Not for Purchase Section 54 : Booking a Flat, Under Construction With Builder, is Investment for Construction

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The Tax Publishers section 54 : Booking a Flat, Under Construction With Builder, is Investment for Construction--Not for Purchase T.N. Pandey The learned author makes analytical study of a recent Mumbai Bench decision which is of claim of exemption under Section 54 of the Income Tax Act, 1961 drawing the conclusion that: (i) it is not necessary that the assessee should himself/herself construct the property; (ii) the commencement of construction before the sale of capital asset is no disqualification for availing of the exemption; (iii) what is necessary is that the construction must be completed within 3 years; and (iv) once the entire purchase consideration has been paid within 3 years, the completion of construction even beyond 3 years will not disentitle the assessee for claiming exemption. 1. Introduction The view expressed in the title has been expressed by the Income Tax Appellate Tribunal, B-Bench, Mumbai, in the case of Mustansir I. Tehsildar v. ITO-21(2)(3), Mumbai, 2017 TaxPub(DT) 5472 (Mum 'B'-Trib) : (2018) 61 ITR (Trib) 465 (Mum 'B'-Trib) : (2018) 168 ITD 523 (Mum-Trib). Such decision has been given in the assessees' case in the context of claim of exemption under Section 54 of the Income Tax Act, 1961 (Act), where the exemption was denied by the AO on the ground that it did not fulfill the requisite conditions prescribed under Section 54 of the Act as in the AO's view, acquisition of a flat in an apartment, being built by the builder is 'purchase' of a flat and not construction through a builder. Hence, benefit under Section 54 of the Act available in the case of construction on satisfaction of the conditions prescribed for this exemption is not met by the assessee and hence, not available to the assessee. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

section 54 : Booking a Flat, Under Construction With Builder, is Investment for Construction--Not for Purchase

T.N. Pandey

The learned author makes analytical study of a recent Mumbai Bench decision which is of claim of exemption under Section 54 of the Income Tax Act, 1961 drawing the conclusion that: (i) it is not necessary that the assessee should himself/herself construct the property; (ii) the commencement of construction before the sale of capital asset is no disqualification for availing of the exemption; (iii) what is necessary is that the construction must be completed within 3 years; and (iv) once the entire purchase consideration has been paid within 3 years, the completion of construction even beyond 3 years will not disentitle the assessee for claiming exemption.

1. Introduction

The view expressed in the title has been expressed by the Income Tax Appellate Tribunal, B-Bench, Mumbai, in the case of Mustansir I. Tehsildar v. ITO-21(2)(3), Mumbai, 2017 TaxPub(DT) 5472 (Mum 'B'-Trib) : (2018) 61 ITR (Trib) 465 (Mum 'B'-Trib) : (2018) 168 ITD 523 (Mum-Trib). Such decision has been given in the assessees' case in the context of claim of exemption under Section 54 of the Income Tax Act, 1961 (Act), where the exemption was denied by the AO on the ground that it did not fulfill the requisite conditions prescribed under Section 54 of the Act as in the AO's view, acquisition of a flat in an apartment, being built by the builder is 'purchase' of a flat and not construction through a builder. Hence, benefit under Section 54 of the Act available in the case of construction on satisfaction of the conditions prescribed for this exemption is not met by the assessee and hence, not available to the assessee.