2019 (5) TMI 534 - AT - Income Tax

Tribunal rules in favor of assessee, allowing deduction under Section 54F for apartment purchase.

Kapil Kumar Agarwal Versus DCIT, Circle-1 (1), Gurgaoon

Kapil Kumar Agarwal Versus DCIT, Circle-1 (1), Gurgaoon - [2019] 72 ITR (Trib) 353 (ITAT [Del]) Issues Involved:1. Whether the acquisition of an apartment under a builder's buyer agreement constitutes a 'purchase' or 'construction' of a new asset.2. Whether the construction of a new asset, if commenced before the date of sale of the original asset, qualifies for deduction under Section 54F of the Income Tax Act.Issue-wise Detailed Analysis:1. Purchase vs. Construction of New Asset:The primary issue was whether the acquisition of an apartment under a builder's buyer agreement, where the builder constructs in a phased manner and payments are linked to construction, is categorized as a 'purchase' or 'construction' of a new asset. The Tribunal referred to the Delhi High Court's ruling in CIT vs. Kuldeep Singh, which held that such transactions should be considered as a 'purchase' rather than 'construction.' The High Court emphasized that the term 'purchase' should be interpreted pragmatically and broadly, not restricted to the final transfer of legal title. The Tribunal concluded that the assessee's acquisition of the apartment under the agreement qualified as a 'purchase' of a new asset.2. Commencement of Construction Before Sale of Original Asset:The second issue was whether the commencement of construction before the sale of the original asset disqualified the assessee from claiming deduction under Section 54F. The Tribunal referred to the Delhi High Court's decision in CIT vs. Bharti Mishra, which held that the timing of the commencement of construction was immaterial as long as the construction was completed within the specified period. The High Court clarified that Section 54F does not stipulate that construction must begin after the sale of the original asset. The Tribunal affirmed that the assessee was entitled to the deduction under Section 54F, even though the construction of the new asset began before the sale of the original asset.Conclusion:The Tribunal concluded that the assessee's acquisition of the apartment under the builder's buyer agreement constituted a 'purchase' of a new asset. Furthermore, the Tribunal held that the assessee was entitled to the deduction under Section 54F, despite the construction of the new asset commencing before the sale of the original asset. The Tribunal reversed the lower authorities' orders and directed the Assessing Officer to grant the deduction under Section 54F of Rs. 79,85,761 to the assessee. The appeal of the assessee was allowed.