If Booking of Flat to be Constructed in future is treated as 'Transfer', Notional Value of the Same shall be allowable as Capital Gain Exemption: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that if the booking of a flat which is to be constructed in a future time is treated as “transfer” for the purpose of computing the capital gain, the same shall be allowable as capital gain exemption under section 54 of the Income Tax Act, 1961.

The assessee, Ms. Sanika Avadhoot had made a booking for purchase of residential premises to be constructed by India Bull Sky Forest in the project India Bull Sky Suites against Flat No.4707 admeasuring 3302 sq.ft. and amount of Rs.72,11,834/- was paid by the assessee by way of booking amount. Thereafter the assessee had also made payments on 21.10.2010 of Rs.4,23,18,166/- and on 22.11.2011 of rs.12,75,398/- totaling to Rs.5,08,05,398/-. After this the developer informed the assessee of its inability to construct and provide the alternative residential premises Unit No. 3907 admeasuring 3341 sq.ft. Under such circumstances the assessee had threatened the developer for specific performance to provide the residential premises or assessee will initiate criminal proceedings against them. Thereafter discussion with the builder with a view to avoid litigation both were mutually agreed for alternative residential premises being unit No. A3 – 3405 on 34th Floor to be constructed in India Bulls Sky Forests.

The assessee has also submitted that the agreement so registered was nothing but the ratification of pre existing agreement dated back to the principal agreement of 2010. The assessee has also submitted that this was merely same contract with only to be constructed premises being replaced and there was no new agreement and the earlier payment form part of the consideration of the registered agreement. The A.O has treated the shifting of flat as transfer and booked the difference in stamp duty valuation and the prices paid by the assessee as income u/s 56 of the Income Tax Act.

While holding in favour of the assessee, the Tribunal bench comprising Shri Pavan Kumar Gadale, Judicial Member & Shri Amarjit Singh, Accountant Member observed that the CIT(A) has clearly elaborated in his findings that when the developer failed to provide original flat then it had offered another flat in the building which was to be constructed on a future date.

“When the assessee has booked the flat that property was not in existing, and it was a property to be constructed in future time. The ld. CIT(A) had explained in detail that if such transaction are treated as transfer by notionally assigning value then the benefit of indexation and benefit of Sec. 54 etc. to be given to the assessee. In the light of the above facts and circumstances, we don’t find any infirmity in the decision of ld. CIT(A). Accordingly, both the grounds of appeal of the Revenue are dismissed,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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