2018 (9) TMI 474 - AT - Income Tax

Tribunal grants exemption under sec. 54, emphasizes agreement date for transfer.

Gautam Jhunjhunwala Versus Income-tax Officer, Wd-25 (4), Kolkata

Gautam Jhunjhunwala Versus Income-tax Officer, Wd-25 (4), Kolkata - TMI Issues:Disallowance of claim for exemption u/s. 54 of the Income-tax Act, 1961.Analysis:The appeal was against the decision of the Ld. CIT(A) confirming the AO's disallowance of the assessee's claim for exemption u/s. 54 of the Act for LTCG of Rs. 15,04,361. The AO held that since the new property was not purchased within one year from the date of transfer of the old asset, the claim was denied. The Ld. CIT(A) upheld this decision, leading to the appeal.The key contention was the interpretation of the term 'transfer' under sec. 2(47) of the Act. The assessee argued that the agreement to sell created a right in favor of the buyer, extinguishing certain rights in the old property. Citing the Supreme Court decision in Sanjiv Lal, the assessee claimed that the agreement date should be considered the transfer date, not the registration date as held by the AO/Ld. CIT(A).The Tribunal noted that to avail sec. 54 benefits, a new asset must be purchased within a specific timeframe related to the old asset's transfer. Considering the definition of 'transfer' under sec. 2(47) and the facts of the case, it was concluded that the agreement to sell extinguished rights in the old asset, constituting a transfer. The Tribunal emphasized that the agreement date was crucial, as it created rights in the buyer's favor, aligning with the Sanjiv Lal decision.Regarding the admissibility of the unregistered agreement to sell, the Tribunal referenced the Registration Act and relevant court decisions. It was established that while such documents may not be admissible for certain purposes, they could be used as evidence for specific performance suits. Citing precedents, the Tribunal affirmed that the unregistered agreement could support a decree of specific performance in accordance with the law.In conclusion, the Tribunal allowed the appeal, directing the AO to grant exemption u/s. 54 of the Act. The decision was based on the understanding that the agreement to sell constituted a transfer, aligning with the Supreme Court's interpretation and legal provisions. The Tribunal's analysis encompassed the legal definitions, precedents, and the specific circumstances of the case, ensuring a thorough and detailed evaluation leading to the favorable outcome for the assessee.