Skip to main content

Can't deny tax relief if delivery of flat delayed

The Income-Tax Appellate Tribunal's Mumbai bench has held that a taxpayer can't be denied investment-related tax benefits if he doesn't get timely possession of a house in which the reinvestment was made, due to a builder's fault .

The I-T Act provides for benefits relating to capital ga ins tax, where sale proceeds of any asset other than a house (section 54F) or sale proceeds of a house (section 54) are reinvested in a residential house property in India. There is no capital gains tax if the purchase price of the residential property in which the reinvestment is made exceeds the sale proceeds. In other cases, the capital gains, and thus the tax outgo, is proportionately reduced. There are conditions to be eligible for such tax-breaks. The original asset (or house) that has been sold must have been held by the taxpayer for more than three years (long-term capital asset). Also, the residential house property in which money is being reinvested has to be purchased within the specified period.

At times, the residential house property in which the reinvestment is made is not available for possession by the taxpayer (buyer) within the prescribed time. Housing projects get stalled as the builder has not obtained permission or has run out of funds. This is common in Mumbai, Noida and Gurugram. It results in the taxpayer losing tax benefits for no fault of his.

Kanu Chokshi, managing partner at Chokshi & Chokshi, a firm of chartered accountants, said, “This judgement will help taxpayers claim exemption under sections 54F and 54, even where agreements are not executed with the builder and investment is made against an allotment letter, provided that the reinvestment is made within the stipulated time.“

Rajeev B Shah had filed an appeal with ITAT, which adjudicates I-T disputes, as his claim under section 54F was rejected by the authorities during tax assessment.The I-T authorities said the residential flat in which the reinvestment was made was incomplete and the registration document was not filed by the taxpayer.

Section 54F requires that reinvestment in the residential house property , by way of purchase, subsequent to the sale of the original asset, must be within two years.

Shah had sold a plot in Rajkot, Gujarat, and reinvested in a residential flat which was under construc tion in La Citadel, being developed by Seth Developers and Poonam Builders.

Shah appealed to ITAT that the builder had been avoiding customers due to disputes and the project was stalled. He had also filed a civil suit against the builder and the matter was pending in the Bombay high court.

ITAT, in its order of July 8, ruled in favour of Shah and held that “the intention of the taxpayer is very clear, he has invested almost the entire sale consideration of land towards purchase of this residential flat. It is almost impossible for the taxpayer to complete other formalities, such as taking over possession for getting the flat registered in his name.This cannot be the reason for denying the taxpayer's claim for tax benefit.

The Times of India, New Delhi, 16 July 2016

Comments

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...