ITAT allows LTCG Exemption u/s 54 on Sale of Old Flat as Possession of New Flat falls Within Prescribed Period [Read Order]
Relying on the Bombay High Court ruling in CIT v. Smt. Beena K. Jain and the Supreme Court judgment in Sanjeev Lal v. CIT, the Tribunal held that the date of possession is relevant for computing exemption under section 54
Old Flat
Old Flat
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the claim of Long Term Capital Gains ( LTCG )exemption under section 54 of Income Tax Act,1961 on the sale of an old flat, as the possession of the new flat was obtained within the prescribed period.
Payal Kishore Kulchandani,appellant-assessee, filed her return declaring a total income of Rs. 4,03,770/-. Assessee reported LTCG of Rs. 91,33,892/- from the sale of an old flat on 21.07.2011, held jointly with her husband, and claimed exemption under section 54 of the Act by purchasing a new flat jointly for Rs. 3,05,00,000/-.
The agreement to purchase the new flat was dated 28.08.2009, which was beyond the prescribed period of one year before the sale of the old property. The Assessing Officer (AO ) disallowed the exemption, noting that most of the payment had been made before 14.12.2009, and completed the assessment under section 143(3) at a total income of Rs. 96,07,966/-.
The assessee appealed to the Commissioner ofIncome Tax (Appeals)[CIT(A)], who dismissed the appeal on 09.04.2025. She then filed an appeal before the tribunal.
The assessee counsel submitted that the agreement for purchasing a new flat was executed on 28.08.2009, with part payment made by 14.12.2009, further payments on 07.02.2011 and 05.04.2011, and possession received on 06.04.2011. He argued that for claiming exemption under section 54, the relevant date was the date of last payment and possession, not the agreement date, and therefore the assessee was entitled to exemption on the sale of the old flat on 21.07.2011.
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He relied on the High Court ruling in CIT v. Smt. Beena K. Jain (217 ITR 363), which held that the date of possession of the new property is relevant for section 54, and on the Supreme Court judgment in Sanjeev Lal v. CIT [2014] 365 ITR 389, which stated that the Act should be interpreted purposively to give relief on long-term capital gains.
The Departmental counsel however, argued that under the strict provisions of section 54, the purchase fell outside the prescribed period, and the CIT(A)’s confirmation of the disallowance should be upheld.
The two member bench comprising Amit Shukal (Judicial Member) and Reenu Jauhri (Accountant Member) considered the submissions of both parties and the judicial decisions cited by the assessee counsel.
It noted that the case was similar to CIT v. Smt. Beena K. Jain, where the agreement for purchase of the new property was executed before the one-year period prior to the sale of the old property, but possession was obtained within the prescribed period. The High Court held that the relevant date for claiming exemption under section 54 was the date of full payment and possession.
In the present case, the assessee received possession of the new flat on 06.04.2011, within one year before the sale of the old flat on 21.07.2011. The Tribunal held that the assessee was entitled to claim the deduction under section 54 and directed the AO to allow the exemption on the LTCG.
Accordingly the appeal was allowed.
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