INCOME TAX ACT, 1961

Section 54 read with Section 45

Capital gains - Exemption under section 54 - Physical possession of property given to assessee after renovation, painting, etc., in view of supplementary sale deed within time -

The issue in the present appeal was whether exemption under section 54 is allowable to the assessee on purchase of residential house within one year before the date on which transfer of capital asset took place. That assessee sold/transferred property on 24-2-2014 and purchased another residential house on 19-2-2013. The AO, therefore, noted that assessee purchased the residential house more than one year before the date of transfer of capital asset and as such assessee is not entitled for any deduction under section 54. In the Supplementary Agreement, it was specifically mentioned that the Seller (First Party) has taken back the physical possession of the property in question from the assessee (Second Party) from 19-2-2013 to 19-4-2013 for finishing and completion of the pending work of the above said property and after completion of the entire work First Party will handover the physical possession of the property to the assessee on or before 19-4-2013. It was also mentioned in the Supplementary Agreement that Sale Deed of the property was executed on 19-2-2013 because of the time binding of Sale Deed registration decided by the parties. Held: Copy of the Sale Deed, dated 19-2-2013 was also filed in which the photograph of the property in question was affixed which clearly revealed that property under sale was incomplete and renovation work was going on and as such, it was not in habitable condition. Due to this fact, the Supplementary Agreement was executed for completion of the work by the seller. It would, therefore, strengthen the submissions of the assessee that physical possession of the property after completion of the entire renovation work was handed-over to the assessee on 19-4-2013 and as such it would fall within one year before the date of transfer of property. Thus, assessee would be entitled for deduction under section 54. Since the assessee filed revised computation of income before AO, therefore, there was no bar on the powers of the CIT(A) being the First Appellate Authority to consider the case of assessee. The assessee also filed copies of the bills to show renovation in the property. Considering the entire material on record in the light of above decisions of the Tribunal, assessee was entitled for deduction under section 54. In view of the above discussion, the orders of the authorities below were, therefore, set aside and the entire addition was deleted.

Relied:Smt. Ramita Mahendra Mehta, Mumbai v. ITO-9(2)(3), Mumbai, dated 13-9-2017 ITA. No. 4535/Mum/2014 and Order of ITAT, Delhi F-Bench, Delhi in the case of Shri Rajiv Madhok v. Asstt. CIT (2020) 59-CCH-163-Del.-Tribunal, CIT v. Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Del-HC) : 2008 TaxPub(DT) 1881 (Del-HC).

REFERRED : Goetz India (P) Ltd., v. CIT (2006) 284 ITR 323 (SC) : 2006 TaxPub(DT) 1528 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2014-2015

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