Deduction U/s. 54 allowable on sale consideration invested one year before sale of property

2. The only issue arises for consideration is disallowance of exemption claimed by the assessee under section 54 of the Income Tax Act, 1961 (in short ‘the Act’).

3. Shri D. Anand, the learned counsel for the assessee, submitted that the assessee sold a flat at Eastern Wing Block No. B, 5th floor, BBC Spring Field Apartments, Old No. 5, EVK Sampath Road, Vepery, Chennai-7, for a total consideration of Rs. 72,00,000. In fact, the entire sale consideration was received on 20-4-2012. However, the sale deed was registered only on 6-6-2012. The learned counsel further submitted that there was agreement for sale executed on 9-4-2012. As per this agreement, the physical possession of vacant flat was handed over to the purchaser. Therefore, under section 2(47) of the Act, there was a transfer of property even though the registration of the document is essential pre-condition for transfer of immovable property the value of which is exceeding Rs. 100 under the common law. The assessee has, in fact, invested on 23-4-2012 to the extent of Rs. 25,00,000 and on 5-5-2012 another Rs. 25,00,000 and a sum of Rs. 2,00,000 was invested on 3-8-2013 in a new flat. The learned counsel submitted that the assessing officer, after taking into consideration of the sale deed dated 06.06.2012, found that an investment was made by the assessee for construction of a new house only after the sale of existing property, therefore, he disallowed the claim of the assessee.

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