LAW FOR ALL

Sec. 54 of Income Tax Act - PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE. - agreement of sale for 1.32 crores in the year 2002 - sale effected in year 2004 due to pending of disputes - in the mean while in the year 2003 a new house was purchased by the income of selling of old house - exemption - as such not shown in income tax returns as not taxable - A.O. assessed tax as the sale was effected in the year 2004 but not in the year 2003 or prior to it - discarded the agreement of sale - Apex court held that In our opinion, such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation we can say that some right, in respect of the said property, belonging to the appellants had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed. Thus, a right in respect of the capital asset, viz. the property in question had been transferred by the appellants in favour of the vendee/transferee on 27th December, 2002. The sale deed could not be executed for the reason that the appellants had been prevented from dealing with the residential house by an order of a competent court, which they could not have violated. In view of the aforestated peculiar facts of the case and looking at the definition of the term ‘transfer” as defined under Section 2(47) of the Act, we are of the view that the appellants were entitled to relief under Section 54 of the Act in respect of the long term capital gain which they had earned in pursuance of transfer of their residential property being House No. 267, Sector 9-C, situated in Chandigarh and used for purchase of a new asset/residential house. The appeals are, therefore, allowed with no order as to costs. The impugned judgments are quashed and set aside and the Authorities are directed to re-assess the income of the appellants for the Assessment Year 2005-2006, after taking into account the fact that the appellants were entitled to the relief, subject to fulfilment of other conditions.= Sh. Sanjeev Lal Etc. Etc. Appellants Versus Commissioner of Income Tax, Chandigarh & Anr. Respondents = 2014 – July. Part – http://judis.nic.in/supremecourt/filename=41729