No bar under law to claim deduction u/s 54 and u/s 54F simultaneously in respect of the same asset – ITAT
In a recent judgment, ITAT Pune has held that there is no bar under law to claim deduction u/s 54 and u/s 54F simultaneously in respect of the same asset. Exemption was allowed as possession of property was taken within the period prescribed.
ABCAUS Case Law Citation:
4218 (2024) (08) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming disallowance of exemption u/s 54 of the Income Tax Act, 1961 (the Act) by Assessing Officer (AO) by denying the date of possession of the house property.
During the year, the appellant had sold two properties and filed Return of Income claiming exemption u/s 54 and 54F of the Act in respect of the capital gains arising on sale of the said properties, in view of purchase of new residential bungalow.
The possession of the new bungalow was taken over in terms of the sale agreement entered into between him and the owner of the property. The sale consideration for purchase of the above new residential house/bungalow was paid before entering the sale deed.
Against the said return of income, the assessment was completed by the Assessing Officer (AO) u/s 143(3) of the Act by disallowing the claim for deduction of income u/s 54F and deduction u/s 54 of the Act by holding that deduction u/s 54 and deduction u/s 54F cannot be claimed simultaneously in respect of the same asset; and that payment for purchase of new Bungalow was made prior to one year before the sale of the original asset.
The CIT(A) confirmed the action of the AO by holding that the possession agreement was a fabricated document in view of the statement made by assessee u/s 132(4) of the Act that the new house was in his possession before the sale agreement.
Before the Tribunal the assessee contended that the possession of the new house was taken within one year and he was not in possession of the said bungalow before. Therefore, the contention that property was purchased prior to one year before the date of sale of the original asset has no basis. He also drawn attention to the covenants of the sale deed according to which the possession of the property was taken on the date specified therein.
It was further submitted that there is no bar under law to claim deductions 54/54F simultaneously in respect of one new residential property.
The Income Tax Department placing reliance on the decision of Hon’ble Bombay High Court contended that the construction of Bungalow was already done and completion certificate was obtained from Municipal Corporation one year before. Also, in view of the statement u/s 132(4), the property was purchased prior to one year before the sale of the original asset. Hence, appellant was not entitled for deduction u/s 54/54F of the Act.
The Tribunal held that there is no bar under law to claim deduction simultaneously u/s 54 and u/s.54F in respect of the same asset.
The crucial fact which needs to be determined in the case was the date of purchase of the new residential property. The Tribunal observed that it is settled position of law that the crucial date for the purpose of determination is when the property is purchased for the purpose of section 54 and the date when the possession and control of the property is given to the purchaser’s hands.
The Tribunal relied on the number of judgments of Hon’ble High Court and Hon’ble Supreme Court wherein it was held that the term “purchase” employed in sub-section (2) of section 54, is not used in the sense of legal transfer and therefore, the holding of a legal title within a period of one year is not a condition precedent for availing deduction u/s 54.
The Tribunal opined that applying the principle in the said cases, the recital of the sale deed clearly stated the date on which the possession of the property was taken which was within the period of one year before the date of sale of original asset. The covenants in the sale deed executed and registered were conclusive in the absence of any evidence to the contrary. Further, the finding of the CIT(A) that sale deed was a fabricated document was a mere bald allegation and cannot be sustained in the eyes of law.
Accordingly, the Tribunal allowed deduction us 54/54F as claimed by the assessee.
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