Tribunal grants section 54F benefit, emphasizes transaction substance & possession date.

The Tribunal allowed the appeal, directing the Assessing Officer to allow the benefit of section 54F amounting to Rs. 2,07,62,580/-, thereby setting aside the findings of the CIT(A). The Tribunal emphasized the substance of the transaction and the actual date of possession as the determining factor for the purchase of the new asset under section 54F. The appeal was thus allowed in favor of the assessee.

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Issues Involved:

1. Sustaining disallowance of the claim under section 54F of the Income Tax Act, 1961.
2. Determination of the correct date of purchase/construction of the residential house for availing benefits under section 54F.

Issue 1: Sustaining Disallowance of Claim under Section 54F

The appellant challenged the decision of the learned Commissioner of Income Tax (Appeals)-10, New Delhi, who upheld the Assessing Officer's denial of the claim under section 54F of the Income Tax Act, 1961. The assessee had declared a long-term capital gain of Rs. 2,18,91,720/- from the sale of shares on 17/08/2011 and claimed exemption under section 54F by investing in the purchase/construction of a residential property. The Assessing Officer disallowed this claim, asserting that the property was purchased before the stipulated period under section 54F, which the CIT(A) upheld, albeit reducing the addition to Rs. 2,07,62,580/-.

Issue 2: Determination of the Correct Date of Purchase/Construction

The core of the dispute revolved around the date of purchase/construction of the residential house. The Assessing Officer and CIT(A) contended that the property was purchased on 29/09/2009, based on the buyer's agreement with the builder. This date was outside the permissible period for availing section 54F benefits, which required the purchase to be within one year before or two years after the transfer of the original asset or construction within three years.

The assessee argued that the property was not ready for possession until April 2012, and the final possession was taken on 06/07/2012, which fell within the permissible period. The assessee relied on various clauses in the buyer's agreement indicating that the construction was not complete at the time of the agreement, and referred to CBDT Circulars No. 471 and 672, which treat the date of possession as the date of purchase for section 54F purposes.

The Tribunal examined the facts, including the buyer's agreement and the timeline of payments and possession. It found that the substantial completion and possession occurred within the stipulated period. The Tribunal referred to the case of Ayushi Patni vs. DCIT and other similar judgments, which treated the date of possession as the date of purchase. The Tribunal concluded that the assessee was entitled to the benefits under section 54F, as the new asset was effectively purchased within two years of the transfer of the original asset.

Conclusion:

The Tribunal allowed the appeal, directing the Assessing Officer to allow the benefit of section 54F amounting to Rs. 2,07,62,580/-, thereby setting aside the findings of the CIT(A). The Tribunal emphasized the substance of the transaction and the actual date of possession as the determining factor for the purchase of the new asset under section 54F. The appeal was thus allowed in favor of the assessee.

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