2021 (5) TMI 337 - AT - Income Tax

Significance of Possession Date in Property Purchase for Tax Deduction

The Tribunal upheld the CIT(A)'s decision to allow the deduction claimed under section 54F of the Income Tax Act, emphasizing the significance of the ... Deduction claimed u/s.54F - investment in question should have been made, in terms of the provisions of section 54F within one year before the sale of property or two years after sale of property and this condition, according to the Assessing Officer, was not satisfied, and, accordingly, deduction under section 54F was inadmissible - HELD THAT:- We find that the issue in appeal is squarely covered in the case of CIT vs Beena K Jain [1993 (11) TMI 7 - BOMBAY HIGH COURT] wherein held the new residential house had been purchased by the assessee within two years after the sale of the capital asset which resulted in long-term capital gains. The Tribunal has held that the relevant date in this connection is July 29, 1988, when the petitioner paid the full consideration amount on the flat becoming ready for occupation and obtained possession of the flat. This has been taken by the Tribunal as the date of purchase. The Tribunal has looked at the substance of the transaction and come to the conclusion that the purchase was substantially effected when the agreement of purchase was carried out or completed by payment of full consideration on July 29, 1988, and handing over of possession of the flat on the next day. Clearly, therefore, the date relevant for determining the purchase of property is the date on which full consideration is paid and possession is taken. There is no dispute that this date is 22.07.2015 which falls within a period of two years from the date on which related property is sold. The Assessing officer has, however, proceeded to adopt the date on which initial payment of ₹ 1,00,00,000/- is made. The approach so adopted by the Assessing Officer is ex facie incorrect and contrary to law and down by Hon’ble jurisdictional High Court in the case of Beena K Jain (Supra). - Decided against revenue. Issues:Challenge to correctness of order allowing deduction under section 54F of the Income Tax Act, 1961 for the assessment year 2015-16.Analysis:Issue 1: Deduction under section 54F disallowed by Assessing OfficerThe Assessing Officer disallowed the deduction claimed under section 54F as the investment was made outside the specified time frame. The appellant argued that the deduction should be allowed based on possession date of the new property, not the payment date. Legal precedents were cited to support this argument. The CIT(A) upheld the appellant's claim, emphasizing the importance of possession date for determining the purchase of property under section 54F.Issue 2: Date of purchase for section 54F deductionThe date of purchase for claiming deduction under section 54F was a key point of contention. The Assessing Officer relied on the date of initial payment, while the appellant argued for considering possession date. Legal interpretations from the Hon'ble Tribunal's judgment in a similar case were cited to support the appellant's stance. The Tribunal concluded that the relevant date for purchase should be when full consideration is paid and possession is taken, not the date of the initial payment.Issue 3: Applicability of legal decisionsThe Tribunal referred to legal decisions, including CIT vs. Smt. Beena K Jain, to determine the date of purchase for section 54F deduction. The Tribunal emphasized the significance of possession date in establishing the purchase of property. The Assessing Officer's reliance on the payment date was deemed incorrect, and the Tribunal upheld the CIT(A)'s decision based on legal precedents and the factual circumstances of the case.In conclusion, the Tribunal dismissed the appeal, affirming the CIT(A)'s decision to allow the deduction claimed under section 54F. The judgment highlighted the importance of possession date in determining the purchase of property for section 54F deduction, in line with legal interpretations and precedents.