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Date of Transfer of Possession can be treated as the Date of Ownership for the purpose of section 54 of the Income Tax Act: ITAT Mumbai [Read Order]

NAA - Service Tax

The Mumbai bench of Income Tax Appellate Tribunal, has recently held that for the purpose of section 54 of the Income Tax Act, 1961 the date of ownership must be determined according to the date in which the possession of the property was handed over to the assessee. The Court relied upon the judicial decisions in CIT vs. Smt. Beena K Jain andV M Dujodwala vs. ITO.The Tribunal was considering an appeal filed by the assessee against the appellate order of CIT(A).

The grievance of the assessee was that the Assessing Officer has disallowed his claim of deduction in respect of new residential property on ground that the purchase of the house was not within the time limit prescribed under section 54 of the Act. The Commissioner of Income Tax (Appeals) has confirmed this order on first appeal. Being aggrieved, the assessee preferred an appeal before the Appellate Tribunal.

The assessee claimed that he has purchased a flat vide agreement dated 28.12.2007 for a consideration of Rs.42.71 lacs and the same was registered on the same date. According to the AO, the assessee has claimed deduction u/s. 54 of the Act on the basis of this purchase, which was made one year before the date of sale of the property and hence, he denied the deduction.

On behalf of the assessee, it was contended that the said property was handed over to the assessee on 11.09.2009 which means, within the time limit prescribed under section 54 of the Act. Therefore, the assessee is entitle to get deduction.

The assessee further noted the decision of the Mumbai Tribunal in the case V M Dujodwala vs. ITO 36 ITD 130 (Mum), in which the Tribunal observed that the ownership is to be considered from the date in which the assessee is allowed possession of the property,for the purpose of deduction u/s. 54 of the Act.

The assessees further relied upon the decision of the Bombay High Court in CIT vs. Smt. Beena K Jain 217 ITR 363 (Bom)in which the same view was taken by the Court while deciding the case.

The Tribunal, in the instant case accepted the contentions raised by the assessee and observed that “In such circumstances and in the given facts of the case and also the case law relied on by learned Counsel for assessee in the case of V M Dujodwala (supra) coordinate bench of this Tribunal and also of Hon’ble Bombay High Court in the case of Smt. Beena K Jain, supra, we are of the view that the assessee’s claim of deduction u/s. 54 of the Act is to be reckoned from the date of handing over of the possession of the flat by the builder to the assessee i.e. 11.09.2009, and if we take that date, the assessee is entitled to deduction u/s. 54 of the Act because the assessee has sold his residential flat on 24.02.2010. We allow the assessee’s claim and order accordingly.”

Read the full text of the order below.

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