Circular No. 672

429. Whether allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of DDA, should be treated as cases of construction for purposes of sections 54 and 54F

What this is

Circular No. 672 was issued by the Central Board of Direct Taxes on 16 December 1993. Its subject is 429. Whether allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of DDA, should be treated as cases of construction for purposes of sections 54 and 54F.

What it does

Extends to co-operative societies and other institutions the treatment already given to the Delhi Development Authority's self-financing scheme. Circular No. 471 dated 15 October 1986 had held that allotment of a flat under that scheme is a case of construction, not purchase, for sections 54 and 54F. The Board now says that where the terms of a co-operative society's or other institution's scheme of allotment and construction are similar to those set out in paragraph 2 of Circular No. 471, allotments under it are likewise to be treated as construction for those two sections.

Why it was issued

Representations were received that allottees of flats and houses under schemes run on the same lines as the Delhi Development Authority's should get the same treatment.

Who it reaches

Members of co-operative housing societies claiming exemption under section 54 or 54F
Allottees under builder or institutional schemes of the same pattern
Assessing Officers testing a capital gains exemption claim against the purchase limb

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.54	s.82

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

429. Whether allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of DDA, should be treated as cases of construction for purposes of sections 54 and 54F
1. Attention is invited to Board’s Circular No. 471, dated 15-10-1986. It was clarified therein that cases of allotment of flats under the Self-Financing Scheme of the Delhi Development Authority (DDA) should be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act. The Board has since received representations that even in respect of allotment of flats/houses by co-operative societies and other institutions, whose schemes of allotment and construction are similar to those of Delhi Development Authority, a similar view should be taken.
2. The Board has considered the matter and has decided that if the terms of the schemes of allotment and construction of flats/houses by the co-operative societies or other institutions are similar to those mentioned in para 2 of Board’s Circular No. 471, dated 15-10-1986 (Sl. No. 428), such cases may also be treated as cases of construction for the purposes of sections 54 and 54F of the Income-tax Act.
Circular : No. 672, dated 16-12-1993.

What to watch

The relief turns on similarity of terms to those in paragraph 2 of Circular No. 471, which this circular does not reproduce; that circular has to be read alongside.
The name of the allotting body is not the test; the terms of the scheme of allotment and construction are.
Whether the case is one of construction or of purchase decides which limb of sections 54 and 54F the claim is judged by, so the characterisation has to be settled before the timing is argued.
The circular speaks to sections 54 and 54F alone.

Where you meet it

In a scrutiny where exemption under section 54 or 54F is denied on the footing that the flat was purchased rather than constructed, and in the appeal against that finding.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 1/2023 — Extension of time limit for compliance to be made for claiming any exemption under section 54 to 54GB of the income tax 6 January 2023
Circular No. 12/2021 — Extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic 25 June 2021
Notification No 39 /2020 [F. No. 370142/23/2020-TPL] / SO 2126(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 29 June 2020
Notification No.35 /2020 [F. No. 370142/23/2020-TPL] / SO 2033(E) — Ministry of Finance 24 June 2020
Circular No. 743 — 432. Taxability of unutilised deposit under the Capital Gains Accounts Scheme, 1988 in the hands of the legal heirs of t 6 May 1996
Circular No. 667 — 431. Whether, in cases where the residential house is constructed within the specified period, the cost of such resident 18 October 1993

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A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.