Assessee can avail the benefit of Capital Gain Exemption if Provisional Possession of the New Property is transferred within 2 Years: Delhi ITAT

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The Delhi ITAT, in a significant ruling, held that assessee can avail the benefit of capital gain exemption if provisional possession of the new property was transferred within two years of disposal of the old property.

The bench, while overruling the contentions of the department, ruled that when the provisional possession of the property is transferred to the assessee, benefit of section 54F of the Income Tax Act, 1961 cannot be denied to him merely on ground that the registration of the sale deed has not been made in his favour.

Assessee sold his immovable property and jewellery for purachasing a new residential unit from M/s. Unitech Acacia Project Private Limited which was provisionally allotted to him. Assessee further deposited the remaining property in the capital gain account scheme and claimed u/s 54 and 54F of the Income Tax Act. However, the claim was rejected by the department on ground that the assessee has failed to purchase or construct residential house within period of one year and there years as the case may be. According to the department, the benefit of s.54F is not available to assessee since the amount of capital gain remained unutilized.

Perafter analyzing the agreement entered into between the assessee and M/s. Unitech Acacia Projects Pvt. Ltd, the bench noted that the possession of the plot was to be handed over to the assessee within a period of six months.

It was also evident from the letter dated 25.4.2016 issued by Unitech Golf and Country Club and provisional possession certificate duly signed by project Engineer of the developer that provisional possession of the plot in question has been delivered to the assessee.

Allowing the second appeal filed by the assessee, the division bench ruled that “When it is not in dispute that the assessee has paid an amount of Rs. 75,85,818/- which is 95% of the total sale consideration for purchase of the property to M/s. Unitech High-Tech Developer (Rs. 7,41,250/- on 20.1.2011 and Rs. 68,44,298/- on 23.3.2011) through banking channel and also deposited Rs. 25,00,000/- under capital gain the right in personam was created in favour of the assessee from the date of entering into an agreement dated 11.1.2011 in favour of the assessee. It does not matter if the registration of the sale deed has not been made in favour of the assessee because transfer of the property is to be taken from the date of agreement in favour of the assessee. Moreover the assessee has made frantic efforts to take the possession of the property from the developer by approaching Hon’ble High Court of Allahabad as well as National Consumer Disputes Redressal Commission.”

Read the full text of the Order below.

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