Instalment Payments outside time window do not debar claim of deduction u/s 54: ITAT upholds AO’s observation [Read Order]

Installment payment - debar claim of deduction - ITAT - AO - Taxscan

The Income Tax Appellate Tribunal (ITAT) Jaipur has ruled that merely because the assessee has made payments in instalments and some of the instalments were paid prior to one year window before the date of sale of the original assets would not debar the assessee from the claim of deduction under section 54 of the Income Tax Act, 1961.

The assessee Prakash Pandharinath Bakre earned long-term capital gains by selling a property for a consideration of Rs. 1,50,00,000to Shri Aditya Palnitkar on 30.12.2014. The assessee claimed a deduction of Rs. 40,34,075/- under section 54 for investment in a new flat and necessary documents in form of sale deed, purchase deed, and possession letter were submitted during the course of assessment proceedings. The question was whether such a claim of deduction under section 54 has been wrongly allowed by the Assessing Officer. The contention of the department was that the payments towards the purchase of the new flat totaling Rs. 36,70,320 were made prior to one year before the date of sale of the property, the investment, therefore, does not qualify for the deduction under section 54 of the Income Tax Act, 1961 rendering the assessment order as erroneous in so far as prejudicial to the interest of the Revenue.

Judicial Member Sandeep Gosain and Accountant Member Vikram Singh Yadav relied on the judgment of the Bombay High Court in the case of Beena K Jain (supra)and held, “We are therefore of the considered view that all the relevant facts were on record, duly examined by the AO and the claim of deduction has been rightly allowed by the AO as per the mandate of provisions of section 54 of the Act. The order so passed by the AO cannot, therefore, be held as erroneous in so far as prejudicial to the interest of the Revenue. Thus, the order of the Pr CIT is hereby set-aside and the order of the AO is sustained.”

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