2018 (2) TMI 510 - AT - Income Tax

Long Term Capital Gain - exemption u/s. 54 entitlement - Held that - We are of the view that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset. Therefore, the Ld. CIT(A) has rightly allowed the exemption u/s. 54 because in the present case also the flat booked with the builder by the assessee has to be considered as a case of construction of flat and the deduction claimed by the assessee u/s. 54 was rightly allowed, which does not need any interference on our part, hence, we uphold the same and reject the grounds raised by the Revenue.

Summary

Issues:
1. Whether the deletion of addition of Long Term Capital Gain by the Ld. CIT(A) was correct?
2. Whether the booking of a flat with a builder constitutes construction for the purpose of claiming exemption u/s. 54 of the Income Tax Act?

Analysis:
1. The appeal was against the deletion of Long Term Capital Gain addition by the Ld. CIT(A). The AO disallowed the deduction claimed by the assessee under Chapter 54 due to an 'Apartment Buyer Agreement' entered into by the assessee with builders. The AO concluded that the purchase of a new flat was not made within the required period as per section 54 of the Act. However, the Ld. CIT(A) allowed the deduction, considering the agreement as a case of construction of a flat, not purchase. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the booking of a flat with a builder should be treated as construction, allowing the exemption u/s. 54. The Tribunal referred to various case laws and CBDT Circulars supporting this interpretation.

2. The crucial issue was whether the booking of a flat with a builder could be considered as construction for claiming exemption u/s. 54. The Ld. CIT(A) and the Tribunal held that in this case, the flat booked with the builder should be treated as a case of construction of a flat, allowing the deduction claimed by the assessee. They relied on judgments by competent courts and CBDT Circulars to support their decision. The Tribunal emphasized that the period of three years for construction of a new house from the date of transfer of the long term capital asset applied in this scenario. Therefore, the Ld. CIT(A)'s decision to allow the exemption u/s. 54 was upheld, dismissing the appeal filed by the Revenue.

In conclusion, the Tribunal affirmed the Ld. CIT(A)'s decision to allow the exemption u/s. 54, stating that the booking of a flat with a builder should be considered as construction of a flat. The judgment was based on detailed analysis of relevant case laws, CBDT Circulars, and the provisions of the Income Tax Act, supporting the assessee's claim for deduction.