Bastimal K Jain vs. ITO ITAT “B” Bench, Mumbai Before Mahavir Singh (J. M.) and Rajesh Kumar (A. M) ITA No.: 2896/Mum/2014 A.Y.: 2010-11. Date of order: 8th June, 2016 Counsel for Assessee / Revenue: Dr. K. Shivaram / Sachidanand Dube

FACTS
During the year under consideration, the assessee had sold his flat for a consideration of Rs.55 lakh on 24.02.2010 resulting into long term capital gain of Rs.50.95 lakh. The assessee claimed deduction u/s. 54 contending that he had purchased a new flat in earlier year, the possession of which was received on 11.09.2009. The AO noted that the agreement for purchase of the new flat was entered into on 28.12.2007 and registered on 28.02.2008. Thus, according to him, the purchase of new flat by the assessee was made one year before the date of the sale of the property. Hence, he denied the deduction claimed u/s 54. The CIT(A) on appeal, relying on the Madras High Court decision in the case of Late R Krishnaswamy (ITA No.697 & 698 of 2013 dated 26.11.2013), held that the date of registration of sale deed was material for the purpose of determining the date of purchase of a flat. Accordingly, the CIT(A) concurred with the views of the AO and held that the assessee had not acquired the new flat within one year before the sale of the Long Term Capital Asset and thus denied the benefit u/s 54 claimed by the assessee.

Before the Tribunal in support of the orders of the lower authorities, the revenue relied on the decision of the Gujarat High Court in the case of CIV s. Jindas Panachand Gandhi [2005] 279 ITR 552.

HELD
The Tribunal noted that the flat intended to be purchased by the assessee was not at all constructed on 28.12.2007 when the agreement for purchase was entered into. Eventually property’s possession was given to the assessee by the builder only on 11.09.2009. According to the Tribunal, the agreement for purchase was just a right for purchase of a flat in the proposed construction. The Tribunal also agreed with the assessee that the acquisition of the property is to be considered only when the possession of the flat was given to the assessee by the builder and that date was on 11.09.2009. Thus, the vital conditions of section 54 of the Act were fulfilled when the property’s possession was handed over to the assessee by the builder on 11.09.2009 i.e. within the time limit prescribed u/s. 54 of the Act for claiming deduction u/s 54 of the Act. In arriving at the above conclusion, the Tribunal also relied on the decision of the Mumbai tribunal in the case of V M Dujodwala vs. ITO (36 ITD 130) and of the Bombay High Court in the case of CIT vs. Smt. Beena K Jain (217 ITR 363).