Deduction u/s 54F cannot be denied on Ground that the Assessee Failed to get the Possession of the Property within the prescribed Time Limit: ITAT Mumbai [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal in recently ruled that the deduction under section 54F of the Income Tax Act, 1961 cannot be denied to the assessee for the reason that he failed to get the possession of the property within the time limit prescribed under the said provision. The Tribunal observed that the benefit of the said section must be granted to the assessee if he invested the amount for purchasing a residential property within the time limit.

The assessee, in the instant case, filed return claiming deduction under Section 54F of the Income Tax Act. The Assessing Officer, however, disallowed the claim by observing that the assessee has not registered the document for his claim for purchase of property even after three years of the said investment of capital gains in property.It was further noted that the assessee failed to prove the genuineness of the claim. Though the assessee approached the CIT(A), the said order was sustained. Therefore, the case was brought before the ITAT.

The Tribunal found that the assessee has invested the amount for purchasing a new flat within the time limit prescribed under the Act. However, he was unable to get the possession of the flat, which is under construction, due to fault of the Builder. According to the Tribunal, the assessee cannot be denied the benefit of section 54F only on this ground.

While quashing the impugned order, the Tribunal held that “In view of the above facts of the case, we are of the view that the assessee is entitled for deduction u/s. 54F of the Act, because the assessee has already invested a sum of Rs.18.60 lakhs in the residential property under construction within the time limit prescribed u/s. 54F of the Income Tax Act.”

Read the full text of the order below.