Delay in registration of property cannot not be a ground to deny exemption u/s 54 & 54F

Delay in registration of property cannot not be a ground to deny exemption under Section 54 & 54F:

Question : Assessee sold vacant land in October/November 2016 purchased a house property, and paid the entire sale consideration on 14-11-2016. 2. The possession of the property was also given to the assessee on the same day itself. 3. However the registration was delayed beyond the prescribed time limit of 24 months. Can he be denied exemption U/S 54 F on account of a delay in registration of new house property?

Answer :  The cases cited and the facts of your situation provide strong support that the delay in registration should not be a ground to deny the exemption under Section 54 or 54F of the Income Tax Act, 1961. Here’s a detailed analysis: Key Points in the Case

• Sale and Purchase Dates: The assessee sold land in October/November 2016, purchased a house property, and paid the full consideration on 14-11-2016. Possession of the property was handed over on the same day (14-11-2016). Registration was delayed beyond the prescribed period of 24 months, but the delay was procedural and beyond the assessee’s control.

Relevant Judicial Precedents

• Siva Jyothi Palam (Income Tax Appellate Tribunal Vishakhapatnam): The Income Tax Appellate Tribunal ruled that mere procedural delays, such as a delayed registration, do not disqualify an assessee from availing exemption under Section 54/54F.The critical factor is the assessee’s compliance with substantive requirements, i.e., investment in a new residential house and possession within the stipulated period.
• Balraj v. CIT (Delhi High Court): The Delhi High Court held that the benefit of Section 54 should be granted if the conditions for purchase or construction of a new property are substantively met, even if registration is delayed.
• Bastimal K Jain v. ITO (Income Tax Appellate Tribunal Mumbai): Income Tax Appellate Tribunal clarified that the deduction under Section 54 is based on the date when the builder handed over possession, not the date of registration. This ruling emphasized that possession and substantive compliance are more important than procedural formalities.

Applicability to Your Case

• Substantive Compliance: The assessee has substantively complied with the requirement to purchase a residential property within the stipulated period.
• Possession: Possession was taken on 14-11-2016, which falls well within the prescribed period. Courts and tribunals have consistently held that possession holds precedence over registration.
• Intention and Conduct: Payment of the entire sale consideration and taking possession demonstrate the assessee’s bona fide intention to comply with the provisions of Section 54/54F.

Conclusion : Based on the above judicial precedents and the facts of the case:

• The delay in registration should not be a valid ground to deny the exemption under Section 54F.
• The assessee’s compliance with the substantive requirements (payment and possession within the prescribed period) aligns with the legislative intent behind the exemption provisions. It would be prudent for the assessee to rely on the judgments mentioned and highlight these precedents in any correspondence or appeals with the Income Tax Department to safeguard their claim.

In the case of Bastimal K Jain v. ITO (2016), the Income Tax Appellate Tribunal ruled that the Assessee’s claim for a deduction under section 54 should be based on the date when the builder handed over the possession of the flat and not the date of registration.