The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the date of possession shall be taken into consideration while allowing the capital gain exemption under section 54 of the Income Tax Act, 1961.
The assesses is a salaried employee and his return was picked up for scrutiny assessment. After the scrutiny assessment proceedings, the Assessing Officer denied benefit of deduction under Section 54 of the Act to the Assessee on the ground that the Assessee had not purchased New Residential House within period specified in Section 54 of the Act which is one year before or two years after the sale of the Existing Residential House. According to the Assessing Officer the New Residential House was purchased on 15.02.2012, i.e., the date on which the Agreement for Sale, dated 07.02.2012 was registered.
The assessee contended that in May 2011 the Assessee along with his wife booked a residential flat in an under construction building named ‘Bankston’ located at Rodas Enclave, Thane (W) from Roma Builders Pvt. Ltd and therefore, the benefit shall be allowed.
The Tribunal bench comprising ITAT Vice-President Pramod Kumar, and Mr. Kuldip Singh, Judicial Member allowed this contention and held that “on the facts of the present case the date on which possession is by the Assessee (i.e. 02.04.2016) should be taken as the date of purchase. The requirement of the Section 54 is that the Assessee should purchase a residential house within the specified period and source of funds is quite irrelevant.”
“Nowhere, it has been mentioned that the funds received as consideration from sale of original asset must be utilized for the purchase of the new residential house [ACIT vs. Dr. P.S. Pasricha : (2008) 20 SOT 468 (Mumbai) (11-01-2008)]. Since the date of purchase falls within a period of 2 years from the sale of Original Asset (i.e. 21.05.2014), the Assessee is entitled to benefit under Section 54 of the Act. The alternate contention of the Assessee, that the benefit of Section 54 be granted to the Assessee by treating the transaction as a case of ‘construction’ in view of the judgment of Hon’ble High Bombay Court in the case of Hilla J B Wadia : 216 ITR 376, now being academic, does not require consideration,” the Tribunal added.
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