Arvindbhai Ramniklal Raval (HUF) Vs ITO (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT) Surat, in the case of Arvindbhai Ramniklal Raval (HUF) vs. ITO, has ruled that an assessee is eligible for a deduction under Section 54F of the Income-tax Act, 1961, even if a registered sale deed for the new residential property has not been executed, provided there is a valid purchase agreement with possession. This decision overturns the disallowance made by the Assessing Officer (AO) and upheld by the Commissioner of Income-tax (Appeals) [CIT(A)].
The case involved an assessee who sold land and claimed a Section 54F deduction for investing in a new residential property. The assessee had entered into a “Kabja Sahit no Vechan Karar” (sale agreement with possession) for the new property, paid the full consideration, and also deducted TDS under Section 194IA. The AO and CIT(A) disallowed the deduction, arguing that Section 54F requires a “purchase” which implies a registered sale deed, and an agreement to sell is merely a promise for future transfer of property, not an actual transfer of ownership. They contended that title only transfers upon execution and registration of a sale deed.
The ITAT, however, took into consideration the payment of the entire sale consideration through banking channels, the deduction of TDS, and the fact that the agreement explicitly conveyed vacant and direct possession to the assessee, stating the assessee had become the sole and absolute owner with full ownership rights. Crucially, the Tribunal relied on the jurisdictional Gujarat High Court’s decision in Kishorbhai Harjibhai Patel vs. ITO and the Supreme Court’s ruling in Sanjeev Lal vs. CIT. These precedents establish that for the purpose of the Income-tax Act’s definition of “transfer” (Section 2(47)), an agreement to sell that extinguishes rights can amount to a transfer. The ITAT concluded that the assessee fulfilled the conditions of Section 54F by investing in the new residential house within the stipulated time, irrespective of the non-registration of the sale deed, given the clear transfer of possession and payment of consideration. Therefore, the appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
