2011 (9) TMI 105 - AT - Income Tax

Exemption u/s 54F - part Performance u/s 53A of Transfer of Property Act- transfer u/s 2(47) - Claim of exemption u/s 54F against purchase of two properties - assessee argued that since the flat has not been actually allotted to the assessee, firstly the transaction should be held as not amounting to transfer and if at all it is to be considered as a transfer then the consideration on account of valuation of flat at Rs. 19.06 lakh be excluded. - Held that - it is clear that since the assessee entered into agreement with the developers for transfer of the property, handed over the possession who in the mean time constructed flats thereon and also received consideration of Rs. 20 lakh in cash, it is difficult to hold that there was no transfer u/s 2(47). It clearly amounted to transfer giving raise to charge of capital gain. Exemption u/s 54F - Held that - since exemption u/s 54F is available only in respect of one flat, in our considered opinion the authorities below were justified in granting this relief only in respect of one flat, which was acquired by the assessee in this year. - Decided against the assessee.

Issues Involved:
1. Admission of additional ground.
2. Reopening of assessment under Section 147/148.
3. Eligibility for exemption under Section 54F.
4. Determination of capital gains and value of consideration.

Issue-Wise Detailed Analysis:

1. Admission of Additional Ground:
The assessee filed an application to admit an additional ground, asserting that the Commissioner of Income Tax (Appeals) erred in confirming the Assessing Officer's order regarding the charging of Rs. 20,00,000 and the notional market value of a flat amounting to Rs. 19,06,800 under "Capital Gains." The contention was that the developer did not fulfill the conditions stated in the development agreement, thus not complying with Section 53A of the Transfer of Property Act, and therefore, the transaction is not covered by Section 2(47)(v) of the Income Tax Act, 1961. The Tribunal admitted the additional ground, noting that it involved a substantial question of law and did not require fresh investigation of facts, following the Supreme Court judgment in National Thermal Power Co. Ltd. v. CIT.

2. Reopening of Assessment Under Section 147/148:
The first ground regarding the reopening of assessment under Sections 147/148 was not pressed by the assessee and was therefore dismissed.

3. Eligibility for Exemption Under Section 54F:
The core issue involved the eligibility for exemption under Section 54F, which allows exemption only for investment in one residential house. The Assessing Officer reopened the assessment upon noticing that the assessee claimed exemption for two properties. The assessee contended that she had not received possession of the flat from the developers, and thus, exemption should be granted for both properties. However, the Assessing Officer restricted the exemption to the flat purchased from Prithvi Builders, leading to the determination of a long-term capital gain of Rs. 13,09,490. The Tribunal upheld this decision, stating that exemption under Section 54F is available only in respect of one flat.

4. Determination of Capital Gains and Value of Consideration:
The Tribunal examined whether the transaction constituted a "transfer" under Section 2(47)(v) of the Income Tax Act and the appropriate value of consideration. The assessee had a 10% share in certain land transferred to developers, receiving Rs. 20 lakh and entitlement to a flat. The Tribunal noted that the transaction involved handing over possession and receiving consideration, thus constituting a transfer under Section 2(47). The Tribunal emphasized that the "full value of consideration" under Section 48 includes both received and accrued amounts. The assessee's argument to exclude the flat's value due to non-receipt was rejected. The Tribunal found that the value of Rs. 19.06 lakh for the flat, as initially declared by the assessee, was appropriate and should not be reduced to Rs. 4.20 lakh. Additionally, the Tribunal noted that the assessee received Rs. 21 lakh from the builder, which was not disclosed as interest income, further supporting the inclusion of the flat's value in the consideration.

Conclusion:
The Tribunal dismissed the appeal, upholding the Assessing Officer's determination of capital gains and restriction of exemption under Section 54F to one flat. The Tribunal found no merit in the assessee's contentions regarding the value of consideration and the nature of the transaction.

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