Capital Gain deduction cannot be denied merely on because of non-registration of conveyance deed

Last updated: 03 August 2021

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The Delhi Income Tax Appellate Tribunal (ITAT) has ruled that a taxpayer cannot be denied the benefit of capital gains deduction under Section 54F of the Income Tax Act simply because the conveyance deed for a property hasn't been registered. The Tribunal found that the taxpayer had proven possession of the property, even without formal registration, and upheld the deduction.

Court :
ITAT Delhi

Brief :
In ITO, Ward 32(4), New Delhi v. Smt. Swati Oberoi [ITA No. 4150/Del./2018 decided July 30, 2021], ITO, Ward 32(4), New Delhi ('the Appellant') sought an appeal to set aside the order dated March 23, 2018 ('the Impugned Order') passed by the Commissioner of Income-Tax (Appeals) ('the Revenue') allowing the benefit of capital gain deduction under Section 54F of the Income Tax Act, 1961 ('the IT Act') to Smt. Swati Oberoi ('the Respondent').

Citation :
ITA No. 4150/Del./2018 decided July 30, 2021

In ITO, Ward 32(4), New Delhi v. Smt. Swati Oberoi [ITA No. 4150/Del./2018 decided July 30, 2021], ITO, Ward 32(4), New Delhi ('the Appellant') sought an appeal to set aside the order dated March 23, 2018 ('the Impugned Order') passed by the Commissioner of Income-Tax (Appeals) ('the Revenue') allowing the benefit of capital gain deduction under Section 54F of the Income Tax Act, 1961 ('the IT Act') to Smt. Swati Oberoi ('the Respondent').

The Respondent filed return of Income ('ROI') of Rs Rs.15,06,65/- for the relevant year which was subjected to scrutiny. The Assessing Officer ('the AO'), during the scrutiny proceedings, held that the Respondent has sold 50% share in a commercial property of Rs.3.5 crores and has shown Long Term Capital Gain ('LTCG') of Rs.3,15,35,564/- in the ROI out of which the Respondent claimed deduction under section 54EC of the IT Act to the tune of Rs.49,55,589/- and deduction under Section 54F of the IT Act for Rs.2,65,79,975/-.

AO- Disallow deductions claimed by the Respondent under Section 54F of the IT Act on failure of the Respondent to furnish sale deed of the property and thereby made an addition of Rs.2,65,79,975/- under the head 'income from capital gains'. Being aggrieved, the Respondent preferred an appeal before Commissioner of Income Tax (Appeals) ('CIT(A)')

CIT(A)- Decided in favour of the Appellant. Being aggrieved, the Appellant preferred an appeal before the Hon'ble Delhi Income Tax Appellate Tribunal ('ITAT'),

ITAT- Held that, benefit of deduction under Section 54F of the IT Act cannot be denied to the Respondent merely on the ground that conveyance deed has not yet been got registered particularly when the Respondent is proved to be in possession of the property in question out of which the Respondent was already owner in possession of 1/3rd share since 2008 after making a complete payment of the sale consideration to the vendors and has duly proved possession over the property by way of electricity and water charges bills.

Further held that, the Impugned Order allowing deduction under Section 54F of the IT Act to the Respondent is precise and dismissed the appeal.

FAQ :

No, the Delhi ITAT has ruled that the benefit of deduction under Section 54F of the Income Tax Act cannot be denied solely on the grounds that the conveyance deed has not yet been registered.

The relevant section is Section 54F of the Income Tax Act, 1961, which deals with deduction on investment in a new residential property to avoid capital gains tax.

The taxpayer proved possession of the property through electricity and water charge bills.

The ITAT dismissed the appeal filed by the Income Tax Officer and upheld the decision to allow the deduction under Section 54F to the taxpayer.