Section 54 – Purchase of residential property is said to have been substantially effected on the date of possession. Accordingly, where assessee had received possession of a residential house one year before the date of transfer of residential house, though the agreement to purchase was entered into much prior thereto, the assessee was held to be eligible to claim deduction u/s. 54.

1. Ranjana R. Deshmukh vs. ITO (Mumbai) Members : Shamim Yahya,  AM and Ravish Sood, JM ITA No.: 697/Mum./2017 A.Y.: 2013-14 Dated: 9^th November, 2018. Counsel for assessee / revenue: Moti B.
Totlani / Chaitanya Anjaria

Section 54
–  Purchase of residential property is
said to have been substantially effected on the date of possession.  Accordingly, where assessee had received
possession of a residential house one year before the date of transfer of
residential house, though the agreement to purchase was entered into much prior
thereto, the assessee was held to be eligible to claim deduction u/s. 54.

FACTS

The assessee,
an individual, sold immovable property on 28^th March, 2013 and
claimed exemption u/s. 54 on the resultant gains. During the course of
assessment, the Assessing Officer (AO) observed that the property in respect of
which exemption was claimed by the assessee was purchased on 29^th
January, 2009 by entering into an agreement to purchase. The AO therefore
concluded that since the residential property purchased by the assessee was
beyond the stipulated period of one year before the transfer of property under consideration
and hence the assessee was not entitled to claim exemption u/s. 54 of the Act.

Aggrieved, the assessee preferred an appeal
to the CIT(A) who upheld the action of the AO.

Aggrieved, the assessee preferred an appeal
to the Tribunal.

HELD

The Tribunal observed that possession of the
residential property purchased by the asssessee was handed over to the assessee
18^th May, 2012 which was within the prescribed period of one year
prior to the date of transfer of property under consideration and therefore the
assessee was entitled to claim exemption u/s. 54 of the Act. The Tribunal held
that purchase of residential property is said to have been substantially
effected on the date of possession and for this view it relied on the decision
of the Bombay High Court in the case of CIT vs. Beena K. Jain [1994] 75
Taxman 145 (Bom.) wherein it was held that purchase was completed by
payment of full consideration and handing over of possession of the flat.

The Tribunal allowed the appeal of the
assessee.