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These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

12-04-2019, Suresh C., Section 54, 13, Tribunal Bangalore

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1 week 1 day ago #9130 by amit
Section - 54, 13
Order Date - 12-04-2019
Favouring - Assessee Partly
Court - Tribunal Bangalore
Appellant - Suresh C.
Respondent - DCIT
Justice - N.V. VASUDEVAN VP & JASON P. BOAZ AM
Citation - 419Taxpundit165
Appeal No. - ITA No. 1625/Bang/2016
Asstt. Year - 2006-07

Order

PER : N V Vasudevan

This is an appeal by the assessee against the order dated 29-07-2013 of the Commissioner of Income Tax (Appeals)-LTU, Bangalore, relating to Assessment Year 2006-07.

2. The assessee is an individual. He owned property in Bangalore in S.No.151/2A, Vibbhutipura Village, K.R.Puram, Bangalore being land measuring 1 Acre and 6 Guntas (hereinafter referred to as ‘the property’). He entered into a Joint Development Agreement (JDA) dated 20-01-2003 with M/s. Ittina Properties Pvt.Ltd. for carrying out development over the land owned by her by constructing flats. As per the JDA, the assessee was to get 27 flats as his share of built up area in consideration for transferring 70% undivided share of property. Out of the 27 flats, the Assessee retained for himself 13 flats and sold the remaining 14 flats to the Developer for a consideration of Rs1,46,15,100/-. The sale of 14 flats to the developer by the Assessee admittedly gave raise to Short term Capital Gain (STCG). On acquiring 13 flats under JDA the gain was admittedly Long Term Capital Gain (LTCG). The dispute ra sed in the various grounds of appeal before the Tribunal is with regard to computation of STCG and LTCG.

3. As far as the LTCG on acquiring 13 flats by the Assessee under the JDA is concerned, the learned counsel for the Assessee submitted before us that the Assessee is entitled to claim deduction u/s.54F of the Income Tax Act, 1961 (Act) and no part of the LTCG is taxable. In ground No.2 raised by the Assessee before the Tribunal, the Assessee has only questioned the manner of determination of LTCG and not a ground regarding deduction u/s.54F of the Act. However in Gr.No.6 a specific ground seeking deduction u/s.54F of the Act has been raised. Since the said claim for deduction u/s.54F of the Act is a legal claim and can be adjudicated on the basis facts already on record, the same is taken up for consideration. The relevant provisions of Sec.54F of the Act, reads thus:

'54F. Profit on sale of property used for residence:- (1) Subject to the provisions of sub-section (4) where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, not being a residential house,(hereinafter referred to as the original asset), and 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, a residential house (hereinafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section that is to say,- ………”

“Provided that nothing contained in this sub-section shall apply where –

(a) the assessee-

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a p riod of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.]

‘Provided that nothing contained in this sub-section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset.’

In support of the claim that deduction u/s.54F of the Act is to be allowed on acquiring 13 flats under JDA, the Ld. Counsel for the assessee relied on a decision of the Hon’ble ITAT in the case of Smt. Netravathi Vs. ITO in ITA No. 2630/Bang/2017 order dated 25-04-2018.

4. In the case of Smt. Netravathi (supra) similar claim for deduction u/s.54F of the Act on multiple flats acquired under a JDA was subject matter of dispute before the Hon’ble ITAT. In that case the AO examined the claim of Assessee for deduction u/s 54F of the Act. He held that as per the proviso (a)(i) to Sec.54F(1), deduction u/s.54F of the Act is allowed only for a residential house. Since the Assessee purchased 13 flats the same cannot be one residential house. Moreover as per proviso (a)(ii) if the Assessee purchases more than on residential house within the time specified in the proviso the claim made in respect of one residential unit also has to be disallowed. Healso observed that the enquiries revealed that the Assessee has sold two flats out of her share of built up area in AY 2015-16. He held that the condition that the new asset should not be sold within the period mentioned in Sec.54F(3) of the Act has also been contravened.

The assessee placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. K.G Rukminiamma – [331 ITR 221], wherein the Hon’ble Karnataka High Court held on

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