Top Stories Sale Deed Classified as Capital Asset, Qualifies for Long-Term Capital Gain Deduction under Section 54B: ITAT [Read Order] Sale Deed as a capital asset within the meaning of Section 2(14) of the Income Tax Act and liable for LTCG and the assessee is also eligible to claim deduction under Section 54B of the Income Tax Act, 1961 By Aiswarya Krishnadas – On April 14, 2024 9:59 am – 2 mins read In a recent decision the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) observed that sale deed classified as capital asset, qualifies for long-term capital gain deduction under Section 54B of Income Tax Act, 1961.

The assessee is an individual and Proprietor of Shailja Buildcon engaged in the business of construction. Assessee filed his Return of Income for the Assessment Year 2013-14 on 27.03.2014 declaring total income of Rs.80,50,300/- which is inclusive of Long Term Capital Gain on sale of immovable property through Banakhat rights as a Confirming Party of Rs.69,37,813 and also claimed exemption under Section  54B of the Income Tax  Act, of Rs.1,79,59,304/-.  The Assessing Officer held that the Banakhat (Agreement of Sale) was entered by the assessee on 29.04.2005 for a consideration of Rs.15.50 lakhs and an advance of Rs. 2 lakhs only paid, balance was not by the assessee and the Banakhat was also unregistered,  but only a notarized agreement. As per the Section 17 of the Registration Act, the assessee does not get right over the property by merely entering into an agreement (Banakhat). Therefore the sale consideration received by the assessee in 2011 through registered Sale Deed as Confirming Party cannot be treated as a transfer and not a capital asset in the hands of the assessee.

Therefore the entire transaction “income from other sources” and taxed accordingly and also denied deduction under Section 54B of the Income Tax Act The counsel for the assessee  S.N. Divetia filed a copy of the Banakhat which was later registered as a document vide serial no. 174 on the 1st day of June, 2013 as “Agreement of Sale” by paying Registration Fees of Rs. 2,68,250/- with the Sub Registrar, Ahmedabad-2, Wadaj. Thus the question of non-registration does not arise and the Assessing Officer and the Lower Authorities failed to note this crucial document. The two member bench comprising Annapurna Gupta (Accountant member) and T.R.Senthil Kumar (Judicial member) do not find any infirmity in the order passed by the CIT (A) who held that rights held by the assessee as a Confirming Party in the Sale Deed as a capital asset within the meaning of Section 2(14) of the Act and liable for LTCG and the assessee is also eligible to claim deduction under Section 54B of the Income Tax Act.  Accordingly, the appeal filed by the Revenue was dismissed.