ITAT upholds CIT(A)'s decision on property exemption under section 54

The ITAT dismissed the Revenue's appeal and the assessee's cross-objections, upholding the CIT(A)'s decision to allow exemption u/s 54 for investment in properties at Jay Pee Green Greater Noida and Model Town, Delhi. The ITAT held that substantial payment for the property at Jay Pee Green Greater Noida within the specified period qualified for exemption despite delayed possession. Additionally, the cost of improvement to make the property habitable at Model Town, Delhi, was considered part of the investment, granting the exemption.

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Issues involved:
1. Denial of exemption u/s 54 for investment in property at Jay Pee Green Greater Noida due to delayed possession.
2. Reduction of exemption u/s 54 for investment in property at Model Town, Delhi, towards cost of improvement.

Analysis:

Issue 1: Denial of exemption u/s 54 for investment in property at Jay Pee Green Greater Noida due to delayed possession:
The assessing officer denied the exemption u/s 54 on the grounds that possession of the property was not delivered within the stipulated period, thus not fulfilling the conditions of section 54(2). The Revenue contended that until possession is granted, the investment cannot be considered as a purchase, relying on the decision in the case of Suraj Lamps & Industries. However, the assessee argued that substantial payment made for the property within the specified period should be considered compliance with section 54, citing the decision in CIT Vs. R.L. Sood. The ITAT agreed with the assessee, emphasizing that the investment in the property was unquestionable, and the exemption was allowable, dismissing the Revenue's appeal.

Issue 2: Reduction of exemption u/s 54 for investment in property at Model Town, Delhi, towards cost of improvement:
Regarding the investment in the property at Model Town, Delhi, the assessing officer reduced the exemption u/s 54 by denying the claim for cost of improvement, stating that it does not fall under the scope of "purchase or construction" as per section 54. The Revenue relied on the decision in the case of Kiran Bansal to support this position. However, the assessee argued that the amount spent was for making the property habitable, citing the decision in the case of B.B. Sarkar. The ITAT agreed with the assessee, holding that the cost of improvement to make the house habitable should be considered as part of the amount invested in the purchase of the new asset, dismissing the Revenue's appeal on this ground as well.

In conclusion, both the Revenue's appeal and the assessee's cross-objections were dismissed by the ITAT, upholding the CIT(A)'s decision to allow the assessee's claims for exemption u/s 54 in both instances.

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