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2017 (8) TMI 843 - AT - Income TaxExemption u/s 54 - disposing of the new house property within one year of purchase for commercial purpose - whether by entering into the Joint Development Agreement (JDA), the property will not loose the status of being residential property? - Held that:- The assessee has invested the sale consideration in the residential property and it is not disputed that the new property is residential. It is only that assessee has not resided nor let out and in the year subsequent to purchase of property, assessee has entered into JDA. In these circumstances, we are of the opinion that the AO cannot deny the exemption u/s 54 because the assessee has not demolished the house even on the day of “JDA”. As per the provisions of section 54, when the assessee transfers the new property within a period of three years, the assessee looses the benefits u/s 54 and the capital gain so claimed is taxable in the year in which the new asset is transferred. In the given case, the assessee has demolished the new asset in the year subsequent to purchase of new asset. Hence, it is an event which occurred subsequently and the AO cannot travel back to the AY in which assessee claimed the exemption u/s 54 and deny the exemption. - Decided in favour of assessee.
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