INCOME TAX ACT, 1961

Section 54 and 54F

Capital gains - Exemption under sections 54 and 54F - New flats against surrender of old flats - Fullfilment of conditions under section 54

Assessee was owner of two flats and entered into a development agreement with the housing society for re-development of property. As per the terms of the agreement, assessee received two new flats against surrender of old flats. As against surrender of flat one and the new flat received in consequence thereof, assessee offered capital gain and claimed deduction under section 54. In case of flat second assessee filed a letter offering the capital gain and claimed deduction under section 54F in respect of new residential flat. However, in respect of the new flat received on surrender of second old flat, AO did not allow assessee's claim of deduction on the reasoning that the deduction was neither claimed in the return of income filed by him nor by filing any revised return of income. Merely because the old as well as new flat was used by the assessee as office, it will not change its character as a residential house. Held: Merely because assessee had claimed deduction under section 54F by treating flat as a commercial property, assessee's claim of deduction under section 54 could not be disallowed if assessee fulfilled the conditions of section 54. Departmental Authorities have no doubt that flat transferred by assessee was a residential flat and on re-development assessee had also received a residential flat. That being the case, assessee was certainly entitled for deduction under section 54.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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