Mr X sold his house in Feb 2014. The transaction resulted in a Long term capital Gain of Rs. 30 lacs.
Mr X had purchased an under construction flat in Feb 2011 in resale.
5 Nov 2011 is the date of transfer of allotment by the builder in the name of X from the original allottee.
X has made the following payments towards 90% construction cost of under construction flat:
Payment to original allottee (Feb 11 to Nov 11) Rs. 14.97 lacs
Payment to builder (Apr 12 to Dec 12) Rs.19.56 lacs
Payment to builder (March 2013) Rs. 1.79 lacs
Total paid Rs. 36.32 lacs
10% construction cost plus registration charges and stamp duty will be paid on possession after completion of construction.
The construction of the above flat is likely to be completed by Dec 2015.
X wants to set off LTCG of Rs. 30 lacs arising on sale of house in Feb 2014 against the above payment of 36.32 lacs and thus claim exemption under section 54 of the Income Tax Act, 1961.
What is the legal position?
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