213/- on the sale of the said property was claimed by the assessee as exempt under Sec.54 on the ground that she had purchased a new residential property for a consideration of Rs.78,43,392/-. On the basis of the aforesaid claim, the assessee had reflected the income under the head ‘Capital gain’ at Rs.nil. It was noticed by the A.O that the assessee had entered into an ‘agreement to purchase’ the new residential property viz. A-801, Lodha Luxuria on 29.01.2009. On the basis of the aforesaid facts, the A.O was of the view that as the new residential property was purchased by the assessee beyond the stipulated period of one year before the transfer of the property under consideration, thus the said investment made by her was not eligible for claim of exemption under Sec.54. In the backdrop of his aforesaid deliberations the A.O disallowed the claim of exemption under Sec.54 of Rs.49,89,213/- and assessed her income at Rs.54,71,760/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) not being persuaded to subscribe to the contentions advanced by the assessee dismissed the appeal.
5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short ‘A.R’) taking us through the facts of the case submitted that the assessee had on 29.01.2009 entered into an agreement with the builder viz. M/s Shreee Sainath Enterprises for purchase of a new residential property viz. A-801, Lodha Luxuria. It was submitted by the ld. A.R that the possession of the new residential property viz. A-801, Lodha Luxuria was delivered to the assessee only as on 18.05.2012. On the basis of the aforesaid facts, the ld. A.R averred that as on the date on which the purchase agreement was executed the immovable property was not in existence, thus, on the basis of instalments paid and documents executed by the assessee only a right as regards the same got vested with the assessee. It was the contention of the ld. A.R, that as the possession of the new residential property was delivered to the assessee within the stipulated period of one year before the date of transfer of the property under consideration, hence, her claim for exemption under Sec.54 was in order. It was submitted by the ld. A.R that as the new residential property was not in existence on the date on which the assessee had entered into an agreement for purchase of the new residential property, thus it was incorrect on the part of the A.O to have held the same as the date of purchase by the assessee. The ld. A.R submitted that purchase of new residential property would be substantially effected on the date when the possession of same is delivered, and not on the date on which the sale agreement or the registration is done. In order to buttress his aforesaid contention the ld. A.R relied on the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Smt. Beena K. Jain (1994) 75 Taxman 145 (Bom). Per contra, the ld. Departmental Representative (for short ‘D.R’) relied on the orders of the lower authorities.
6. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record. The issue involved in the present appeal lies in a narrow compass. The assessee had sold her residential property on 28.03.2013 for a consideration of Rs.74 lac. The LTCG of Rs.49,89,213/- arising on the sale of the said property was claimed by the assessee as exempt under Sec.54 of the Act. However, the said claim of deduction was declined by the A.O, for the reason that the ‘agreement to purchase’ the new residential property viz. A-801, Lodha Luxuria entered into by the assessee on 29.01.2009 fell beyond the period of one year prior to the date on which the property under consideration had been transferred. The contention advanced by the assessee that as the possession of the new residential property viz. A-801, Lodha Luxuria was delivered on 18.05.2012, i.e within a period of one year prior to the date of transfer of the property under consideration, thus she was entitled towards claim of deduction under Sec.54, did not find favour with the A.O.
7. We have deliberated at length on the issue under consideration and find substantial force in the contention dvanced by the ld. A.R before us. Admittedly, though the assessee had entered into an agreement to purchase the new property viz. A-801, Lodha Luxuria on 29.01.2009, but then the possession of the same was delivered to her only as on 18.05.2012. We are persuaded to subscribe to the claim of the ld. A.R that the purchase of new residential property would be substantially effected on the date when the assessee had paid the full consideration on the flat becoming ready for occupation and had obtained possession of the same. In the backdrop of our aforesaid observations, we are of the considered view that as the possession of the new residential property was delivered to the assessee on 18.05.2012 i.e. within a period of one year prior to the transfer of the property under consideration, thus the purchase of the same could safely be held to have been substantially effected on the said date. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Beena K. Jain (1994) 75 Taxman 145 (Bom), wherein the Hon’ble High Court has held as under:
“2. Under section 54F in the case of an assessee if any capital gain arises from the transfer of any long-term capital asset, not being a residential house and the assessee has, within a period of one year before or two years after the date of which the transfer took place purchased a residential house, the capital gain shall be dealt with as provided in that section. As per the section Certain exemption has to be allowed in respect of the capital gains to be calculated as set out therein. The department contends that the assessee did not purchase the residential house either one year prior to or two years after the sale of the capital asset which resulted in long-term capital gains. According to the department, the agreement for purchase of the new flat was entered into more than one year prior to the sale. Hence the petitioner is not entitled to the benefit under section 54F. In our view the Tribunal has rightly negatived this contention and has held that the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is 29-7-1988 when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and came to the conclusion that purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on 29-7-1988 and handing over of possession of the flat on the next day.”
We thus respectfully follow the aforesaid judgment of the Hon’ble Jurisdictional High Court, and hold that the date of final occupation of the new residential property under consideration i.e 18.05.2012 shall be taken as the date of acquisition of the same by the assessee for the purpose of determining her eligibility towards claim of deduction under Sec. 54 of the Act.
8. The appeal of the assessee is allowed in terms of our aforesaid observations.
