Section 54F Deduction Allowed on Flat Allotment Despite Delayed Sale Deed: ITAT Mumbai

Ashwin Chhotalal Paurana Vs ITO (ITAT Mumbai)

Summary: ITAT Mumbai partly allowed the appeal of the assessee and held that exemption under Section 54F of the Income Tax Act, 1961 could not be denied merely because the conveyance/sale agreement for the new residential property was executed at a later date. The assessee had acquired rights in respect of land and subsequently surrendered those rights under a Deed of Conveyance dated 31.03.2017, becoming entitled to consideration of Rs.1.10 crore. The assessee was thereafter allotted a residential flat through a Letter of Allotment dated 10.06.2017 for a total consideration of Rs.1.40 crore, under which the amount of Rs.1.10 crore receivable by him was adjusted against the purchase consideration. The AO denied Section 54F exemption on the ground that sufficient documentary evidence of purchase of the new residential property had not been furnished, while the CIT(A) upheld the disallowance on the ground that the residential unit was not completed and ownership was not acquired within the stipulated period.

The Tribunal noted that the Letter of Allotment dated 10.06.2017 and adjustment of Rs.1.10 crore towards the new residential house were not disputed by the Revenue. Relying upon CBDT Circular No. 471 dated 15.10.1986, it observed that where a flat is allotted under a construction scheme, the date of allotment is relevant for determining acquisition of the property. The allotment made in favour of the assessee had never been cancelled, and the conveyance/sale agreement was ultimately executed on 31.03.2021 upon payment of the requisite stamp duty. Accordingly, merely because the conveyance deed was executed later could not lead to the conclusion that the assessee had not acquired the residential house pursuant to the allotment letter.