Exchange of old flat by new qualifies deduction u/s 54

IT : Exchange of old flat for new flat to be constructed under development agreement qualifies as construction of new house for availing deduction u/s 54

• The acquisition of a new flat under a development agreement in exchange of the old flat amounts to construction of new flat. Therefore, the provisions of section 54 are applicable and assessee is entitled to exemption if the new flat had been constructed within a period of 3 years from the date of transfer.

• Compensation received by the assessee from the builder for providing alternate accommodation during the period of construction of the building as per development / building agreement is not capital receipt nor any way related to the capital asset transferred.

• The compensation had been paid in connection with the alternate accommodation given to the assessee to facilitate construction of the flat. Since the actual rent paid by the assessee for the alternate accommodation was lower than the amount received, there was net income to the assessee which had been rightly taxed as income from other sources.

■■■

[2012] 21 taxmann.com 316 (Mumbai - Trib.)

IN THE ITAT MUMBAI BENCH 'I'

Jatinder Kumar Madan

v.

Income tax Officer, Ward 19(1)(3)

RAJENDRA SINGH, Accountant Member

AND VIVEK VARMA, Judicial Member

IT Appeal No. 6921 (Mum.) of 2010

[assessment year 2006-07]

APRIL 25, 2012