The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), allowed deduction under Section 54 and 54F of the Income Tax Act, 1961 on the ground that Utilization of capital gain within one year from taking possession of new flat.
The assessee, Pradeep Kumar Sonthalia has claimed exemption under section 54 and 54F of the Income Tax Act. Such exemption has been denied to the assessee by the Commissioner of Income Tax (Appeals) observing that it has booked the flat with the builder in earlier year but ultimately took the possession in subsequent years. Therefore, the Commissioner observed that the assessee failed to fulfil the conditions of section 54 and 54F of the Income Tax Act.
The case of the assessee is that capital gain has been arose in the year in which he took the possession of the flat and, therefore, this capital gain be set off against price of the flat, which ultimately came to his possession.
The Commissioner in his judgment noted that “The action of the Assessing Officer in disallowing claim under Section 54 and 54F of the Income Tax Act is correct as deduction claimed by the appellant is not satisfying the requirements of section 54 and 54F of the Income Tax Act to claim the deduction with respect to ‘construction’ of property”
A Bench consisting of Rajpal Yadav, Vice-President (KZ) and Girish Agrawal, Accountant Member observed that “The assessee has utilized the capital gain arose within one year from taking possession of the new flat and, therefore, on the basis of the Circulars and the judgments referred by the CIT(Appeals), is entitled for the deduction. Accordingly, we allow the claim of the assessee and direct the ld. Assessing Officer to grant deduction under section 54 and 54F of the Income Tax Act.”
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