ITO Vs Anju Madhan (ITAT Delhi)
The appeal before the Tribunal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2016–17. The central issue concerned the assessee’s claim of exemption under Section 54 of the Income-tax Act, 1961, in respect of long-term capital gains arising from the sale of property.
The assessee, along with her husband, had originally purchased a property in Greater Kailash, New Delhi. Over the years, the assessee incurred expenditure on improvements and constructed additional floors. During the relevant assessment year, the property was sold for a total consideration of ₹8.40 crore, resulting in long-term capital gains of ₹6.68 crore. The assessee claimed exemption under Section 54 by investing in another residential property through an agreement to sell and taking possession of the property.
During assessment proceedings, the Assessing Officer disallowed the exemption on two primary grounds. First, the agreement to purchase the new property was not registered. Second, the vendor of the property did not have a clear title, and the property was subject to litigation.
On appeal, the Commissioner (Appeals) examined the matter in detail and allowed the claim of exemption. It was noted that the vendor had acquired clear title through a conveyance deed dated 16.10.2012, and the property had been converted into freehold. The Commissioner (Appeals) also observed that there was no objection to the mutation of title and that any prior dispute or litigation did not affect the vendor’s right to enter into the agreement to sell at the relevant time.
