Appeal Upheld: Exemption under Sec. 54 Granted Despite Delay in Possession

The case involved an appeal by the revenue against the CIT(A)'s decision granting exemption under Sec. 54 to the assessee despite not receiving possession of the new residential flat within the stipulated period. The ITAT upheld the CIT(A)'s decision, emphasizing that compliance with the conditions of Sec. 54 was sufficient for claiming exemption, regardless of possession or legal title transfer. The delay in possession was deemed beyond the assessee's control, and making payments to the builder within the prescribed time frame constituted a valid purchase under Sec. 54.

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Issues involved:
1. Exemption under Sec. 54 for not receiving possession of new residential flat within stipulated period.
2. Claim of exemption under Sec. 54 despite lack of evidence of possession after 5 years of sale.
3. Interpretation of "purchase" under Sec. 54 in the context of legal title transfer.

Issue 1: Exemption under Sec. 54 for not receiving possession of new residential flat within stipulated period:
The case involved an appeal by the revenue against the order of the CIT(A) granting exemption under Sec. 54 to the assessee despite not receiving possession of the new residential flat within the stipulated period of two years from the sale of the old flat. The A.O disallowed the exemption claim as possession was not obtained within the specified timeframe. The CIT(A) allowed the exemption, stating that possession was not a prerequisite for claiming exemption under Sec. 54. The A.O's contention was that lack of possession rendered the assessee ineligible for exemption. The ITAT held that as long as the assessee purchased the new residential house within the stipulated time period, she was entitled to claim exemption under Sec. 54, regardless of possession. The ITAT upheld the CIT(A)'s decision, emphasizing that compliance with the conditions of Sec. 54 was sufficient for claiming exemption.

Issue 2: Claim of exemption under Sec. 54 despite lack of evidence of possession after 5 years of sale:
The A.O disallowed the exemption claim under Sec. 54 as the assessee did not receive possession of the new residential flat even after 5 years from the sale of the old flat. The CIT(A) allowed the exemption, considering the wider interpretation of "purchase" under Sec. 54. The ITAT concurred with the CIT(A), stating that the word "purchase" in Sec. 54 was not limited to possession or registered sale deed. The ITAT emphasized that the assessee had made payments to the builder within the stipulated period for the purchase of the property, entitling her to claim exemption under Sec. 54. The delay in possession due to an internal dispute was beyond the assessee's control. The ITAT upheld the CIT(A)'s decision based on the legislative intent of Sec. 54 and relevant case laws.

Issue 3: Interpretation of "purchase" under Sec. 54 in the context of legal title transfer:
The key contention revolved around the interpretation of "purchase" under Sec. 54 concerning the transfer of legal title within the stipulated period. The CIT(A) and the ITAT held that the assessee's compliance with making payments to the builder within the prescribed time frame constituted a valid purchase under Sec. 54, irrespective of possession or legal title transfer. The ITAT emphasized that possession was not a mandatory condition for claiming exemption under Sec. 54, as long as the purchase was made within the specified timeframe. The decision was supported by relevant judicial pronouncements and legislative intent, concluding that the assessee was entitled to exemption under Sec. 54 despite the delay in possession due to external factors.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the reasoning behind the final decision rendered by the ITAT.

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