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Payment to builder equivalent to spending on construction

Pradeep Kumar Chowdhry vs. DCIT (ITAT Hyderabad)

 S. 54F: Amount paid to builder for house is equivalent to amount spent by assessee for construction. Fact that only advance is given and construction is delayed beyond 3 years does not deprive assessee of exemption

Decided:.....(i) In the present situation we have to consider the following factors distinguishing a house construction as against flat booked with the construction company in the context of exemption u/s. 54F:

(a) Real estate prices have soared up and, therefore, very few individual house are being constructed.

(b) Exemption is available in case of purchase of a flat within two years.

(c) It has been held by co-ordinate Benches that consideration received on transfer has been invested either in purchasing a residential house or in constructing a residential house, even though the transactions are not complete in all respects and as required under the law would not disentitle the assessee from availing benefit u/s. 54F of the Act.

(d) The concept of reasonable delay will not apply once we accept the decision of the co-ordinate Bench in the case of Narasimha Raju Rudra Raju (supra).

(e) Section 54F is a benevolent provision.

(ii) In this scenario, the only issue is whether the amount of consideration received on transfer invested by the assessee in a flat constructed within three years would amount to construction of a residential house within the time limit of three years. In short, we are of the opinion that a flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the present state of affairs.Further, as already pointed out even if only advance is given the benefit still will be available for exemption u/s. 54F.

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