Gautam Jhunjhunwala Vs ITO (ITAT Kolkata)
In order to avail the benefit of sec. 54 of the Act, one must purchase a residential house/new asset within one year before or two years after the date on which transfer of the old residential house in respect of which the long term capital gain had arisen. In the instant case, the residential house was transferred by the assessee vide sale deed registered on 27.12.2011. The sale deed has been executed in pursuance of an agreement to sell which had been executed on 16.09.2011 and out of the total sale consideration of Rs. 30 lacs, Rs. 1 lac has been received by the assessee by way of advance/earnest money (cheque dated 16.09.2011 though encashed on 21.11.2011). So we note that when the agreement to sale has been executed a new residential flat had been purchased by the assessee on 04.10.2010 within one year from the date of agreement to sell the old asset. As per sec. 2(47) of the Act which defines the word ‘transfer’ in relation to a capital asset it can be said that if a right in the property is extinguished by an agreement to sell, the capital asset can be deemed to have been transferred.
When any right in respect of any capital assets is extinguished and that right is transferred to someone, it would amount to transfer of a capital asset. In the light of the aforesaid definition and taking into consideration the facts of the present case we note that the assessee executed an agreement to sell for Rs. 30 lacs consideration in respect of its capital asset on 16.09.2011 for transferring the old residential house/original asset in question and a sum of Rs. 1 lac in cheque was received as advance consideration though encashed only on 21.11.2011, we note that the said cheque has not bounced/dishonoured. So, as per the ratio decidendi of the Hon’ble Supreme Court decision in Sanjeev Lal, supra, we note that in the light of the aforesaid facts and in view of the definition of the term ‘transfer’ it can be concluded that some right in respect of capital asset (old asset) in question had been transferred in favour of the vendee and, therefore, some right which the assessee had in respect of the capital asset in question had been extinguished because after execution of the agreement to sell, it would not open to the assessee to sell the property to someone else in accordance with law. As observed by the Hon’ble Supreme Court a right in personam had been created in favour of the vendee in whose favour the agreement to sale had been executed and who had also paid Rs. 1 lac by way of advance/earnest money. It is not the case of the AO/Ld. CIT(A) that the vendee as per agreement to sale is not the vendee when the registration of conveyance deed was executed on 26.12.2011 and, therefore, as per the ratio laid by the Hon’ble Supreme Court in Sanjeev Lal (supra), we find force in the claim made by the assessee to claim exemption u/s. 54 of the Act and we hold that once an agreement to sale is executed in favour of vendee, the said vendee gets a right to get the property transferred in his favour by filing a suit under Specific Performance Act and, therefore, some right in respect of the said property (old residential property) belonging to the assessee had extinguished and some rights have been created in favour of the vendee/transferee when the agreement to sale has been executed. Thus, a right in respect of the capital asset (old residential property in question) has been transferred by the assessee in favour of the vendee/transferee on 16.09.2011 and, therefore, since purchase of the new property on 04.10.2010 which fact has been disputed by the AO/Ld. CIT(A) the purchase of the property is well within one year from the date of transfer as per sec. 2(47) of the Act, therefore, we allow the appeal of the assessee.
