Payment Within 2 Years Enough for Section 54F Deduction, Signing Date of Agreement Not Important: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, has recently deleted the disallowance made by the assessing officer, holding that the reinvestment payment was made within the deadline of 2 years under section 54F.

The assessee had sold land in Nashik for a consideration of Rs 70 lakhs and claimed a deduction under Section 54F as she reinvested this consideration in a residential property at Rs 76,65,000. However, the registered agreement for purchasing the flat was signed 2 years after the sale of the land. The Assessing Officer (AO) disallowed the deduction under section 54F as the agreement was signed after the 2-year deadline.

The assessee filed an appeal before the CIT(A), but it upheld the disallowance. Therefore, the assessee approached the Income Tax Appellate Tribunal (ITAT), Mumbai. The assessee presented a paper book to prove the claim of deduction. He cited the allotment letter issued by the builder where the flat was allotted for Rs 76,65,000. The appellant made payments for the flat in 2012-13 with Rs 15 lakh in June 2012 and Rs 55 lakh in July 2013. She argued that the term “purchase” under section 54F does not require the formal agreement to be signed within 2 years; just the investment of the proceeds is sufficient. The assessee claimed that she had correctly complied with the conditions prescribed under section 54F.

The ITAT observed that the assessee had made the payment for reinvestment within the prescribed limitation of 2 years, and the assessee had been allotted the flat through the builder’s allotment letter. Therefore, it concluded that the assessee had met both these conditions. Based on these findings, the tribunal allowed the claim of the assessee under section 54F and deleted the disallowance made by the assessing officer.