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Whether Flat Purchased Within One Year From The Date Of Sale Would Be Entitled To Claim Exemption U/s. 54?

QUERY: A NRI Tax Payer in 2003, booked a Flat in Kolkata, basically for investment purposes.

A Three Room Flat with specific Flat No. 32G, was allotted to him in May 2004. He went on paying the Price as per the Agreement, aggregating to Rs. 34,62,659/-, according to the progress of the Building Construction.

In 2006, he decided to return to Kolkata permanently and has been looking for a Residential Flat for his residence. He got a bigger 4 Bed Room Flat No. 31J in the same building. He made an initial payments of Rs. 8,35,200/- to the allottee of the said Flat No. 31J, as commitment money, with a clear understanding that, on his return to Kolkata, he will sell the Flat No. 32G allotted to him and pay the balance amount of Rs. 67,00,000/-.

He returned to Kolkata permanently on 31-1.2008 and sold the flat allotted to him on 3-6-2009 for net Sale Price of Rs. 67,00,000/- and paid for the bigger Flat No. 31J, the balance of the agreed amount.

He took the Physical Possession of the bigger Flat No. 31J on 13-11-2008.

Now, the question is, whether the Capital Gain on Sale of the Flat No. 32G, allotted to him in the Year 2004, after FIVE Years of the date of allotment would be considered as a Long Term Capital Gains and the said Capital Gains on an Investment for Residential Flat within one year from the date of sale will be an exempted income in terms of the Provisions contained in section 54 and/or section 54F of the Income-tax Act, 1961.
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A right in Flat No. 32G was acquired in May, 2004, which was under construction. For which he made payments in instalments. The said right was sold by him on 3-6-2009 without taking the possession of the said flat.

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