Section 54F – Since assessee had entered into a registered agreement within time period prescribed u/s. 54F, he was entitled to claim exemption even in respect of amounts paid at the time of booking which was more than one year prior to the date of transfer. New house vests in the assessee by registered deed and not by availing of housing loan or payment of booking amount.

During the previous year relevant to assessment year 2009-10, land belonging to the assessee was acquired by the Karnataka Industrial Development Board for Bangalore Metro Rail Corporation and the assessee received compensation of Rs. 84,61,701 on 21-07-2008. The assessee acquired a residential flat at Bangalore for Rs. 50,98,720 by registered sale deed dated 11-09-2008. He, accordingly, claimed exemption of Rs. 46,11,166 u/s. 54F of the Act.

In the course of assessment proceedings the Assessing Officer (AO) noticed that the said flat whose cost was considered for claiming exemption u/s. 54F of the Act was booked on 19-01-2006 and the assessee had taken a loan of Rs. 40 lakh from Syndicate Bank which was sanctioned on 24-05-2006 for investment in purchase of the said flat. Thus, the AO noticed that the amount of Rs. 44,70,852 was paid by 31-03-2007 i.e., more than one year prior to acquisition of the new asset. The AO was also of the view that since the assessee invested Rs. 40 lakh out of the Housing Loan from Syndicate Bank in the purchase of the new asset and therefore only Rs. 6,23,433 qualified for exemption. He accordingly, worked out the exemption u/s. 54F at Rs. 6,23,433 and allowed Rs. 6,23,433 instead of Rs. 46,11,166 as claimed.

Aggrieved, the assessee preferred an appeal to Commissioner of Income-tax (Appeals), who dismissed the appeal by holding that the assessee is not eligible for exemption u/s. 54F as claimed.

Aggrieved, the assessee preferred an appeal to the Tribunal.

Held:

The Tribunal noted that the AO had restricted the claim for exemption for the reason that though the flat was purchased by registered deed dated 11-09-2008, the booking was made on 09-01-2006 and a housing loan of Rs. 40 lakh was taken from Syndicate Bank on 24-05-2006 which was invested in the said property before 31-03-2007.

The Tribunal did not agree with the view of the authorities below that both these investments amounting to Rs. 44,70,852 being made more than one year prior to the date of receipt of compensation of Rs. 84,61,701 for asset, on 21-07-2008, the assessee would not be eligible for exemption u/s. 54F of the Act. The Tribunal was of the view that the amounts paid by the assessee on booking of the asset on 09- 01-2006 and the housing loan of Rs. 40 lakh availed from Syndicate Bank for investment in the purchase thereof have not vested the assessee with the ownership of the new asset. The assessee has been vested with the ownership of the new asset only by virtue of the Registered Sale Deed dated 11-09- 2008. It held that the authorities below have erred in restricting the exemption u/s. 54F of the Act to Rs. 6,23,433. It held that the assessee is entitled to exemption of Rs 46,11,166 as claimed by it.

This ground of appeal filed by the assessee was allowed.