Section 54 relief for under-construction flat booking upheld where possession followed construction and consideration was paid.

Deduction under section 54 was treated as available where the new residential flat was booked under an agreement before construction was complete, because the material event was acquisition of the new house through payment of consideration and receipt of possession after construction. Execution of the booking agreement alone did not complete the transaction for section 54 purposes. The note also records that substantial payments were made during the relevant period and that identical treatment had been accepted in the co-owner's case, supporting consistent allowance of the claim. On those facts, the disallowance was held unsustainable.

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Issues: Whether deduction under section 54 of the Income-tax Act, 1961 was allowable where the new residential flat was booked under an agreement before it came into existence and possession was received after construction.

Analysis: The flat was under construction on the date of the agreement, and the transaction could not be treated as completed merely on execution of that agreement. For the purposes of section 54, the relevant event was the acquisition of the new residential house by payment of consideration and receipt of possession after construction. The Court also noted that the substantial payments were made in the relevant period and that the claim had been accepted on identical facts in the co-owner's case, which supported consistency in treatment.

Conclusion: The deduction under section 54 was allowable, and the disallowance was unsustainable.

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