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2015 (12) TMI 499 - ITAT MUMBAI

2015 (12) TMI 499 - ITAT MUMBAI - TMI - Entitlement for deduction u/s 54 - Held that:- We have already noticed that the deduction u/s 54 is available only if the assessee constructs a new house within three years after the date of transfer. In the instant case, the assessee has constructed a house prior to the date of transfer of original house, in which case, the assessee is not entitled to claim deduction u/s 54 of the Act in respect of the cost of new flat. - Decided against assessee. - ITA N .....

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Long term capital gain of ₹ 1.55 crores thereon. The assessee claimed deduction u/s 54 of the Act pertaining to the cost of another flat. The assessee had booked the flat with M/s Life Style Property Venture in the year 2004 and the agreement was registered on 01-12-2004. He paid the consideration in instalments as per the agreement. He finally got the possession on 30th June, 2007. The assessee claimed that the date of possession of flat should be considered as the date of purchase of fla .....

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with the contentions of the assessee and accordingly allowed the deduction u/s 54 of the Act. Aggrieved, the revenue has filed this appeal before us. 3. We have heard the rival contentions and perused the record. The Ld A.R reiterated the contentions that were made before the tax authorities, viz., the date of possession should be considered as the date of purchase of new house, since the assessee obtained a habitable house only on the date of possession. On the contrary, the Ld D.R placed stro .....

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e. Thus, it is seen that the Statute has prescribed different time limits for "Purchase of a new house" and for "Construction of a new house". There should not be any dispute that the expressions "Purchase" and "Construction" denotes two different kinds of actions. The deduction is available only if a new house is purchased within one year before the date of transfer of the original residential house. Thus, if a new house is constructed within one year pri .....

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tial apartment and finally handed over the possession on 30.06.2007. The moot question is whether the transaction of entering into an agreement with a builder for purchase of a flat that is going to be constructed is a case of "Purchase" or "Construction". 5. In this regard, we may gainfully refer to the decision rendered by the Hon'ble jurisdictional High Court of Bombay rendered in the case of Mrs. Hilla J.B.Wadia (216 ITR 376), wherein the Hon'ble High Court has he .....

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context of the manner in which such residential properties are now being constructed in a city like Bombay where, looking into the cost of land, co-operative housing societies are being formed for constructing a building in which flats are allotted to the members. This must also be viewed as a method of constructing residential tenements." 6. An identical question, i.e., whether the booking of flat with a builder is to be considered as a case of 'purchase' or 'construction' .....

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is that the residential house must have been constructed within three years after the sale of the capital asset. Therefore, for proper application of this section it has to be seen whether it is a purchase or a construction in the above case. Vide Board's Circular No. 471, dt. 15th Oct., 1986 it has been explained that to qualify investment for construction under s. 54F the crucial date is the date of allotment of flat by DDA and payment of instalment was only a follow-up action and taking .....

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are to be considered in similar manner for the purpose of allowing exemption under s. 54. The above circulars are binding on the revenue authorities under s. 119 of the Act. Since the flat has been allotted to the assessee by the builder who would fall in the category of other institutions mentioned in the circulars, it has to be taken as a case of construction of the residential flat and not as a purchase of a residential flat." 7. Another Mumbai bench of Tribunal has also considered an id .....

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builder before the due date of filing of the return of income u/s 139(1) for the assessment year 2006-07 and the balance amount had been paid in installments after the said date. The total amount paid by the assessee to the builder was ₹ 14,62,500/- till 16.2.2009. In the back drop of this factual position, it is required to be seen whether the assessee had fulfilled the conditions of section 54 of the Act so as to make him eligible for claim of exemption u/s 54 of the Act. The first cond .....

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be considered as a case of construction of new residential house and not purchase of flat. This position has been clarified by the CBDT in circular No.472 dated 16.12.1993 in which it has been made clear that the earlier circular No. 471 dated 15.10.1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies and other institutions. The builder would fall in the category of other institutions as h .....

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