Booking flat which yet to be constructed under a housing project is eligible for sec. 54 relief: ITAT

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Booking flat which yet to be constructed under a housing project is eligible for sec. 54 relief: ITAT

 

SMT. Harminder Kaur
[2021] 126 taxmann.com 160 (Delhi – Trib.)
Short Overview of the case:
Section 54, read with section 139, of the Income-tax Act, 1961 with regard to  Capital gains arisen on sale of property used for residence 
The issue was with regard to Time limit for Investment
Assessment year 2011-12 
Assessee sold a residential property and invested sale consideration in new residential property by way of booking flat in a housing project 
Assessee filed its return of income claiming exemption under section 54 
Assessing Officer disallowed same on ground that assessee had neither invested amount of capital gain in purchase or construction of residential house within stipulated period nor deposited it in capital gain scheme account within limit provided under section 139
It was noted that assessee had provided detail of payments made for booking flat which showed that payments were made much prior to due date of filing of return under section 139(4)
Whether since investment in property was made prior to due date of filing of return of income under section 139(4), assessee was to be allowed deduction under section 54. 
ITAT held it as yes
It observed that assessee sold a residential property and invested sale consideration in new residential property by way of booking flat in a housing project 
 Accordingly, assessee claimed exemption under section 54. 
Assessing Officer disallowed same on ground that booking of flat was not purchase of flat because construction of such flat was yet to be carried out and it was not completed till completion of assessment.
On issue of whether since assessee had made entire payment towards investment in new flat within period of three years from date of transfer of original asset, amount was to be treated as invested in purchase/construction of new residential property, ITAT held it in favour of assessee.
Conclusion: 
1. Where assessee paid amount of sale consideration received from sale of a residential house for purchase of another residential property prior to due date of filing of return of income under section 139(4), his claim for exemption under section 54 was to be allowed
2. Where assessee sold residential property and utilised sale consideration for booking flat in a housing project which was yet to be constructed, since assessee had made entire payment towards investment in new flat within period of three years from date of transfer of original asset, amount was to be treated as invested in purchase/construction of new residential property and assessee was to be allowed exemption under section 54
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