Assessee wins appeal for deduction under section 54

The Tribunal allowed the assessee's appeal regarding the disallowance of deduction under section 54 of the Income Tax Act. It held that the date of possession of the new asset should be considered as the date of purchase, entitling the assessee to the deduction. The Assessing Officer was directed to grant the deduction as claimed, resulting in the appeal being allowed.

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Issues Involved:
1. Disallowance of deduction under section 54 of the Income Tax Act.
2. Determination of the date of purchase of the new asset for the purpose of claiming deduction under section 54.

Detailed Analysis:

1. Disallowance of Deduction under Section 54:
The primary issue in this appeal is the disallowance of the deduction claimed by the assessee under section 54 of the Income Tax Act, amounting to Rs. 1,10,60,730. The assessee had sold a property in Kolkata and computed long-term capital gains, claiming a deduction for reinvestment in a new apartment. The Assessing Officer (AO) partially allowed the deduction but restricted it to Rs. 8,42,028, leading to an assessed income of Rs. 1,19,03,130. The Commissioner of Income Tax (Appeals) upheld the AO's decision, prompting the assessee to appeal to the Tribunal.

2. Determination of the Date of Purchase of the New Asset:
The crux of the dispute is the determination of the "date of purchase" of the new asset for the purpose of section 54. The assessee argued that the date of purchase should be considered as the date of possession, which was within one year before the sale of the original asset. The authorities below had taken the date of the last installment payment as the purchase date, which was outside the prescribed period.

The Tribunal examined the relevant dates:
- Buyer's agreement executed on 26.05.2010.
- Installment payments made between 15.03.2011 and 27.03.2012.
- Possession letter issued on 18.06.2012.
- Original asset sold on 09.07.2012.
- Conveyance deed executed on 22.09.2015.

The Tribunal held that the AO misdirected by considering the date of installment payments as the purchase date. It emphasized that under section 2(47) of the Act, the transfer includes any transaction allowing possession in part performance of the contract. Thus, the date of possession (18.06.2012) should be considered as the date of purchase, as the right over the property passed on this date.

The Tribunal supported its view by referencing the Bombay High Court's decision in CIT Vs. Smt. Beena K. Jain, which held that the relevant date for purchase is when the full consideration is paid, and possession is obtained.

Conclusion:
The Tribunal concluded that the assessee is entitled to the deduction under section 54, as the possession of the new asset was taken within one year before the sale of the original asset. The AO was directed to grant the deduction as claimed by the assessee, and the appeal was allowed.

Order:
The appeal by the assessee was allowed, and the AO was directed to delete the impugned additions and grant the deduction under section 54 as claimed.

Pronouncement:
The order was pronounced in open court on 18th October 2022.

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