Case Law Details
In this case, the assessee had exchanged old flat with new flat to be constructed by the builder under development agreement which amounts to transfer under section 2(47) of the Act. Thus, the only other condition which is required to be satisfied is that assessee either purchases a new residential flat within the prescribed limit or constructs a new residential flat within a period of 3 years from the date of transfer.
The acquisition of a new flat under a development agreement in exchange of the old flat amounts to construction of new flat. This view is supported by the decision of the Tribunal in the case of ITO vs. Abbas Ali Shiraz (supra). Therefore, the provisions of section 54 are applicable and assessee is entitled to exemption if the new flat had been constructed within a period of 3 years from the date of transfer. The ld. AR has also argued that cash compensation received by the assessee amounting to Rs.11,25,850/- can not be taxed as capital gain as assessee had invested a sum of Rs.12.00 lacs in REC bonds under section 54EC. Since cash compensation was part of consideration for transfer of the old flat and the assessee had invested the money in REC bonds, the exemption under section 54 EC will be available. In any case, the long term capital gain computed by the AO including cash compensation as part of sale consideration is much below the cost of new flat and therefore, the cash component is also exempt under section 54. As regards the completion of new flat within a period of 3 years, assessee has filed a copy of letter dated 30.5.2007 of the builder in which it has been mentioned that the builder had applied for occupation certificate and possession was to be given on 14.6.2007. This letter was not available before lower authorities. The exact date of taking possession of the flat is also not clear. This aspect therefore, requires verification by the AO as to whether assessee had taken possession of new flat within a period of 3 years. We, therefore, allow the claim of exemption under section 54 subject to verification of above aspects by the AO after providing opportunity to the assessee.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA No. : 6921/Mum/2010
Assessment Year : 2006-07
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Whether one can surrender the flat purchased in last year and had exchanged the old flat with a new flat which amounted to transfer The exemption under section 54 is allowable ?