Delhi High Court
Commissioner Of Income Tax vs R.L. Sood on 24 September, 1999
Equivalent citations: 2000 108 TAXMAN 227 Delhi
ORDER
1. By this petition under section 256(2) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act'), pertaining to the assessment year 1982-83, the revenue seeks a direction to the Tribunal to state the case and refer the following question for the opinion of this court :
1. By this petition under section 256(2) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act'), pertaining to the assessment year 1982-83, the revenue seeks a direction to the Tribunal to state the case and refer the following question for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that for the purpose of section 54 of the Income Tax Act, 1961, the date of agreement to purchase should be taken as the date of purchase and the date of registration of sale deed for purchase is not relevant."
2. The assessee was the owner of a residential house which he sold on 22-9-1981 for a total consideration of Rs. 2,75,000. On 25-9-1981, he entered into an agreement for purchase of a residential flat and by September, 1982 paid a sum of Rs. 2,39,850 to the builder of the said flat. The actual possession was delivered to the assessee on 17-2-1983 and the sale deed in his favour was registered on 26-2-1985.
2. The assessee was the owner of a residential house which he sold on 22-9-1981 for a total consideration of Rs. 2,75,000. On 25-9-1981, he entered into an agreement for purchase of a residential flat and by September, 1982 paid a sum of Rs. 2,39,850 to the builder of the said flat. The actual possession was delivered to the assessee on 17-2-1983 and the sale deed in his favour was registered on 26-2-1985.
3. During the course of the assessment proceedings for the relevant assessment year, the assessing officer brought the difference between the sale price of the residential flat sold by the assessee and the cost of acquisition of the said house to tax as capital gains on the ground that the assessee had failed to satisfy the conditions laid down in section 54(1) of the Act inasmuch as he had failed to purchase the flat within the stipulated period of one year. The assessee's appeal to the Commissioner (Appeals) was unsuccessful.
3. During the course of the assessment proceedings for the relevant assessment year, the assessing officer brought the difference between the sale price of the residential flat sold by the assessee and the cost of acquisition of the said house to tax as capital gains on the ground that the assessee had failed to satisfy the conditions laid down in section 54(1) of the Act inasmuch as he had failed to purchase the flat within the stipulated period of one year. The assessee's appeal to the Commissioner (Appeals) was unsuccessful.
4. The assessee took the matter in further appeal to the Tribunal, who took the view that the assessee having purchased the new flat within one year of the sale of his old residential house, the provisions of section 54(1) of the Act stood satisfied and, therefore, no income by way of capital gains could be taxed in the hands of the assessee. The revenue's application under section 256(1) having been dismissed by the Tribunal the present petition had been filed.
5. We have heard Mr. Sanjiv Khanna, the learned senior standing counsel on behalf of the revenue.
5. We have heard Mr. Sanjiv Khanna, the learned senior standing counsel on behalf of the revenue.
6. In our view the Tribunal was justified in declining to make a reference on the proposed question to this court. Admittedly, the assessee had paid a sum of Rs. 2,39,850 out of the total sale consideration of Rs. 2,75,000 for purchase of flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dated 25-9-1981, i.e., within four days of the sale of his old property, the assessee acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of section 54. Merely because the builder failed to hand over possession of the flat to the assessee within the period of one year, the assessee cannot be denied the benefit of the said benevolent provision. This would not be in consonance with the spirit of section 54.
6. In our view the Tribunal was justified in declining to make a reference on the proposed question to this court. Admittedly, the assessee had paid a sum of Rs. 2,39,850 out of the total sale consideration of Rs. 2,75,000 for purchase of flat within the period of one year from the date of sale of his old residential house. Thus, on payment of a substantial amount in terms of the agreement of purchase dated 25-9-1981, i.e., within four days of the sale of his old property, the assessee acquired substantial domain over the new residential flat within the specified period of one year and complied with the requirements of section 54. Merely because the builder failed to hand over possession of the flat to the assessee within the period of one year, the assessee cannot be denied the benefit of the said benevolent provision. This would not be in consonance with the spirit of section 54.
7. We may note that realising the practical difficulty faced by the assessee in such situations, the Board issued a Circular No. 471 dated 15-10-1986, clarifying that when the DDA issues the allotment letter to an allottee under its Self-financing Scheme, on payment of first instalment of cost of construction, the allottee gets title to the property and such allotment should be treated as cost of construction for the purpose of capital gains. On the same analogy, the assessee having been allotted the flat, he having paid a substantial amount towards its cost within the stipulated period of one year, he cannot be denied the benefit of the said section because the flat purchase by him had come into his full domain within the period of one year, though the sale deed in his favour was registered subsequently.
7. We may note that realising the practical difficulty faced by the assessee in such situations, the Board issued a Circular No. 471 dated 15-10-1986, clarifying that when the DDA issues the allotment letter to an allottee under its Self-financing Scheme, on payment of first instalment of cost of construction, the allottee gets title to the property and such allotment should be treated as cost of construction for the purpose of capital gains. On the same analogy, the assessee having been allotted the flat, he having paid a substantial amount towards its cost within the stipulated period of one year, he cannot be denied the benefit of the said section because the flat purchase by him had come into his full domain within the period of one year, though the sale deed in his favour was registered subsequently.
8. In the light of the said circular and keeping in view the spirit of section 54, we decline the request of the revenue to call for a reference on the proposed question.
8. In the light of the said circular and keeping in view the spirit of section 54, we decline the request of the revenue to call for a reference on the proposed question.
9. Consequently, the petition is dismissed.
9. Consequently, the petition is dismissed.
