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Booking of an Under-Construction Flat is a Case of Construction and not Purchase

The Mumbai  bench of  Income Tax Appellate Tribunal (ITAT) in Mr. Mustansir I Tehsildar vs Income Tax Officer has held that booking of an under-construction flat is a case of construction and not a purchase. 

The bench comprising of Judicial Member Saktijit Dey and Accountant Member B.R.Baskaran ruled so while allowing the assesse’s appeal. 

The instant appeal filed by assesse challenging the order of CIT(A), Mumbai confirming the partial rejection of claim made by the assessee for deduction under Section 54 of the Income Tax Act for assessment year 2013-14. 

Assesse in the present case held a share in flat of an apartment ,sold the same for consideration  and consequent thereto, the long term capital gain was computed .The assessee had earlier booked a flat which was under construction and he had made payments to the builder much earlier to the date of transfer of old flat and the aggregate payments made by the assessee towards the new flat was more than the amount of Capital gain ie; entire amount of capital gain was deductible u/s 54 of the Act by treating the acquisition of new flat as a case of “Construction”. 

The assessing officer, on the other hand took the acquisition of flat as a case of purchase of flat. Accordingly he took the view that the flat should have been purchased one year before or two years after the date of transfer and the aggregate payment made by the assesse falls outside the period and hence not eligible for deduction u/s 54 of the Act. 

The tribunal observed that since the amount invested in the new flat prior to the due date for furnishing return of income was more than the amount of capital gain, the requirements of depositing any money under capital gains account scheme does not arise in the instant case. 

It further observed that the acquisition of new flat in an apartment under construction should be considered as a case of “Construction” and not “Purchase” and held that the assesse is entitled for deduction of full amount of capital gains u/s 54 of the Act The tribunal bench set aside the order passed by Ld CIT(A) and direct the AO to allow the deduction u/s 54 of the Income Tax Act as claimed by the assesse.

Article referred: http://www.taxscan.in/booking-construction-flat-case-construction-not-purchase-itat-grants-capital-gain-exemption/15393/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Taxscan+%28Top+Stories+%E2%80%93+Taxscan+%7C+Simplifying+Tax+Laws%29

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