Builder’s error in allotting flat will not impact tax benefit claim, rules ITAT

Mumbai, Mar 20, 2024

In a peculiar case dealt with by the Income-tax Appellate Tribunal (ITAT), Mumbai bench, a taxpayer Mukesh Harilal Mehta had claimed section 54 deduction in his Income-tax (I-T) return for the financial year 2014-15. The tax tribunal held that this claim cannot be denied owing to a mistake committed by the builder in allocating the flat. The builder had erroneously allotted the flat purchased by him to another buyer, but accepted this error and allotted a similarly placed flat in the same building to Mehta.

Section 54 of the I-T Act provides that any long term capital gain arising to an individual on sale of a residential property shall be exempt to the extent that such capital gain is invested in the purchase of another residential property within one year before or two years after such sale.

Or the new residential property can be constructed within three years from the date of sale of the original property.

These conditions were met by Mehta. However, the I-T officer during assessment denied this claim as there was no registered sale deed evidencing the purchase of the new flat. Further, the details of the new flat mentioned in the possession letter were different from the flat towards which the payment had been made.

The ITAT held that the denial of exemption is unjustified as he cannot be penalized for a mistake committed by the builder in allocating the flat.

[The Times of India]