Deduction u/s 54-54F allowed if delivery of house could not be obtained but entire payment is made – Del ITAT


ITO v SMT BINA GUPTA [ITA No.4074/Del/2012 (dtd 18/10/2013) (Delhi ITAT)]

Background:

Assessee sold house on 13.06.2008 on which long term capital gain was shown at Rs.31,00,369. Deduction u/s 54 was claimed for entire capital gain on a/c of investment in house. Assessee has also sold a plot at Sradhapuri, Meerut on 10.11.2008 on which Long Term Capital Gain is shown at Rs.19,89,914/-. Deduction u/s 54F has been claimed for this entire amount on a/c of investment in the same houseas mentioned above. 

The AO found that the assessee had advanced monies to the builder on agreement and deposited money in capital gains scheme. The AO held that since no house had been purchased till the date of assessment order as two years period had lapsed, deduction u/s 54 and 54F was to be disallowed. 

Assessee’s contentions:

  • Assessee had entered into an agreement to purchase a flat at Banglore from M/s Golden Gate Properties Ltd on 18.12.2008 for Rs.60,19,380/- and had paid a total sum of Rs.42,50,000/- on different dates between 31.05.2008 to 31.12.2008 to the builder and the amount of Rs.14,50,000/- was deposited in separate capital gain a/c in July 2009
  • The builder agreed to allow possession of the said flat on or before 30.09.2009 i.e within a period of 15-16 months of the date of transfer of the original assets. 
  • As far as the assessee is concerned, it had made the investment in the said property and the fault of non-completion was attributable to the builder and not the assessee.
  • Reliance was placed upon CIT vs R.L. Sood (2000) 108 Taxman 227 (Delhi); CIT vs Sardarmal Kothari 302 ITR 286; CIT vs Sambandam Uday Kumar 345 ITR 389 (Kar)
  • There is no relationship between the assessee and the builder as such there can be no occasion to consider any connivance

Tax authority’s arguments:

  • The assessee has not been give any possession of the flat or a house as per the requirement of the Statute and since the requirements of the Act are not fulfilled, the impugned order deserves to be set aside and the assessment order be upheld.

HELD:

  • The Certificate given by the assessee has not been disputed by the Revenue despite a specific query. 
  • Considering the grounds agitated by the Revenue on merit, we find no substance in them as admittedly the payments were made by the assessee on the specific dates pursuant to the agreement entered with M/s Golden Gate Properties Ltd, Banglore on 18.12.2008 i.e within the specified time and the delivery was scheduled to take place before 30.09.2009 i.e very much within the stipulated time. 
  • The fact that there was no relationship between the assessee and the builder has not been assailed by the Revenue as such no connivance or collusion can be read into the Agreement. 
  • In these peculiar circumstances looking at the settled legal position on the said issue as considered by the Jurisdictional High Court amongst others, we find no infirmity in the impugned order. 

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