Benefit of Sec. 54F shall be available if house constructed by the builder

If sale consideration invested in a flat that is newly constructed by a builder on behalf of the assessee within 3 years then, it would amount to construction of residential house for the purpose of section 54F.   images1
Facts:
The assessee, an individual, filed return of income claiming an exemption of Rs. 2,29,82,700 u/s 54F of Income-tax Act, 1961. The assessee had sold a property on 12.9.2008 and had a long term capital gain of Rs. 2,29,82,700. He invested sale consideration in a residential flat promoted by a builder and said amount was claimed as deduction under section 54F.
During assessment proceedings:
The AO took the view that the new house should have been completed within a period of 3 years. Thus, AO disallowed deduction under section 54F on ground that construction of a new house was not completed within 3 years.
On appeal to CIT(A):
The assessee submitted that Section 54F is a beneficial provision and he has acquired a new house and has paid monies as per the agreement with the builder. Thus, he is desirous to avail of the benefit or else he will be put to substantial loss in spite of his bona-fide investment, with a view to avail of the exemption.
The CIT(A) was of view that the investment/purchase should have been completed within two years thereon, i.e., by September, 2010. It was observed that the structure is not complete and the entire project is going through rough phase and it is more than five years since the assessee had entered into contract with the builder.
Thus, CIT(A) held that a reasonable delay in construction can always be condoned if it is for the reasons beyond the control of the assessee. However, there is a total uncertainty as to when this project would be finally completed. Hence, dismissed the appeal of assessee.
Held:
The Tribunal highlighted that exemption shall be available in case of purchase of a flat within two years. In addition, if consideration received on transfer has been invested either in purchasing a residential house or in constructing a residential house, even though the transactions are not complete in all respects, the assessee shall be eligible to avail benefit under section 54F.
A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Further, even if only advance is given, the benefit still will be available for exemption under section 54F.
The assessee shall get the benefit u/s. 54F for payment made till 12.9.2011. Hence, the AO may verify the exact amount invested by the assessee up to 12.9.2011 and allow the claim under sec. 54F accordingly.
Thus, benefit of Sec. 54F shall be available if house constructed by the builder. The assessee was also eligible to claim benefit for payments made till 12.9.2011.

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