TaxTMI 
TaxTMI 
2026 (3) TMI 1479
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....ng AY 2016-17. The assessee claimed exemption u/s 54 of the Income Tax Act, 1961 (for short 'the Act') to the extent of Long term capital gain earned by her to the extent of Rs. 6,68,29,816. During the assessment proceedings, the Assessing Officer ('AO') observed that the assessee has taken exemption on the basis of unregistered agreement to purchase that she has entered with Sh, Prateek Madhan (son of assessee) for 25% share of property E-108, Malcha Marg. The Ld. AO observed that Sh. Prateek Madhan himself does not have clear title on the above said property and the same is still under litigation in the court of ADJ-02 & Waqf Tribunal. After considering the submissions of the assessee, the Ld. AO not convinced with the submissions of the assessee disallowed the exemption claimed by the assessee. 3. Aggrieved with the above order, the assessee preferred an appeal before the ld. CIT(A)-23, New Delhi. The assessee filed a detailed submission before the First Appellate Authority. Before Ld. CIT(A), the assessee submitted that the vendor got the clear title on 16.10.2012 vide conveyance deed dated 16.10.2012, the property was converted into free hold property in favour of the vendo....
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....9] 120 ITR 46/2 Taxman 541, however, gave it a wider meaning and it was held that the payment made for execution of release deed by the brother thereby joint ownership became separate ownership for price paid would be covered by the word 'purchase'. It was observed that the word 'purchase' used in Section 54 of the Act should be interpreted pragmatically. In a practical manner and legalism shall not be allowed to play and create confusion or linguistic distortion. The argument that purchase primarily meant acquisition for money paid and not adjustment, was rejected observing that it need not be restricted to conveyance of land for a price consisting wholly or partly of money's worth. The word 'purchase', it was observed was of a plural semantic shades and would include buying for a price or equivalent of price by payment of kind or adjustment of old debt or other monetary considerations. It was observed that if you sell a house and make profit, pay Caesar (State) but if you buy a house or build another and thereby satisfy the conditions of Section 54, you were exempt. The purpose was plain, the symmetry was simple; the language was plain. 9. Rec....
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....executed." 5.4 The Hon'ble Delhi High Court further referred to the decision of Hon'ble Madhya Pradesh High Court in the case of Smt. Shashi Varma Vs. CIT (224 ITR 106(M.P)) and that of the Hon'ble Calcutta High Court in the case of CIT Vs. Smt. Bharati C. Kothari (244 ITR 352(Cal))} and opined that when substantial investment was made in the new property, it should be deemed that sufficient steps had been taken and it would satisfy the requirements of section 54 of the Act. As per the Hon'ble High Court, the basic purpose behind section 54 of the Act is to ensure that the assessee is not taxed on the capital gain, if he replaces his house and spend money earned on the capital gain within the stipulated period. 5.5 The Hon'ble Delhi High Court categorically held that the word 'purchase' used in section 54 of the Income Tax Act, 1961 is not restricted to or confined to registered sale deed. The relevant portion of the judgment is reproduced below: "13. The view we have taken gets support from sub-section (2) to Section 54. The aforesaid sub-section requires the assessee to deposit unspent amount not utilized by the assessee for ....
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....hi, belonging to him on 3-12-1974 for Rs. 98,000. By reason of the agreement of sale coupled with possession the assessee purported to have purchased a property No. 12, West Patel Nagar, New Delhi, for Rs. 2,03,000 on 6-2-1975. It is not in dispute that if the aforementioned transaction amounts to purchase of property, the same would be within a period of one year. The only question, which, therefore, arises for consideration is whether the aforementioned agreement dated 6-2-1975 would answer the description of purchase within the meaning of section 54 of the Income-tax Act, 1961 ('the Act'). Out of the consideration of Rs. 2,03,000, the assessee admittedly at the time of entering into the aforementioned agreement paid a sum of Rs. 1,73,000 which was more than the amount of Rs. 98,000 which he received by way of consideration in terms of the transaction which took place on 3-12-1974. Section 54 relates to profit on sale of property used for residence. The said provision reads, thus: "54. Profit on sale of property used for residence. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, ....
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....nd this Court in CIT v. R.L. Sood [2000] 245 ITR 727 have held that registration of the document is not mandatory for claiming depreciation on the property. In this view of the matter, we have no doubt in our mind that the learned Tribunal went wrong in holding that for the purpose of applicability of section 54, registration of document is Imperative. We, therefore, answer the question in the negative, Le, the assessee is entitled to exemption in terms of section 54." (emphasis supplied) 5.8 The parity of reasoning explained by the Hon'ble Delhi High Court in the cases of Kuldeep Singh (supra) and Balraj(supra), squarely covers the controversy in the present case in favour of the appellant and it is held that in spite of the fact that the agreement was not registered, the transaction under consoderarion would be treated as a "purchase" within the meaning assigned to it by provisions of section 54. 6.1 Regarding controversy about (earlier) agreement to sale in FY 2010-11, entered into with M/s. Jain Realty Ltd., it is noted that the process of conversion of the property from lease-hold to free-hold was underway in the office of the Land & Development Office....
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....ove discussion, in the facts and circumstances of the case, it is difficult to hold that on date of entering into the agreement to sell under consideration i.e. on 06.06.2015, there was any bar on the vendor to enter into the agreement to sell. Of course, it is well settled law that a person cannot transfer a better right than what he had at the time of transfer. In case, subsequently, the vendor is declared to be without title on 06.06.2012, as a consequence of a decree of competent court of law, necessary legal consequences would follow. 7. In view of the above discussion, the sole ground of appeal is allowed and as a consequence, the impugned addition is deleted." 5. Aggrieved with the above order, the revenue is in appeal before us raising following grounds of appeal: - "1. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition of Rs. 6,68,29,816/- levied by the Assessing Officer u/s 143(3) of the Act on account of Capital gain on property. The appellant sold the property for consideration of Rs. 8,40,00,000/- and earned a capital gain of Rs. 6,68,29,816/- and claimed the entire amount of capital gain u/s 54 on....
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....ore the Ld. AO and it cannot be treated as additional evidence under Rule 46A. Further, he brought to our notice a copy of the assessment order in the case of Mr. Prateek Madhan wherein the same transaction was accepted by the Ld. AO while completing the assessment in his hand wherein he has disclosed a long term capital gain and claimed a deduction u/s 54 of the Act. He submitted the same addition cannot be made in the hands of the appellant. In this regard, he relied on the decision of Hon'ble Supreme Court in the case of Singapore Airlines Ltd. v. CIT (2022) 144 taxmann.com 221 (SC), and in the case of Nagubai Ammal nd Ors. vs. B. Shama Rao and Ors. 9. Considered the rival submissions and material placed on record, we observed that the assessee has sold the property and claimed deduction u/s 54 of the Act and purchased a property for a consideration of Rs. 7 crores and the above said property was purchased from Sh. Prateek Madhan, and it was claimed that the possession also was taken over on 06.06.2015. The main controversy raised by the Ld. AO is that the above said property was not registered as well as the vendor was not having proper title on the above said property. We o....