S. 54F : Capital gains-Investment in a residential house-Sale of land -Allotment of flat as per an escrow document-Denial by builder- Assessing Officer taxing the value of flat as deemed consideration and denying the exemption-Since Assessee has performed his part of duty by disclosing the sale prior to its receipt, then it is deemed on the part of the AO to allow deduction on the same, despite the Dispute or delay in getting the flat-Entitle to exemption. [S. 45, 133(6)]

Assessee sold land to a builder. In addition to sale consideration in money form, there was a parallel understanding to receive additional consideration, in kind, of a ready made flat in the builders project on the same land. Though there was no agreement for flat but there was an escrow document Assessee in its return declared sale consideration received as well as value of flat receivable and claimed exemption u/s 54F towards value of flat receivable. AO rejected claim u/s 54F on ground that builder denied to have agreed to give any flat in kind and hence under 54F the criteria of having purchased flat failed.

On appeal the ITAT held that due to disputes between Assessee and builder this issue of allotment went to court and High Court recognised the validity of escrow and thus the allotment has the Court acceptance though case not finally decided. If AO is taxing the deemed value of flat as sale consideration then it is deemed that Assessee has paid the full value of consideration as required under 54F of the Act. Since Assessee has performed his part of duty by disclosing the sale prior to its receipt, then it is deemed on the part of the AO to allow deduction on the same, despite the Dispute or delay in getting the flat. Accordingly the exemption u/s. 54F of the Act is allowed.