ITAT allows LTCG deduction under section 54 based on possession date not agreement date for new property

ITAT Mumbai allowed the assessee's appeal regarding LTCG deduction under section 54. The CIT(A)-NFAC had denied the deduction, concluding that the appellant failed to acquire a new residential flat within the mandatory one-year period before transfer. The ITAT held that for computing the limitation period under section 54, the relevant date should be determined based on payment of consideration and possession of the new house property, not merely the agreement date. Following judicial precedents from Bombay HC and various ITAT benches, the tribunal ruled in favor of the assessee, granting the section 54 deduction.

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Issues:
1. Disallowance of sec.54 deduction claim by the assessing officer.
2. Interpretation of the relevant dates for sec.54 deduction eligibility.
3. Applicability of judicial precedents in determining sec.54 deduction eligibility.

Analysis:

Issue 1: Disallowance of sec.54 deduction claim
The assessee appealed against the disallowance of his sec.54 deduction claim amounting to Rs. 1,69,47,407 in the assessment for the year 2015-2016. The CIT(A) upheld the disallowance based on the timing of the purchase of a new residential flat in relation to the sale of the old property. The assessing officer concluded that the appellant did not fulfill the mandatory condition of acquiring a new residential flat within the specified time period under section 54 of the Income Tax Act, 1961.

Issue 2: Interpretation of relevant dates for sec.54 deduction eligibility
The primary contention revolved around the interpretation of the relevant dates for sec.54 deduction eligibility. The appellant argued that the date of possession should be considered as the date of acquisition for the new flat. However, based on judicial precedents, including the decision of the Bombay High Court and the ITAT, it was established that the date of allotment or registration of the agreement for sale should be considered as the date of acquisition for the purposes of sec.54. The Tribunal held that the date of possession is immaterial in the conveyance of immovable properties.

Issue 3: Applicability of judicial precedents
The Tribunal considered various judicial precedents that supported the assessee's position regarding the interpretation of the relevant dates for sec.54 deduction eligibility. Rulings such as CIT vs. Smt. Beena K. Jain and other cases settled the issue in favor of the assessee, emphasizing that the relevant date for computing the limitation under sec.54 should be based on the payment of consideration and possession of the new house property. The Tribunal found merit in the appellant's arguments and allowed the appeal, directing that necessary computations be made as per law.

In conclusion, the Tribunal allowed the assessee's appeal, overturning the disallowance of the sec.54 deduction claim based on the interpretation of the relevant dates and the applicability of judicial precedents supporting the assessee's position.

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