GAIL TIMMINS,MUMBAI vs. INCOME TAX OFFICER INT TAX 4(1)(1), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “I” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.7223/MUM/2025 (AY: 2017-18) Gail Timmins vs. ITO Int. Tax 4(1)(1) A-1005 Metropolis CHS IP Road Kautilya Bhawan Bandra Kurla Andheri West, Mumbai-400058. Complex, Mumbai-400051. PAN/GIR No: ADHPT7186N (Appellant) (Respondent) Assessee by Shri Mohan Tondon Revenue by Shri Sridhar G. Menon (Sr. DR) Date of Hearing 11.06.2026 Date of Pronouncement 09.09.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal emanates from the final assessment order passed u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (in short, ‘Act’) by the ITO, Int. Tax, Circle 4(2)(1), Mumbai [in short, ‘AO’], dated 26.03.2025 for the assessment year (AY) 2017-18 pursuant to the directions issued by the Dispute Resolution Panel- 2, Mumbai (DRP) vide order u/s 144C(5) dated 28.07.2025. 2. The grounds of appeal raised by the assessee in are as under:

“1. The Learned AO and DRP erred in treating the assessces investment in under construction flats vide agreement dated 07.07.2014 as a purchase made beyond the permissible one year period, without appreciating that the payments made after sale of old house constituted construction within three years, fulfilling the conditions of section 54

resident status, had not originally filed her return of income for A.Y. 2017-18. On

the basis of information available with the Department regarding transactions in

immovable property and remittances, proceedings u/s 148A were initiated and

notice u/s 148 of the Act was issued on 31.03.2024. In response thereto, the

assessee filed her return of income on 20.03.2025 declaring total income of

Rs.14,450/-. Subsequently, notices u/ss 143(2) and 142(1) of the Act were issued.

The assessee initially did not furnish the requisite details; however, in response to the subsequent show-cause notice, the assessee filed submissions which have

been considered by the AO.

3.1 The assessee had sold an immovable property for a consideration of

Rs.98,00,000/- pursuant to an agreement dated 03.05.2016 and claimed

exemption of Rs.55,69,428/- u/s 54 of the Act against the long-term capital gain

arising therefrom. In support of the claim, the assessee furnished purchase deeds

of two immovable properties dated 07.07.2014 along with the schedule of

payments. The AO observed that the properties had been purchased more than

one year prior to the date of transfer of the original property. Accordingly, holding

that the conditions prescribed u/s 54 were not satisfied, the AO denied the

exemption and added Rs.55,69,428/- to the income of the assessee as long-term

capital gain.

3.2 The assessee filed objections against the proposed addition before the

Dispute Resolution Panel. The DRP, vide directions dated 28.07.2025 issued u/s

144C(5) of the Act, upheld the addition of Rs.55,69,428/- on account of long-term

capital gain and rejected the objection raised by the assessee. Consequently, the

AO passed the final assessment order u/s 144C(13) of the Act, assessing the total

income at Rs.55,83,880/- as against the returned income of Rs.14,450/-.

assessee filed appeal before the Tribunal. The Ld. AR of the assessee has filed

paper book giving details of sale and purchase of the properties and copies of the

submissions made before the AO and DRP. He submitted that the assessee had

sold the property vide registered sale deed dated 03.05.2016. The assessee

booked two adjoining residential flats (flat Nos. B-1403 and B-1404) at Ekta

Tripolis Goregaon West, Mumbai from Ekta Everglade Homes Pvt. Ltd. (Developer)

to be used as a single residential unit for a total consideration of Rs.3,52,94,264/-

(Rs.1,76,47,132/- each). The agreement to sell with the developer was registered

on 07.07.2014 and the completion of construction was stipulated to be received

by December, 2017. Prior to the registration of the agreement, assessee had

already paid to the developer Rs.1,55,29,476/-for the two flats. The assessee also

availed housing loan of Rs.1,60,71,809/- from HDFC and the bank had disbursed

the said amount in the financial years 2014-15 to 2017-18. The occupation

certificate for the new property was received by the developer from MHADA on

10.04.2023. The Ld. AR submitted that the significant delay in construction is

attributable to the developer and not to the assessee. In connection with the

claim of deduction u/s 54 of the Act, the Ld. AR submitted as under:

“Section 54 of the Income Tax Act, 1961. as applicable for AY 2017-18, grants exemption from Long Term Capital Gain arising on transfer of a residential house property if the Assessee.

Purchases one residential house within ONE year BEFORE or TWO years AFTER the date of transfer, OR CONSTRUCTS one residential house within THREE years after the date of transfer. The critical distinction in the present case is between 'purchase' and 'construction The Ld. AO and the Hon'ble DRP erred by treating the transaction as a purchase and applying the one-year backward/two-year forward time limit applicable to purchase, whereas the correct characterization of the transaction is 'construction under an Agreement with a Developer to which the three-year time limit applies. 3.2 Key Legal Issue: Purchase vs. Construction The AO and DRP anchored their denial on the Agreement to Sell dated 07.07.2014 treating it as the date of 'purchase and computing that this date falls more than one year prior to the sale of the Old Property (03.05.2016), thereby disqualifying the exemption. This reasoning is fundamentally flawed for the following reasons a. The property contracted under the Agreement dated 07.07.2014 was an UNDER- CONSTRUCTION FLAT The Developer was constructing a multi-storey residential complex, and the Assessee was merely a purchaser/investor in the ongoing construction project. The Developer M/s Ekta Everglade Homes Pvt. Ltd received the Occupation Certificate only on 10.04.2023. The property was clearly under construction at the time of sale of the Old Property

b. The Agreement dated 07.07 2014 was an Agreement to Sell an under- construction flat with a completion date of December 2017 Title and possession were not transferred to the Assessee in 2014 The date of Agreement cannot be treated as the date of 'purchase in such circumstances. c. The Assessee invested the capital gains amount of Rs. 55,69,428/- in the new residential house property by making installment payments towards the construction thereof during FY 2016-17 and FY 2017-18, which are within THREE YEARS of the date of sale (03.05.2016), and the total investment of Rs. 57,93,683/- exceeds the LTCG.”

4.1 The Ld. AR, without prejudice to the above submission, submitted that

even if the contention of the assessee that the transaction was not a “purchase”

but “construction” is not accepted, the assessee would still be entitled to

exemption u/s 54 of the Act to the extent of capital gain invested after the date of sale of the old property (03.05.2016) and until the due date of filing the return

of income u/s 139(1) of the Act, i.e., by 31.07.2017 (being the due date for a non-

resident individual). The total investment made by the assessee during FY 2016-

17 and FY 2017-18 amounts to Rs.57,93,683/-, which exceeds the LTCG of

Rs.55,69,428/-. The assessee is therefore, entitled to full exemption u/s 54 of the

Act even on this alternate basis.

submitted that the agreement for sale between the developer and the assessee

was entered into on 07.07.2014, which was 21 months before the registered sale

deed of the property by the assessee on 03.05.2016. He submitted that the

purchase before one year or after two years to be outside the scope of benefit

u/s 54 of the Act. The claim of the assessee that it was a “construction” and not

“purchase” is not supported by the facts on record. He therefore, requested to

uphold the order of the lower authorities.

no dispute that the assessee had sold his property on 03.05.2016 and entered

into agreement of sale with the “Developer”, Ekta Everglade Homes Pvt. Ltd., on

07.07.2014. Therefore, the purchase deed was entered into by the assessee with

the developer 21 months before the sale of the property by the assessee. The DRP in its order has reproduced section 54 of the Act and thereafter, disallowed the

claim of deduction u/s 54 of the Act by observing as under:

“4.3.7 As per the plain reading of section 54 of the Act, the assessee is eligible to claim deduction in respect of long term capital gain earned from sale of residential property only if the the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India

4.3.8 In the present case it is seen that while the sale of residential property took place on 03.05.2016, the assessee has purchased new residential property on 07.07.2014 which is more than one year before the sale of the residential house property. Thus, the condition laid out in section 54 is not fulfilled by the assessee

4.3.9 The Panel notes that the assessee is also claiming that she had invested in the new residential house property the capital gain to complete the construction of the said residential house property and so was eligible to claim deduction u/s 54. In this regard the Panel notes that as per the Agreement to Sell dated 07.07. 2014, the agreement is for the "purchase" of Flat Nos. B-1403 & B-1404, Ekta Tripolis, Goregaon (West), Mumbai. As per the agreement, the assessee is referred to as the "Purchaser" and M/s Ekta Everglade Homes Pvt Ltd as the "Developer". In fact clause 12. 12 of the said agreement states that the Purchaser (i.e the assessee) shall not interfere in any manner in any work of development or construction and the Developer alone shall have full control and absolute authority in this regard. The relevant clause of the agreement is reproduced as under:

12.12 Till the entire development of the said Land to its full development potential is completed, the Purchaser shall not interfere in any manner in any work of development or construction and the Developer alone shall have full control, absolute authority and say over the sald Land, unallotted areas, roads, open spaces, gardens, infrastructure facilities, recreation facilities and/or any other common facilities or the amenities to be provided in the said Land and the Purchaser shall have no right or interest in the enjoyment and control of the Developer in this regard.

12.13 The Purchaser is aware that the Developer may develop the said Land in a phase wise manner on such terms and conditions as the Developer may deem fit and shall be entitled to all the benefit of FSI or any such entitlements for the more beneficial and optimum use and enjoyment of the same in such manner as the Developer deem fit and the Developer shall be entitled to grant, offer, upon or in respect of any portion of the said Land to any third party all such rights, benes including right of way, right to draw from or open sewers, installations and/or services in the said land in may be desired by the Developer and the Purchaser existing and irrevocably consents to the same.

4.3.10 Thus, the claim of the applicant assessee that she was constructing the house property is not correct. Even for argument's sake if we go through this argument of the assessee that she was constructing the property, the assessee again does not fulfil the conditions laid down in section 54 as the construction was completed only on 10.04.2023, which is well beyond the period of date of sale of the original house property, which in this case was 03.05.2016. In any case, the agreement itself proves that the property was being constructed by the Developer M/s Ekta Everglade Homes Pvt Ltd and it was the Developer who received the completion/occupancy certificate and not the assessee. The relevant extract of the letter of the Developer regarding the occupancy certificate received on 10.04.2023 is reproduced below:

Date: 13 April 2023

To, GAIL CARRIE ANN TIMMINS & SHAHID ALI CHOWDHARY A-1005, A WING, FLOOR NO 10, JP ROAD, 4 BUNGALOWS, ANDHERI WEST, MUMBAI-400053dT.P.O

Dear Sir/Madam,

Re: Agreement for Sale dated 7-Jul-14 for purchase of Flat no. 1403 ("said flat") on the 14th floor in Wing B of the building known as "Ekta Tripolis" ("sald Building") constructed on Plot No. R-6 admeasuring 12,137.20 square meters lying, being and situate at Village Goregaon, Siddharth Nagar, Goregaon (West), Taluka Borivali, District Mumbai Suburban ("said Agreement")

4.3.11 In view of the above, the Panel is also of the view that the applicant assessee does not fulfil the conditions laid down in section 54 of the Act for claiming deduction of long term capital gain on sale of residential house property. In the present case the assessee has neither purchased within a period of one year before or two years after the date on which the transfer took place a residential house nor has within a period of three years after that date constructed one residential house in India. The addition of Rs. 55,69,428/- proposed by the AO on account of long term capital gain by denying the claim of deduction u/s 54 of the Act is upheld.”

6.1 The appellant has not been able to rebut the findings of the DRP either on

facts or in law. The DRP has thoroughly examined various primary documents

before arriving at the conclusion in its order. Therefore, we do not find any reason

to differ with the findings of the DRP, which we confirm.

6.2 However, we find merit in the without-prejudice submission of the

assessee. For assessment year 2017-18, the conditions for claiming exemption u/s

54 of the Act were different from the laws currently in force. The conditions for

exemption was that the property must have been held for more than 36 months

before selling it. This condition is undisputedly satisfied in the present case. The

assessee could invest the capital gains into one residential house property in

India. The exception allowing investment in two properties was not available in

AY 2017-18. The timeline for reinvestment was purchase of one residential house

one year before or two years after the sale date and for construction of new

house, the time available was three years after the sale date. Since the sale date

was 03.05.2016, the time allowed for purchase of one residential house was from

03.05.2015 to 03.05.2018. The Ld. AR submitted that the assessee has invested

Rs.57,93,683/- as against LTCG of Rs.55,69,428/- and hence, eligible for

exemption u/s 54 of the Act of the entire LTCG. The contention of the appellant is

as per law and is prima facie acceptable. However, we find that this fact has not been examined and verified by the AO. Therefore, we deem it proper to remand

back the matter to the AO for verification of the claim of the assessee regarding

payments of purchase consideration upto 03.05.2018 and allow the necessary

relief as per law after granting adequate and reasonable opportunity of being

heard to the assessee. The ground is allowed for statistical purpose.

Order is pronounced on 09.09.2026.

Sd/- Sd/- (SAKTIJIT DEY) (BIJYANANDA PRUSETH) VICE PRESIDENT ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 09.09.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI