2019 (1) TMI 1130 - AT - Income Tax

Tribunal grants exemption u/s 54F based on possession date, not agreement date

Ayushi Patni Versus The Dy. Commissioner of Income Tax, Circle – 7, Pune And (Vice-Versa)

The Tribunal ruled in favor of the assessee in a dispute over exemption u/s 54F of the Income Tax Act for the assessment year 2012-13. The Tribunal held ... Entitlement to exemption u/s 54F - long term capital gain arising from sale of shares invested in purchase of residential flat - AO disallowed assessee’s claim of exemption on the pretext that the flat was purchased by the assessee more than one year prior to the date of transfer of capital asset - whether date of signing of the agreement cannot be said to be the date of purchase of residential house? - contention of the assessee is that since final consideration was paid and the possession of flat was received within a period of one year prior to the date of transfer of capital asset, the same should be considered as the date of purchase Held that:- In the instant case, full consideration has been paid by the assessee for purchase of residential flat within a period of one year before the date of transfer of capital asset. Thereafter, actual possession of the flat was delivered to assessee on 17.09.2010 i.e., within a period of one year prior to the date of transfer of capital asset. It is an un-rebutted fact that at the time of execution of agreement, the residential property was not in existence. Therefore, taking into consideration facts of the case, the date of possession of flat is the date of actual purchase for the purpose of claiming exemption u/s 54F of the Act. Thus in view of undisputed facts of the case and the decision rendered in the case of CIT Vs. Smt. Beena K. Jain (1993 (11) TMI 7 - BOMBAY HIGH COURT), we hold that the assessee is eligible for claiming exemption u/s 54F on the entire amount of capital gain utilized for purchase of residential property. Consequently, the appeal of the assessee is allowed Issues Involved:- Dispute over exemption u/s 54F of the Income Tax Act, 1961 for assessment year 2012-13.- Assessee's appeal against Commissioner of Income Tax (Appeals) for not allowing full exemption u/s 54F.- Revenue's cross-appeal against CIT(A) for allowing part exemption u/s 54F to the assessee.Detailed Analysis:1. Issue of Exemption u/s 54F:- Both parties raised issues arising from the same facts, leading to joint adjudication.- Assessee claimed exemption u/s 54F for long term capital gain from sale of shares invested in a residential flat.- Dispute centered around the date of purchase of the flat concerning possession and payment of consideration.- Assessee argued possession and full payment determined purchase date, not the agreement date.2. Assessee's Arguments:- Assessee's representative highlighted that possession and full payment determine the purchase date.- The agreement date did not confer any rights as the property was non-existent then.- Cited relevant legal precedents to support the claim that possession date signifies the purchase date for exemption u/s 54F.3. Revenue's Stand:- Revenue contended that the agreement date should be considered as the purchase date, not possession.- Claimed the agreement date exceeded the one-year limit before the transfer of the capital asset.- Opposed CIT(A)'s decision to grant partial relief based on installments paid within the one-year period.4. Tribunal's Decision:- Tribunal analyzed the facts and legal arguments presented by both sides.- Referred to the clause in the agreement emphasizing possession upon full payment.- Cited the decision of the Hon'ble Bombay High Court and a Tribunal case supporting the possession date as the purchase date for exemption u/s 54F.- Held in favor of the assessee, allowing exemption on the entire capital gain used for the residential property purchase.- Dismissed Revenue's appeal, upholding the assessee's claim for exemption u/s 54F.5. Conclusion:- The Tribunal's decision favored the assessee, recognizing the possession date as the crucial factor for determining the purchase date for exemption u/s 54F.- The judgment aligned with legal precedents and the substance of the transaction, emphasizing the actual acquisition of the property for exemption eligibility.- The appeal of the assessee was allowed, and the Revenue's appeal was dismissed, concluding the case on January 17, 2019.