Lawstreet Journal

Benefit from scrapped flat deal amounts to capital gain: ITAT

Lawstreet Journal 11 Sep 2020 8:33pm

Image courtesy: Lawstreet Journal Judiciary Benefit from scrapped flat deal amounts to capital gain: ITAT

Under Section 54 of the Income-Tax (I-T) Act, if long-term capital gains arising out of a house sale are invested in another home in India within a stipulated period of time, then to the extent of such investment, the taxable component of capital gains is reduced. This results in a lower tax outgo. 

Thus, if entire amount of long-term capital gains is invested, no tax is payable. Anil Harish, an advocate specialising in real estate, told TOI: “I agree with the ITAT view and it is a good decision. Years ago, in 1979, the Bombay high court had held that when a part-payment was made and a right was acquired, this amounted to a capital asset, even though the transaction had not been completed. On the sale of the asset, the surplus was to be treated as a capital gain. This high court order has been the foundation for several other decisions referred to in the recent ITAT order.”

In this case heard by ITAT, Mukesh Sohanraj Vardhan, the taxpayer, had treated the benefit of Rs 18.75 lakh received from the builder on cancellation of his deal—flat booked in Vardhaman Heights, Byculla—as a long-term capital gain. He had invested a significantly higher amount in another house property within the stipulated time and thus claimed the benefit of Section 54. The I-T officer, though, sought to treat the sum of Rs 18.75 lakh as income from other sources—a position the commissioner of income-tax (appeals) upheld.

The appellate commissioner was of the view that an… Continue Reading...


Tagged: Income Tax   Income Tax Appellate Tribunal  
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