TaxTMI 
TaxTMI 
2026 (6) TMI 830
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....,00,000/- or more Sub-Registrar Grade-I, Malvan Rs.1,30,00,000/- 3. In view of the above information, an order u/s 148A(d) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') dated 20.03.2023 was passed with the above amount of Rs. 1,30,00,000/- as escapement of income. Thereafter, notice u/s 148 of the Act was issued on 20.03.2023 which was duly served on the assessee. The assessee in response to the same filed his return of income on 05.05.2023 declaring Nil income. Statutory notices u/s 142(1) of the Act along with a questionnaire were issued and served on the assessee. The assessee in response to the same filed the following details of long term capital gain: Sale consideration 1,30,00,000/- Expenses for road construction for access to plot condition 33,00,000/- Net sale consideration 97,00,000/- Index cost 11,16,033/- Capital gain 85,83,967/- 4. The assessee also claimed exemption u/s 54F of the Act of an amount of Rs. 1,15,00,000/-. It was submitted that an agreement to purchase the property (land) was done on 04.05.2016 and an amount of Rs. 90,00,000/- was paid on 31.03.2016. However, the Assessing Officer was not sati....
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....as settled the issue by holding that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. The relevant extract of the order is reproduced below: "15. Therefore, a SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. The observations by the Delhi High Court, in Asha M. Jain v. Canara Bank - 94 [2001] DLT 841, that the "concept of power of attorney sales have been recognized as a mode of transaction" when dealing with transactions by way of SA/GPA/WILL are unwarranted and not justified, unintendedly misleading the general public into thinking that SA/GPA/WILL transactions are some kind of a recognized or accepted mode of transfer and that it can be a valid substitute for a sale deed. Such decisions to the extent they recognize or accept SA/GPA/WILL transactions as concluded transfers, as contrasted from an agreement to transfer, are not good law. 16. We therefore reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. Transactions of the nature of 'GPA sales' or 'SA/GPA/WILL transfers&#....
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....interest u/s 234 A, B & C of the Act. 4. On the facts and in the circumstances of the case, the CIT(A) erred in law and merit in levying penalty u/s 271A(1)(c) of the Act. 5. On the facts and in the circumstances of the case, the CIT(A) erred in law and merit in levying penalty u/s 271F of the Act. 6. The appellant prays for leave to raise any additional grounds of appeal or to alter, modify or withdraw any of the grounds raised in the appeal. 7. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC in rejecting the claim of exemption u/s 54F of the Act. He submitted that the assessee during the year had sold her immovable property for a total consideration of Rs. 1,30,00,000/- and has purchased a new residential property from Shri Rajan Sarmalkar for a total consideration of Rs. 1,15,00,000/-. The assessee has paid an amount of Rs. 90,00,000/- to the seller on 31.03.2016. Referring to pages 1 to 4 of the paper book, he drew the attention of the Bench to the copy of agreement to sell dated 04.05.2016. Referring to page 37 of the paper book he drew the attention of the Bench to the bank statement evidencing the payment ....
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....he sale deed. He accordingly submitted that the claim of exemption u/s 54F of the Act should not be denied to the assessee. 9. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC. 10. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has sold her immovable property for a total consideration of Rs. 1,30,00,000/-. Against the sale consideration the assessee claimed to have incurred an amount of Rs. 33,00,000/- towards road construction and development. After considering the indexed cost of acquisition at Rs. 11,16,033/-, the assessee computed the net long term capital gain at Rs. 85,83,967/-. The assessee also claimed the exemption u/s 54F of the Act amounting to Rs. 1,15,00,000/- on the basis of an agreement to purchase dated 04.05.2016 and the part payment of Rs. 90,00,000/- paid on 31.03.2016. However, the Assessing Officer rejected the plea of the assessee on the ground that the assessee could not substantiate the incu....
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....e as to whether the assessee is entitled to claim exemption u/s 54F of the Act when substantial amount of sale consideration has been given to the seller through an agreement to sell but the sale deed could not be entered into within the stipulated period of 2 years of the sale of the capital asset. 13. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of DCIT vs. Kruti Lalitkumar Jain (supra). In that case the assessee had sold her development rights and lease rights and had entered into an MOU with Kumar Housing Corporation Private Limited for purchase of property. The said MOU was un-registered. The assessee had claimed exemption u/s 54F of the Act which was denied by the Assessing Officer on the ground that the sale deed was not executed within the stipulated period of 2 years. The Tribunal held that the assessee had paid an amount of Rs. 10.60 crores for purchase of the property and the said consideration was mentioned in the final sale deed. It was accordingly held that even through the sale deed was entered into subsequently, there was no reason to reject the claim of the assessee. The relevant observations of the Tribunal rea....
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....e find the Hon'ble Bombay High Court in the case of CIT vs. Dr. Laxmichand Narpal Nagda (supra) has held that when the whole consideration was paid, possession of the flat was obtained and the flat was actually put to use for dwelling, deduction u/s 54 cannot be denied for mere non-registration of the flat. The relevant observations of the Hon'ble High Court read as under: "4. The Supreme Court in the case of CIT v. T N. Aravinda Reddy though in the context of a different factual background observed that the word "purchase" in section 54 has to be construed in a wider sense. 5. In the case of CIT v. Mrs. Shahzada Begum, the Andhra Pradesh High Court, rejecting the submission that the crucial date for the purpose of determining when the property is purchased within the meaning of section 54 is the date of registration of the sale deed in favour of the assessee when the title passes, came to the conclusion that the expression "purchase" would connote the domain and control of the property given into the assessee's hands. 6. Taking into consideration the letter as well as the spirit of section 54 and the word "towards" used before the word "purchase" in ....
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....ts. In other words, it has to be examined or discerned from the facts of each case as to whether the assessee had undertaken such an exercise or not? 12. The main purpose of Section 54 of the Act is to give relief in respect of profits on the sale of a residential house. Necessary conditions to be fulfilled for the applicability of Section 54 are: (i) Assessee should be an individual or a Hindu Undivided Family; (ii) Capital assets should result from the transfer of a long term capital asset; (iii) Capital gain must arise from transfer of building which is chargeable as 'income from house property'; (iv) Property should be a residential house; (v) Assessee must have within a period of two years after that date purchased another property; (vi) Property purchased must be residential; (vii) Exemption would be available only to the extent the sale proceeds are utilized; (viii) Where re-investment in a residential property is not made before due date for filing report, amount not so utilized till such date is required to be deposited in Capital Gain Account Scheme. Thus, if the above condit....
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....e assessee that she had invested entire net consideration in construction of residential house within stipulated period, it would meet requirement of section 54F and she would be entitled to get benefit of section 54F even if the construction was not completed within a period of three years. The relevant observations of Hon'ble High Court read as under: "8. Section 54F of the Act is a beneficial provision which promotes for construction of residential house. Such provision has to be construed liberally for achieving the purpose for which it is incorporated in the statute. The intention of the legislature, as could be discerned from the reading of the provision, would clearly indicate that it was to encourage investments in the acquisition of a residential plot and completion of construction of a residential house in the plot so acquired. A bare perusal of said provision does not even remotely suggest that it intends to convey that such construction should be completed in all respects in three (3) years and/or make it habitable. The essence of said provision is to ensure that assessee who received capital gains would invest same by constructing a residential house and once ....
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....sed' or 'constructed'. For such purpose, the capital gain realized should have been invested in a residential house. The condition precedent for claiming benefit under the said provision is the capital gain realized from sale of capital asset should have been parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If after making the entire payment, merely because a registered sale deed had not been executed and registered in favour of the assessee before the period stipulated, he cannot be denied the benefit of Section 54F of the Act. Similarly, if he has invested the money in construction of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under Section 54F of the Act". 28. We find the Pune Bench of the Tribunal in the case of Ramdas Sitaram Patil vs. ACIT (supra) has held that that where recital of sale deed clearly pointed out that possession of property was taken on 31.03.2015 which was within period of one year before....
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....54, it seems to us that the said word is not used in the sense of legal transfer and, therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting section 54. In the instant case, the whole consideration was paid, possession of the flat was obtained and it was actually put to use for dwelling within four months, as a result exemption contemplated under section 54 was clearly attracted. 7. Our pointed attention was drawn by the Revenue to the decision of the Supreme Court in the case of Alapati Venkataramiah v. CIT wherein the word "transfer" as found in section 12(b) of the Indian Income-tax Act, 1922, is interpreted as meaning "passing of title". Since the word interpreted as well as its context are different, the ratio of that decision will have no application to the instant case." 10. Applying the above principle in the present case, the recital of the sale deed clearly says that possession of the property was taken on 31.03.2015 which is within the period of one year before the date of sale of original asset. The covenants in the sale deed executed and registered are conclusive in the absence of any evidence t....
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....ption of capital gains under Section 54G of the Act can be claimed on transfer of assets in cases of shifting of industrial undertaking from urban area to any other non-urban area. This exemption may be claimed if the capital gains arising on transfer of any of assets of existing industrial unit is utilized within one year or three years after the date on which the transfer took place for purchase of new machinery or plant for the purposes of the business of the industrial undertaking in the area to which the said undertaking is shifted. The Legislature consciously has not used the expression 'towards the purchase of plant and machinery' as in Section 54(4) of the Act in contrast to Section 54(2) of the Act wherein the words 'towards' is used before the word 'purchase'. The expression 'purchased' used in sub-clause (a) of section 54G of the Act requires to be understood as the domain and control given to the assessee. In the present case, it is not in dispute that the assessee has paid advance amount for acquisition of land, plant, building and machinery, etc., within the time stipulated in the Section, but it is not the case of the assessee that after such payment of advance amoun....