The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the capital gain deduction under Section 54 of the Income Tax Act, 1961 could be allowable in the year of handing over of possession not in the year of payment of consideration.
The assessee, Satyamurti Ramasunder was handed over with possession on 16.01.2011 and the assessee had sold his original asset on 05.08.2011. Thus, the new property was purchased within one year of the sale of the original asset which fulfilled the requirement of Section 54 of the Income Tax Act. The Assessing Officer had assumed jurisdiction under Section 147 of the Income Tax Act.
He also held that the Appellant was not entitled to exemption/deduction under Section 54 of the Income Tax Act allegedly for the reason that the new asset (residential house) was purchased one year from the sale of original asset and that the new asset was not “purchased” but was constructed”.
Satyamurti Ramasunder, who appeared on behalf of the assessee pointed out that the Assessing Officer had denied the deduction under Section 54 of the Income Tax Act for the reason that new property was not purchased but was constructed and that construction within one year before the sale of the original asset was not eligible for deduction under Section 54 of the Income Tax Act.
Ram Dhan Meena, appeared on behalf of the revenue.
The Division Bench of Saktijit Dey, (Vice-President) and Girish Agrawal, (Accountant Member) Referring to the decision arrived in Bastimal K. Jain vs. ITO allowed the appeal filed by the assessee and observed that “deduction under Section 54 was rightly allowed because of the purchase of new property, what is relevant is “handing over of possession” and not “payment of consideration”.
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