Capital Gain Exemption not allowable merely on basis of Agreement without Payment Evidence: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the exemption under Section 54F of the Income Tax Act, 1961 has held that the exemption is allowable merely on the basis of the agreement without the evidence of payment of the purchase of new flat.

During the year under consideration, the assessee sold a plot and claimed a capital gain exemption under section 54F towards investment in the new flat. However, the assessee has not produced any construction agreement with the builder. The payment through three cheques for a total amount of Rs. 59,22,521/- before the due date of filing of return of income under section 139 of the Act was not in dispute.

The Assessing Officer denied the exemption by holding that the assessee has not produced any agreement entered into with the builder for the purchase of flat before the authorities proving the claim of three payments made for the purchase.

Before the Tribunal, the revenue contended that mere agreement without payment evidence, the authorities below have rightly denied the claim of deduction and pleaded for upholding the same.

The Tribunal held that when there was no clarity on the purpose for which the assessee made with the builder, under section 133 of the Act, the Assessing Officer would have called for details/explanation from the builder, which was not done by the Assessing Officer.

“Since the assessee has paid a sizeable amount towards the purchase of new flat out of the sale consideration, the Department cannot deny the claim of deduction under section 54F of the Act. However, the reason for not filing a copy of the purchase agreement with the builder against which the payment was made by the assessee was not explained. The assessee is liable to file complete details for claiming any deduction under the Income Tax Act, otherwise, such deduction is not allowable.”

“Since there was a long delay in construction of the property, the assessee made a request dated 18.08.2014 for withdrawal of the amount paid and the entire amount of Rs.59,22,521/- was refunded to the assessee on 06.02.2015. However, the assessee has not furnished any evidence of payment of Rs. 59,22,521/- with the builder with whom the assessee has entered into an agreement for the purchase of a new flat. Without furnishing payment details, the assessee’s claim cannot be entertained. In view of these facts and circumstances, we direct the assessee to furnish complete evidence towards payment of the above amount before the Assessing Officer for verification and the details are found to be correct, the assessee can be allowed to claim deduction under section 54F of the Act and otherwise not,” the Tribunal said.