INCOME TAX ACT, 1961

Section 54

Capital gains - Deduction under section 54 - Capital gain being invested in purchase/construction of a new residential house within the period prescribed under section 54(1) - Assessee by mistake claimed deduction under section 54F

Assessee claimed deduction under section 54F with respect to long term capital gain arrived on account of sale of property. AO found that the assessee was owner of more than one residential house other than the new asset, therefore, he rejected the said claim. Assessee submitted that it wrongly claimed deduction under section 54F instead of section 54 against the capital gain derived from the sale of residential unit. Thus, he requested the AO to allow deduction under section 54. AO rejected the said claim alleging that the assessee only received the allotment letter from the real estate development company. Held: Merely because the assessee, by ignorance of law or mistake, claimed deduction under section 54F instead of section 54, such ignorance of law/mistake on the part of the assessee could not be utilized to its disadvantage by the AO. Further, it was established that not only the flats were allotted to the assessee in the impugned assessment year but also the sale deeds relating to the flats purchased were executed and registered in favour of the assessee before the end of the financial year relevant to the assessment year under dispute. That being the case, the investments made by the assessee in purchase of flats was within the period prescribed under section 54(1). Therefore, the assessee would be eligible to claim deduction under section 54 in respect of the investment made in purchase of new flats.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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