TaxTMI 
TaxTMI 
2014 (9) TMI 958
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....tion of claim for deduction under section 54 of the Act made by the assessee in her return of income. 2. The assessee sold a residential flat on October 10, 2005 for a sum of Rs. 28,50,000. The assessee claimed a sum of Rs. 14,33,450 as deduction under section 54 in respect of cost of a new flat. The Assessing Officer noticed that the assessee had booked a flat in a project as per the sale agreement registered on December 4, 2002 for a consideration of Rs. 31,20,000. The assessee paid the above said consideration in instalments. It is noticed that the flat was booked in the joint names of the assessee and her relative. According to the assessee, she obtained possession of the new flat on December 4, 2004. Before the Assessing Officer, the ....
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....f the first instalment of the cost of construction, the allotment is final unless it is cancelled. The allottee, thereupon, gets title to the property on the issuance of the allotment letter and the payment of instalments is only a follow up action and taking delivery of possession is only a formality." Accordingly, the Assessing Officer rejected the claim for deduction under section 54 of the Act. 4. The learned Commissioner of Income-tax (Appeals) also confirmed the decision of the Assessing Officer with the following observations : ". . . The fact of having executed the agreement by way of registering the same on December 4, 2002 is not in dispute. Th....
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....e obtained a habitable house only on the date of possession. On the contrary, the learned Departmental representative placed strong reliance on the orders of the tax authorities. There is no dispute with regard to the fact that the assessee can purchase a new house within one year before the date of transfer of the original residential house in order to avail of deduction under section 54 of the Act. The said deduction is also available if a new house. (a) is purchased within two years after the date on which the transfer of original house took place, or (b) is constructed within a period of three years after the date on which the transfer to....
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.... (page 380) : "In the present case, the assessee had transferred the property in which she had a half share and which was being used for the purpose of her residence to the society. The question is whether she can be said to have constructed a house property for the purpose of her residence within a period of two years from that date. This provision will have to be construed in the context of the manner in which such residential properties are now being constructed in a city like Bombay where, looking into the cost of land, co-operative housing societies are being formed for constructing a building in which flats are allotted to the members. This must also be vi....
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....to the abovementioned Circular No. 471 extended the facility of exemption under sections 54 and 54F in respect of allotment of flats/house by co-operative societies and other institutions, and the allotment and construction of the flat by co-operative societies and other institutions are to be considered in similar manner for the purpose of allowing exemption under section 54. The above circulars are binding on the Revenue authorities under section 119 of the Act. Since the flat has been allotted to the assessee by the builder who would fall in the category of other institutions mentioned in the circulars, it has to be taken as a case of construction of the residential flat and not as a purchase of a residential flat." 9. Another Mumbai Be....
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....he assessee was to make payment in instalments and the builder was to handover the possession of the flat after construction. It has therefore to be considered as a case of construction of new residential house and not purchase of flat. This position has been clarified by the CBDT in Circular No. 472 dated December 16, 1993 in which it has been made clear that the earlier Circular No.471 dated October 15, 1986 in which it was stated that acquisition of flat through allotment by DDA has to be treated as a construction of flat would apply to co-operative societies and other institutions. The builder would fall in the category of other institutions as held by Mumbai Bench of the Tribunal in the case CIT (Asst.) v. Sunder Kaur Sujan Singh Gadh ....