Reji Easow Vs Income Tax Officer (ITAT Mumbai)
ITAT Mumbai held that for claiming exemption under section 54 Date on which possession is by the Assessee should be taken as the date of purchase and further section only require Assessee to purchase/Construct a residential house within the specified period and source of funds is quite irrelevant.
Date on which possession is by the Assessee ) should be taken as the date of purchase. The requirement of the Section 54 is that the Assessee should purchase a residential house within the specified period and source of funds is quite irrelevant. Nowhere, it has been mentioned that the funds received as consideration from sale of original asset must be utilized for the purchase of the new residential house [ACIT vs. Dr. P.S. Pasricha : (2008) 20 SOT 468 (Mumbai) (11-01-2008)]. Since the date of purchase falls within a period of 2 years from the sale of Original Asset (i.e. 21.05.2014), the Assessee is entitled to benefit under Section 54 of the Act. The alternate contention of the Assessee, that the benefit of Section 54 be granted to the Assessee by treating the transaction as a case of ‘construction’ in view of the judgment of Hon’ble High Bombay Court in the case of Hilla J B Wadia : 216 ITR 376, now being academic, does not require consideration.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
By way of the present appeal the Appellant/Assessee has challenged the order dated 20.01.2020 passed by the Commissioner of Income Tax (Appeals) under Section 250 of the Income Tax Act, 1961 in appeal (10423/2017-18). On the following grounds are as under:-
1. The learned CIT(A) erred in confirming the disallowance of deduction claimed under Section 54 of the Income Tax Act.
2. The learned CIT(A) erred in not directing the learned AO to allow deduction under section 54 on the ground that the appellant has made investment in constructed residential house within three from the date of sale of original residential property.
2. The facts, in brief, relevant to the issue under consideration are as follows. The assesses is a salaried employee and his return was picked up for scrutiny assessment. In the ensuring scrutiny assessment proceedings it was noticed that in May 2011 the Assessee along with his wife booked a residential flat (Flat No. 203) in an under construction building named ‘Bankston’ located at Rodas Enclave, Thane (W) from Roma Builders Pvt. Ltd [hereinafter referred to as ‘New Residential House’] for a consideration of 1,40,51,500/-. In December 2012, the Assessee made majority of payments to the builders by availing a mortgage/housing loan. Thereafter, on 21.05.2014, the Assessee and his wife, being co-owners holding 50% share, sold a residential flat [hereinafter referred to as ‘Original Asset’] for INR 1,15,00,000/- and 2tilized the sale proceeds for making towards repayment of the existing mortgage/housing loan. In the income tax return for the Assessment Year 2015-16 relevant to the Financial Year 2014-15 during which the sale took place, the Assessee claimed deduction under Section 54 of the Act and offer to tax ‘Nil’ long term capital gains computed as under:
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