Date of Possession of Flat is “Date of Actual Purchase” for the Purpose of Claiming Capital Gain Exemption u/s 54: ITAT [Read Order]

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that the date of possession of flat would be the date of actual purchase for the purpose of claiming capital gain exemption under Section 54 of the Income Tax Act 1961.

 The assessee Sanjay Vasant Jumde, is a non-resident Indian The assessee filed his return declaring total income for A.Y. 2019-20. As against this returned income when the assessment was completed, the deduction claimed by the assessee under Section 54 of the Income Tax Act and was disallowed which was upheld by the D.R.P. The assessee, during the year of sale of his bungalow and a plot had earned long term capital gain. The assessee claimed deduction under Section 54 Income Tax Act of the for investment in a residential flat.

This deduction was disallowed by the A.O on the ground that the assessee had purchased the new flat on 21-12-2016 while the capital gain arose on sale of the property on 23-10-2018. Thus, in the opinion of the A.O the new residential flat was purchased by the assessee more than one year before the sale of the property.

As per section 54 of the Income Tax Act , the deduction is available if a new residential property is purchased within a period of one year before or two years after the date on which the transfer takes place or has, within a period of three years from the date of transfer, constructed one residential house in India.

 Nikhil Pathak, on behalf of the assessee had complied with the conditions of section 54 of the Income Tax Act and that the assessee received possession of the new residential property within two months of the sale of old property and hence deduction under Section 54 of the Income Tax Act was allowable to the assessee

 Satyajit Manda on behalf of the revenue submitted that, the substantial consideration was paid and, in this case, more than 95% of the consideration for the new asset had been paid by the assessee in the year 2016-17 which was beyond the margin allowed under the said provision.

 The Division Bench of R.S. Syal (Vice President) and Partha Sarathi Chaudhury (Judicial Member) allowed the appeal.

The bench referred to the judgement of the Hon‟ble Bombay High court in the case of CIT Vs. Smt. Beena K. Jain in which it was observed that, it was right in allowing the exemption under the said provision considering the date of possession of the new residential premises instead of date of sale of agreement and the date of registration.

The Bench further referred to the decision of Pune Tribunal which observed that “it is an unabated fact that at the time of execution of agreement, the residential property was not in existence. Therefore, taking into consideration the facts of the case, the date of possession of the flat as the date of actual purchase for the purpose of claiming exemption u/s 54 of the Income Tax Act .”

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates