Tribunal Allows Deduction Under Sec 54F for Full Payment and Possession Despite No Property Registration.

The ITAT ruled in favor of the assessee, allowing the deduction under Section 54F of the Income Tax Act, despite the lack of property registration. The Tribunal emphasized that full payment and possession were sufficient for claiming the deduction, aligning with the principles set by the Delhi HC. Consequently, the assessee's appeal was allowed, overturning the AO's decision.

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Issues:
Assessment of capital gains on sale of gifted property, eligibility for deduction u/s 54F of the Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2009-10. The assessee sold a property received as a gift and did not declare the capital gains. The Assessing Officer treated the sale as short term capital gains and brought Rs. 34,79,400 to tax. The assessee claimed exemption u/s 54F of the Act, but the AO declined it due to lack of evidence for acquiring a new property. The CIT(A) decided in favor of the assessee regarding the nature of capital gains but against the deduction u/s 54F. The AR argued that the assessee acquired a new property through a sale agreement and was entitled to the deduction. The DR contended that ownership does not transfer until registration and since the property was not purchased within one year, the deduction was not permissible.

The ITAT considered the evidence presented by the assessee, including a sale agreement and full payment for the new property. The AR argued that possession was taken, but registration was pending due to disputes. The ITAT noted that the full payment was made, and the assessee was residing in the new property. Citing the decision in Balraj Vs. CIT, the ITAT held that the deduction u/s 54F should not be denied solely based on pending registration. The ITAT directed the AO to allow the deduction, emphasizing that justice should prevail when full payment has been made. The decision was in line with the principles established by the Delhi High Court in a similar case. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 18th Aug'17.

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