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 that the date of possession, not the date of the agreement, is crucial for claiming the exemption. The tribunal also supported the interpretation that investment in two adjacent flats, considered as a single residential unit, is eligible for the exemption under section 54F. As a result, the Revenue's appeals were dismissed.

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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.

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