Cause Title : ACIT vs Sh. Sanjay Choudhary, ITA No.1274/Del/2020, A.Y. 2013-14, Income Tax Appellate Tribunal
Date of Judgment/Order : 23/01/2023
Corum : Sh. N.K.Billaiya, Accountant Member And Sh. Anubha V Sharma, Judicial Member
Citied: ACIT V. Om Prakash Gyal [2012] (JP)
Background
The Assessee had claimed benefit under Section 54F of the Income Tax Act for having constructed residential house out of the capital gains from sale of some properties. However the tax dept. rejected the claim arguing that the Assessee has not held the properties for at least 36 months and further the purchases made by the Assessee were not through registered sale deed.
The Appellate Authority however took a contrary view and gave benefit of Section 54F of the Act to the assessee which lead to the present appeal filed by the Dept.
The question before the Appellate Tribunal was whether exemption under Section 54F of the IT Act would be available for the properties purchased by the Respondent who does not have any registered deed in his name.
The revenue dept. contended that Ld. CIT(A) has fallen in error in considering the nature of transactions for acquiring three properties by the assessee vide agreements and power attorney to be duly purchased. He submitted that the property did not fall in the class of residential properties and Ld. AO has rightly disallowed the exemption.
Judgment
The Appellate Tribunal observed that the original seller have confirmed having owned and sold the said property as claimed by the assessee. He also provided copy of original GPA dated 10.06.2009 executed by him in favour of his wife thereby granting power of attorney for management and to sell the above mentioned property. His wife had received the sale consideration from Smt. Bhawana Gupta. Ld. AO had considered this transaction to be a sale of capital asset by the assessee and calculated long term capital gain.
The Appellate Authority had held that the transactions for sale as well as purchases of land for construction of new residential house/residential house are through registered Power Of Attorney (POA) cum consideration receipts except the property at Mehrauli which is true unregistered POA along with receipts. Therefore, if the sale consideration has been accepted for the purpose of computing LTCG on the registered POA, then the purchase of land/house on the basis of regd. POA cannot be considered a default for the purpose of exemption u/s 54F.
The Bench is of considered opinion that execution of the sale deed or any document of Conveyance in favour of vendee, only transfers the ‘ legal title’ for the purpose of civil consequences. The ownership of a property is a bundle of interests and apart from the registered sale deed or any other document of conveyance, vendee can acquire interest in semblance of right of owner by documents like GPA or agreement to sell. The ‘purchase’ of immovable property involves acquiring all those interests in the property. Same may be by some inchoate instruments in favour of the purchaser. Non execution of a registered document of transfer of title may have civil consequences in regard to his title, qua rights between the seller and purchaser but for the purpose of benefits of Section 54/54F, the assessee shall be deemed to have ‘purchased’ the properties. As for the purpose of Section 54/54F of the Act, the important question is that money out of Long term capital gain (LTCG) should be paid/spent by the assessee, before the end of statutory period, for claiming exemption. When the Ld. AO had not doubted the payments out of LTCG made by assessee for purchase of three properties with inchoate documents executed in favour of the assessee. Then for not having the sale deed executed in his favour, assessee cannot be said to have not ‘Purchased’ the properties as a statutory compliance. Thus, the findings of Ld. CIT(A) in this regard require no interference.
On the issue of whether the construction done by the Assessee was residential or not, the bench was of considered opinion that the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. As per judgment in Om Prakash Gyal (supra), only requirement for claiming exemption under Section 54F is construction of residential house and it does not matter that house constructed is on agricultural land.
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