2015 (3) TMI 1014 - AT - Income Tax

Date of possession key for tax exemption under section 54F

The tribunal upheld the CIT(A)'s decision, confirming the assessee's entitlement to exemption under section 54F of the Income Tax Act. It was determined ... Exemption u/s 54F - CIT(A) allowed the claim - Plea raised by the the Revenue was that the money was paid earlier i.e. prior to the window year allowed under section 54F of the Act - Held that:- In addition to the reasons for acquisition of two independent 9 flats being one flat, the next contention of the assessee was vis-à-vis the date of purchase of the property and it was admitted by the assessee that the agreements for purchase of flats though were executed on 19.11.2004, but the possession was obtained in April, 2007 in respect of which, the assessee furnished the copies of occupancy certificate issued by PMC in respect of the impugned flats dated 18.03.2008 and the first bill of MSEB dated 14.08.2007 in respect of combined flats i.e. flat Nos.304A and 304B. All these documents, the assessee claims to have filed before the Assessing Officer, but the CIT(A) confronted the same to the Assessing Officer in appellate proceedings and remand report was received from the Assessing Officer. In the remand report, the Assessing Officer mentioned that the occupancy certificate issued by PMC confirms the fact that the construction was completed and building was ready for occupation during the previous year relevant to assessment year 2008-09. Similarly, in respect of electricity bill, the verification carried out by the Assessing Officer reflected that the bill was issued during the previous year relevant to assessment year 2008-09. Another evidence filed by the assessee was the temporary possession letter dated 20.04.2007 issued by the builder which the Assessing Officer admitted that the assessee had furnished during the course of assessment proceedings In view of the evidences and the remand report of the Assessing Officer, it is apparent that the assessee had received the possession of the two flats in City Woods complex during the captioned assessment years though the agreement of purchase of the said flats was executed on 19.11.2004.In view of the above said facts and circumstances and evidences filed by the assessee before the CIT(A), we confirm the observation of CIT(A) in this regard that the assessee had purchased the said flats in instant assessment years under appeal. The next aspect of the issue was the purchase of two separate flats vide two separate sale deeds. In the facts of the case, the assessee had purchased two flats which were joined by the assessee and had a common entrance and a common electricity meter. In view thereof, we find no merit in the order of Assessing Officer and confirming the order of CIT(A), we hold that the assessee in the facts and circumstances, is entitled to the claim of deduction under section 54F of the Act, in view of the following ratio laid down by the Hon’ble Karnataka High Court in CIT Vs. D.Ananda Basappa [2008 (10) TMI 99 - KARNATAKA HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Allowance of exemption under section 54F of the Income Tax Act, 1961.2. Eligibility for deduction under section 54F when investing in two separate flats.3. Consideration of the date of possession versus the date of agreement for claiming exemption under section 54F.Detailed Analysis:1. Allowance of exemption under section 54F of the Income Tax Act, 1961:The primary issue was whether the assessee was entitled to claim exemption under section 54F of the Income Tax Act, 1961. The assessee declared long-term capital gains from the sale of land and claimed a deduction under section 54F for the investment in residential property. The Assessing Officer (AO) denied the deduction, arguing that the investment was made in two independent flats and that the payments were made outside the permissible period.2. Eligibility for deduction under section 54F when investing in two separate flats:The AO contended that the assessee had invested in two independent flats with separate kitchens, living rooms, and car parking slots, thereby violating the provisions of section 54F, which allows exemption for investment in 'a residential house.' The CIT(A) rejected this contention, relying on various case laws, including the Karnataka High Court's decision in CIT Vs. D.Ananda Basappa, which held that the term 'a residential house' should be interpreted to include multiple units if they are used as a single residential unit. The CIT(A) concluded that the purchase of two separate residential units does not disqualify the assessee from claiming the deduction under section 54F.3. Consideration of the date of possession versus the date of agreement for claiming exemption under section 54F:The AO argued that the agreements for purchasing the flats were executed on 19.11.2004, which was outside the permissible period for claiming exemption under section 54F. The assessee contended that the possession of the flats was obtained on 20.04.2007, within the allowable period. The CIT(A) accepted the assessee's claim, noting that the occupancy certificate was issued by PMC on 18.03.2008, and the first electricity bill was dated 14.08.2007, indicating that the possession was indeed obtained within the relevant assessment year. The CIT(A) relied on the Bombay High Court's decision in CIT Vs. Beena K. Jain, which held that the date of possession, rather than the date of the agreement, should be considered for determining the allowability of exemption under section 54F.Conclusion:The tribunal upheld the CIT(A)'s decision, confirming that the assessee was entitled to the exemption under section 54F. The tribunal emphasized that the relevant date for considering the exemption is the date of possession, not the date of the agreement. Additionally, the tribunal supported the view that investment in two adjacent flats, treated as a single residential unit, qualifies for the exemption under section 54F. Consequently, the appeals filed by the Revenue were dismissed.