Assessee denied section 54F LTCG exemption as agreement to purchase residential flat without registered sale deed insufficient

ITAT Rajkot dismissed assessee's appeal claiming LTCG deduction under section 54F. Though assessee sold land and purchased residential flat through agreement to sale and was in possession, the sale deed was not executed/registered. ITAT held that mere agreement to purchase cannot be construed as purchase deed within section 54F provisions. Citing Suraj Lamp Industries case, ITAT ruled that agreement to sale without registered deed of conveyance does not constitute completed transfer. Since statutory conditions under section 54F were not fulfilled due to non-registration of purchase documents, exemption was denied.

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Issues involved:
The appeal involves the disallowance of claim u/s 54F of the Income-tax Act, 1961 by the Assessing Officer and the Commissioner of Income-tax (Appeals) for the Assessment Year 2015-16.

Issue 1: Disallowance of claim u/s 54F:
The Assessing Officer disallowed the claim u/s 54F amounting to Rs. 82,64,245/- as the registered purchase deed for a residential house was not executed within the stipulated time period of two years after the transfer took place. The Assessing Officer held that the exemption under Section 54F is allowable only if the purchase is completed within the specified timeframe.

Issue 2: Appeal before CIT(A):
The assessee filed an appeal before the CIT(A) challenging the assessment order. However, the CIT(A) dismissed the appeal, upholding the decision of the Assessing Officer to disallow the claim u/s 54F.

Issue 3: Arguments of the Appellant:
The Appellant submitted that despite entering into an agreement for sale and making the full sale consideration, the registered conveyance deed could not be executed due to ongoing litigation regarding the title of the land. The Appellant argued that the possession of the property had been assumed, and the rights in the property had been transferred as per the agreement to sale.

Issue 4: Arguments of the Respondent:
The Respondent contended that the purchase of the flat had not been finalized within the required timeframe of three years from the sale of the land. The Respondent emphasized that the basic title of the purchase was still under dispute and pending before the court, thus justifying the denial of the exemption claimed u/s 54F.

Issue 5: Tribunal's Decision:
After considering the arguments of both parties, the Tribunal noted that while the possession of the property was with the assessee, the title of the land was disputed, and the sale deed had not been executed. Referring to legal precedents, the Tribunal concluded that the conditions under Section 54F had not been fulfilled by the assessee, as the registered purchase deed for the residential house was not completed. Therefore, the Tribunal dismissed the appeal of the assessee.

In conclusion, the Tribunal upheld the decision to disallow the claim u/s 54F, emphasizing the importance of fulfilling all conditions stipulated under the Act for claiming exemptions.

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