TaxTMI 
TaxTMI 
2026 (5) TMI 1408
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....issued to the M/s. Aadinath Developers vide letter dated 23.12.2019 in which M/s. Aadinath Developers has accepted that the assessee had made advance booking of the flat No. 1301 & 1302 in 'Millionist-14'?" 3. The solitary issue pertains to the claim of deduction under section 54 of the Act by the assessee. 4. The brief facts of the case pertaining to this issue as emanating from the record are: The assessee is an individual and for the year under consideration, filed its return of income on 27.03.2018, declaring a total income of Rs. 19,59,750/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, from the perusal of the computation of income filed by the assessee along with the return of income, it was observed that the assessee has shown long-term capital gains on the sale of a residential flat at 'Nil', after claiming a deduction under section 54 of the Act. While doing so, the assessee had shown sale consideration of the residential flat at Rs. 6,51,23,500/-, against which the indexed cost of acquisition of Rs....
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.... letter, which is not proof of purchase of residential property. The AO further held that, in the present case, the possession of the property is still with the developer and thus, it cannot be established that the same has been rightfully transferred to the assessee, giving rise to the claim of deduction under section 54 of the Act. It was further held that neither the assessee nor the developer has been able to prove that there is an extraordinary situation which has resulted in the delay in the project due to some unavoidable reasons. The AO also took into consideration the response received from the Developer pursuant to notice issued under section 133(6) of the Act, whereby the Developer confirmed the receipt of Rs. 2,60,57,000/- from the assessee and also confirmed that in lieu of Flats No. 1901 and 1902, Flats No. 1301 and 1302 have been allotted to the assessee due to sanctions being granted only upto the 17th floor. The Developer also confirmed that construction has been delayed by more than 2 years and that the flat will be handed over upon completion of the building. On the basis of the said reply received from the Developer, the AO arrived at the conclusion that, till d....
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....r of a building to be constructed in the building known as "Millionist-14". In respect of these flats, the Developer, M/s. Aadinath Developers, issued a letter of allotment to the assessee on 02.06.2016, which forms part of the paper book from pages 1-12. The total consideration for the purchase of each flat was Rs. 2,69,43,120/-. Out of the said amount, the assessee paid the total sum of Rs. 2,60,57,000/- in respect of the aforementioned two flats, which were allotted in his name by the Developer, i.e., M/s. Aadinath Developers. From the bank statement, forming part of the paper book at page 26, we find that the said amount was paid by the assessee in two tranches, i.e., on 24.06.2016 and 30.06.2016. Subsequently, as the developer received approval for construction only up to the 17th floor, the assessee was allotted Flats No. 1301 and 1302 on the 13th floor of the very same building. As the assessee invested the entire amount of long-term capital gains amounting to Rs. 2,52,02,110/- and made a payment of Rs. 2,60,57,000/- to the builder in respect of two flats, which were under construction, the assessee claimed a deduction under section 54 of the Act. The AO denied the deduction....
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....his section, that is to say,- (i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain." 9. Upon perusal of section 54 of the Act, it is evident that the assessee is entitled to claim the relief in the respect of Long-Term Capital Gain arising from the transfer of the original asset, only if a resi....
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.... the assessee, the claim for deduction under section 54 cannot be disallowed. 13. However, in the present case, the AO has denied the claim of deduction on the basis that the building has not yet been constructed and the possession of the residential flats booked by the assessee has still not been transferred to the assessee even after the expiry of three years from the date of the original asset. As noted in the foregoing paragraphs, the AO also observed that the assessee has no proof that, due to extraordinary circumstances, the project was delayed due to unavoidable reasons. On the other hand, as per the assessee, the delay in the construction of the property is beyond his control. In this regard, the assessee placed on record copies of the orders in respect of proceedings initiated before the Maharashtra Real Estate Regulatory Authority in respect of the project, and the complaint filed with the police against the builder. During the hearing, the learned Authorised Representative ("learned AR") also placed on record a copy of the news bulletin regarding the arrest of the proprietor to M/s. Aadinath Developers, on account of duping the buyer. 14. Thus, in view of the afore....