Section 54F – The assessee cannot be denied deduction u/s. 54F, if the assessee makes investment in residential house within the time limit prescribed u/s. 54F but is unable to get the title of the flat registered in his name or unable to get the possession of the flat due to fault of the builder.

FACTS

During the year under consideration, the assessee had sold one plot of land and had claimed deduction u/s. 54F for investment of sale proceeds in an under-construction flat.

The Developer had allotted, flat No. 602 of 6th floor, to the assessee.

The AO rejected the claim of deduction u/s. 54F of the Act on the ground that the property was incomplete and document related to purchase of property was not registered even after three years of the said investment.

Aggrieved, the assessee preferred appeal before the CIT(A), who also confirmed the action of the AO by stating that merely because a so-called letter of allotment was issued in a building which was never given permission for construction beyond two floors, it cannot be said that for the purpose of section 54F, the appellant’s obligation ended as soon as he issued the cheque.

Aggrieved, the assessee filed appeal before the Tribunal.

HELD

We find that the facts in question are not disputed and the only issue is that whether assessee is eligible for deduction u/s 54F, when the assessee has made investment in purchase of residential house within the time limit prescribed u/s. 54F but is unable to get the title of the flat registered in his name or is unable to get the possession of the flat due to fault of the builder.

The intention of the assessee is very clear that he has invested almost the entire sale consideration of land in purchase of this residential flat. It is another issue that the flat could not be completed and the suit, directing the builder to complete the construction, filed by the assessee, is pending before the Hon’ble BombayHigh Court.

It is impossible for the assessee to complete formalities such as taking over possession for getting the flat registered in his name and this cannot be the reason for denying the claim of the assessee for deduction u/s. 54F of the Act.

Hence, the appeal filed by the assessee is allowed.