· During the year under consideration, assessee sold land for a consideration of Rs.1,29,00,000/- and claimed deduction u/s 54B of the Act in respect of purchase of following:
(a) Agricultural land in Jaipur for Rs.28,84,500/- through a registered sale deed
(b) Agricultural land in Jaipur for Rs.1,00,00,000/- through an agreement to sell
· The AO, however, allowed the deduction only in respect of purchase of land at S. No. (a), holding that for getting the claim of deduction, it was necessary that the sale deed should have been registered.
· The Tribunal took note of the fact that the assessee had paid the consideration through cheques and had also obtained the possession of the property. Tribunal further referred to the judgment of Hon’ble Supreme Court in the case of Sh. Sanjeev Lal v. CIT [2014] 269 CTR 001, wherein it was held that the transfer was complete on the execution of agreement to sell, and the assessee was entitled to claim deduction u/s 54 in respect of purchase of new residential house, subsequent to such transfer through agreement to sell.
· The Tribunal held that if someone has sold a property, consequently the other person has purchased the said property.It was further held by the Tribunal that if the transfer of property is complete as per the definition of transfer u/s 2(47) of the Act, the assessee is held liable to pay tax on the capital gains earned by him, on the same analogy, the transfer is also complete in favour of the purchaser as well, and therefore, the word ‘purchase’ cannot be interpreted and detached from the definition of the word ‘transfer’ as given u/s 2(47) of the Act.
· Thus, the Tribunal directed the AO to give the benefit of deduction u/s 54B of the Act to the assessee in respect of the purchase of property through an agreement to sell.
For further reading, refer the attachment.
Further Reading