An Income Tax tribunal has ruled that a seller can avail capital gains tax exemption even if they agreed to buy a new house before selling the old one, as long as possession aligns with the stipulated time frames. Delhi's ITAT case involved an NRI who sold property, entered an agreement for a new one, and later gained possession.
Tax officials argued the exemption isn't valid due to the early agreement, but the ITAT stated that as long as possession occurs within the required period, the exemption stands. The decision is significant, especially in metro cities where property agreements precede construction, setting a precedent for similar cases and maintaining the essence of section 54 which provides relief from capital gains tax.