Booking of flat with builder is construction within the meaning of section 54 and hence period of three years apply for construction of new house for claiming LTCG dedcution- ITAT
ABCAUS Case Law Citation:
ABCAUS 2206 (2018) (02) ITAT
The Revenue was aggrieved by the order passed by the Commissioner of Income Tax-Appelas (CIT-A) in deleting the addition made by the Assessing Officer (AO) on account of disallowance of deduction claimed u/s 54 of the Income Tax Act, 1961 (the Act) with respect to Long Term Capital Gain.
Brief Facts of the Case:
During the relevant assessment year, the assessee had sold a property resulting in Long Term Capital Gain (LTCG) against which he had claimed deduction under section 54. The case was selected for scrutiny through CASS and notice u/s 143(2) of the Act was issued requiring the assessee him to furnish necessary details and documents along with supporting evidence.
During the assessment proceedings the AO also noticed that the assessee has entered into an ‘Apartment Buyer Agreement’ with a private builder company. The AO was of the view that the acquisition of new property through ‘Apartment Buyer Agreement’, amounted to “purchase” of new house rather than “construction” and that as per the provisions of section 54 of the Act the purchase should have been made before one year of the sale of Long Term Capital Asset or within two years of the sale.
Having treated it as “purchase” the AO was of the view that the purchase of new house was not made within the period of one year before the sale of asset against which claim u/s 54 had been made by the assessee.
Accordingly, the AO disallowed the claim of deduction u/s 54 and assessment was completed. Aggrieved with the assessment order, the assessee appealed before the CIT(A), who allowed the deduction u/s 54.
Observations made by the Tribunal:
The ITAT observed that CIT(A) had discussed the issue in dispute elaborately while giving his detailed findings.
The Tribunal after gpinging through the findings given, case laws and CBDT Circular discussed therein, opined that the booking of flat with the builder had to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset.
According to the Tribunal CIT(A) had rightly allowed the exemption u/s 54 of the Act, because the flat booked with the builder by the assesse had to be considered as a case of construction of flat and the deduction claimed by the assessee u/s 54 of the Act was rightly allowed.
The Tribunal upheld the order of CIT(A) and rejected the grounds raised by the Revenue.