No denial of Sec. 54B relief merely because new property was purchased without registered sales deed

No denial of Sec. 54B relief merely because new property was purchased without registered sales deed.



Where assessee sold land and claimed deduction under section 54B on purchase of agricultural lands one through registered sale deed and another through an agreement to sell, assessee could not be denied benefit of deduction u/s 54B in respect of purchase of property through agreement to sell.

‘Purchase’ cannot be interpreted and detached from definition of word ‘transfer’ as given u/s 2(47). When transfer takes effect as per provisions of section 2(47), if a liability to pay tax arise in case of seller, consequent right to get deduction on purchase of property accrues in favour of purchaser, if he otherwise is so eligible to claim it as per relevant provisions of Act.

Refer extract of Judgement:

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[2017] 86 taxmann.com 217 (Chandigarh – Trib.)
IN THE ITAT CHANDIGARH BENCH
Anil Bishnoi
v.
Assistant Commissioner of Income-tax, Chandigarh
SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
IT APPEAL NO. 1459 (CHD.) OF 2016
[ASSESSMENT YEAR 2014-15]
SEPTEMBER  27, 2017 
T.N. Singla for the Appellant. Smt. Chanderkanta for the Respondent.
ORDER
Sanjay Garg, Judicial Member – The present appeal has been preferred by the assessee against the order of Commissioner of Income Tax(Appeals)-3 [hereinafter referred to as CIT(A)], Gurgaon dated 31.10.2016.
2. The sole issue raised by the assessee in this appeal is against the action of the lower authorities of denial of deduction u/s 54B of the Act in relation to the Investment in agricultural land. The brief facts of the case are that the assessee during the year under consideration sold land for a consideration of Rs. 1,29,00,000/- and claimed deduction u/s 54B of the Income-tax Act, 1961 (in short ‘the Act’) claiming purchase of following agricultural lands:-
(i)   Agricultural land at Kiratpur Rotwara, Tehsil Phagi Jaipur of Rs. 28,84,500/- though a registered sale deed dated 6.5.2013.
(ii)   Agricultural land at Village Dudu, Tehsil Mojmabad, Jaipur for Rs. 1,00,00,000/- through an agreement to sell dated 16.4.2014.
The Assessing officer though allowed the deduction in respect of purchase of land at S.No. (i) above, however, he show caused the assessee in respect of deduction claimed in respect of land as mentioned at S.No. (ii) above, observing that for getting the claim of deduction it is necessary that the sale deed should be registered, whereas, in the case of purchase of land at Village Dudu allegedly for a sum of Rs. 1,00,00,000/-, it was by way of an agreement to sell and not through registered Deed. The assessee explained that the entire payment for purchase of the land was made through cheques and the possession was handed over to the assessee by the seller with all the rights to use the said land or to sell it further. The name of the assessee had also been entered in Kashra Girdawari a document showing the possession and cultivation of the land. It was also explained that at the time of the execution of the agreement to sell, the assessee was not aware of the Stay Order to the sale of land issued by the ADM and hence due to the above legal obstruction, the sale deed could not be registered.
3. The Ld. Assessing officer, however, rejected the above contention of the assessee and observed that the word used in section 54B of the Act is ‘purchase’ and not the word ‘transfer’ as defined u/s 2(47) of the Act. He observed that though as per the definition of word ‘transfer’ it is not necessary to get deed registered, however, in the case of purchase of immovable property, the same can be done through registered sale deed only.
4. The assessee unsuccessfully contested the appeal before Ld. CIT(A).
5. Before us, Ld. Authorised Representative of the assessee has reiterated his submissions as were made before the lower authorities. He has further submitted that the assessee was prevented by sufficient cause for not registering the deed of the purchase of property as the alienation of the same was stayed by the ADM and that the assessee was not aware of the said Stay Order at the time of entering into the transactions. He has further relied upon the following decisions and submitted that for the claim of deduction u/s 54 of the Act, the registration of sale deed is not necessary. It is enough if the assessee has paid the consideration, acquired the possession with full rights and has fulfilled other requirements of the provisions of the Act:-
1.   Sh. Sanjeev Lal etc. v. CIT 269 CTR 001(SC) 2014
2.   CIT v. T.N. Aravinda Reddy [1979] 12 CTR 0423 (SC)
3.   CIT v. K. Jelani Basha [2002] 256 ITR 0282 (Madras)
4.   CIT v. Ram Gopal [2015] 372 ITR 498 (Delhi)
5.   Balraj v. CIT [2002] 254 ITR 22 (Delhi)
6.   CIT v. R.L. Sood [2000] 245 ITR 727 (Delhi)
7.   CIT v. Dr Laxmichand Narpal Nagda, [1995] 211 ITR 804 (Bom.)
8.   CIT v Mrs. Shahzada Begum, [1988]73 CTR 0229 (A.P.)
9.   S. Dabir Singh, Jalandhar v. Department of Income TaxITA No. 27 (Asr.)/2015
6. On the other hand, Ld. DR had relied upon the findings of the lower authorities.
7. We have heard the rival contentions and have also gone through the record. Admittedly, the assessee paid the consideration through cheques and also obtained the possession of the property in question. The claim of deduction u/s 54B of the Act has been denied to the assessee on the ground that the said deed of purchase/ sale had not been registered with the competent authority. The Hon’ble Supreme Court in the case of ‘Sanjeev Lal v. CIT’ (supra) has discussed as to whether the agreement to sell can be considered to be an instrument of transfer of property. The Hon’ble Supreme Court observed that though in normal circumstances by executing an agreement to sell in respect of immovable property, a right in personam is created in favour of the transferee/ vendee and when such a right is created, the vendor is restrained to sell the said property to someone else because the transferee has got a legitimate right to enforce specific performance of said agreement to sell. In normal circumstances, it cannot be said that entire property have been sold at the time when agreement to sell is entered into. However, looking at the provisions of section 2(47) of the Income-tax Act, 1961, ‘transfer’ in relation to the capital asset is complete if a right in a property is extinguished by executing an agreement to sell, the capital asset can be deemed to have been transferred. The Hon’ble Supreme Court thus held that the transfer was compete on the execution of agreement to sell and that the assessee was entitled to claim of deduction u/s 54 in respect of purchase of new residential house subsequent to such transfer through agreement to sell. In the case of ‘T.R. Arvinda Reddy’ (supra), the Hon’ble Supreme Court while interpreting the word ‘purchase’ referred to in section 54(1) of the Act held that the ordinary meaning of the word ‘Purchase’ as buying for price or equivalent of price by payment in kind or adjustment towards an old debt or other monetary consideration and that there was no reason to divorce this ordinary meaning from the legal meaning of the word in section 54(1) of the Income Tax Act. The decision of the Hon’ble Supreme Court has been further followed by the Hon’ble Bombay High Court in the case of ‘CIT v. Dr. Laxmichand Narpal Nagda’, (supra), wherein the Hon’ble Bombay High Court has observed as under:-
“6. Taking into consideration the letter as well as the spirit of section 54 and the “towards” used before the word “Purchase” in sub-section (2) of section 54, it seems to us that this said word is not used in the sense of legal transfer and, therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting section 54. In the instant case, the whole consideration was paid, possession of the flat was obtained and it was actually put to use for dwelling within four months, as a result exemption contemplated u/s 54 was clearly attracted.”
8. We may further like to add here that if capital gains are deemed to have been earned by the assessee on transfer of land as per the provisions of Section 2(47) of the Act, as per which the registration of the sale deed is not necessary, the consequences are that the seller or the assessee is said to have transferred his right in property and consequently those rights are acquired by the transferee; if in the case of transferor the same is to be treated as sale, then, we do not find any reason to give a different meaning to the word ‘Purchase’. If someone has sold a property, consequently the other person has purchased the said property. If the transfer of property is complete as per the definition of transfer u/s 2(47) of the Act, the assessee is made labile to pay tax on the capital gains earned by him, on the same analogy, the transfer is also complete in favour of the purchaser also. The provisions cannot be interpreted in a manner to say that transfer vis-a-vis selling is complete but vis-a-vis purchase is not complete in respect of same transaction. In view of this, the word ‘Purchase’ cannot be interpreted and detached from the definition of word ‘transfer’ as given u/s 2(47) of the Act. When the transfer takes effect as per the provisions of section 2(47) of the Act, if a liability to pay tax arise in the case of the seller, the consequent right to get deduction on the purchase of property accrues in favour of the purchaser, if he otherwise is so eligible to claim it as per the relevant provisions of the Act.
9. In view of our above observations, the Assessing officer is directed to give the benefit of deduction u/s 54B of the Act in respect of the purchase of the property at Village Dadu to the assessee.
10. In the result, the appeal of the assessee is allowed.

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