Possession date can support Section 54 relief for under-construction homes when timely acquisition and supporting evidence are established

Section 54 relief may be available where possession of a new residential property is obtained within the prescribed period, particularly when the property is under construction. The relevant purchase date may, in such circumstances, be treated as the date of possession rather than the date of the registered agreement. The analysis also highlights that subsequently produced documentary evidence, including the purchase agreement, housing-loan records, application of sale proceeds towards loan repayment, and possession documentation, can support the deduction where the original disallowance resulted only from non-production of the agreement during assessment.

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Issues: Whether the assessee was entitled to deduction under section 54 of the Income-tax Act, 1961, on the footing that the date of possession of the new residential property constituted the relevant date of purchase, and whether the additional documentary evidence supporting the claim could sustain the allowance.

Analysis: The assessment was made by disallowing the deduction only because the registered purchase agreement was not produced before the Assessing Officer. The appellate authority accepted the subsequently furnished agreement and the connected evidence showing that the new property had been acquired through a housing loan, the sale consideration from the original residential property had been applied towards repayment of that loan, and possession of the new property had been handed over on 29.02.2016. The Tribunal followed co-ordinate bench and jurisdictional High Court decisions holding that, where the property is under construction and possession is handed over within the prescribed period, the date of possession can be treated as the relevant date for purchase for the purpose of section 54.

Conclusion: The assessee was held entitled to deduction under section 54 on the long-term capital gains, and the Revenue's challenge failed.

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