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2015 (7) TMI 832 - AT - Income TaxExemption u/s 54F - Capital gain - joint development agreement - Since the assessees are having multiple flats as their shares from the builder, the Assessing Officer disallowed the claim under Section 54F - whether gain arises for assessment on transfer of the land by all the assessees along with three others - Held that - The assessees entered into an agreement and handing over the physical possession of the property to builder allowing it to enjoy 60% of the land in lieu of 40% of the constructed area. The transaction between the assessees and the builder is by way of arrangement or agreement which has the effect of transferring the landed property for enjoyment of the builder. In other words, the assessees transferred 60% of the land area to the builder for its enjoyment. Therefore, this Tribunal is of the considered opinion that there was a transfer on 8.12.2006 within the meaning of Section 2(47)(i) and 2(47)(vi) of the Act. Therefore, the relevant transaction took place in the financial year 2006-07 which falls in the assessment year 2007-08. Hence capital gain, if any, is assessable only in the assessment year 2007-08 and certainly not in the year 2009-10. - Accordingly, we hold that no capital gain arises for assessment in the year under consideration. - Decided in favour of assessee. Entitlement to exemption under Section 54F - when the assessees received eight flats/residential units from the builder in lieu of cost of the land transferred to the builder, whether the assessees are entitled for exemption under Section 54F of the Act? - Held that - The assessee entrusted the construction of the building to the builder in lieu of 60% of the landed area transferred to the builder. Therefore, the assessees, from the date on which the transfer was made by entering into agreement for joint development, are in the process of constructing the residential house. Therefore, this Tribunal is of the considered opinion that the assessees are entitled for exemption under Section 54F of the Act. We have gone through the judgment of Madras High Court in V.R. Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) wherein the assessee obtained five independent flats in a multi-storied construction and claimed exemption as independent unit under Section 54F of the Act. The Madras High Court, after referring to the amendment made with effect from 1.4.2015, found that the assessee is eligible for exemption under Section 54F of the Act. In view of the judgment of the Madras High Court, this Tribunal is of the considered opinion that the assessee are eligible for exemption even though multiple flats were allotted to them in lieu of cost of 60% of the land allotted to the builder. - Decided in favour of assessee.
Issues Involved:
1. Year of capital gain assessment. 2. Eligibility for exemption under Section 54F of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Year of Capital Gain Assessment: The primary issue is determining the correct year for assessing capital gains from the transfer of land by the assessees. The Revenue argued that the capital gain should be assessed in the financial year 2008-09, relevant to the assessment year 2009-10, due to a revised agreement dated 1.7.2008 extending the joint venture period. The Departmental Representative contended that the possession was deemed to be given on 1.7.2008, thus making the capital gain assessable in the year under consideration. Conversely, the assessees argued that the transfer took place on 8.12.2006 when the initial joint venture agreement was executed, and vacant possession was handed over to the builder. They maintained that the subsequent agreement merely extended the construction period without altering the original transfer terms. The Tribunal examined the joint venture agreement dated 8.12.2006, which included a clause for handing over vacant possession to the builder and executing a Power of Attorney. The Tribunal concluded that the transfer occurred on 8.12.2006, as the physical possession was handed over, and the builder commenced construction. Thus, the capital gain should be assessed in the financial year 2006-07, relevant to the assessment year 2007-08, not in the year 2009-10. 2. Eligibility for Exemption under Section 54F: The second issue revolves around the eligibility of the assessees for exemption under Section 54F of the Income-tax Act, 1961, given that they received multiple flats in exchange for the land transferred to the builder. The Revenue's position was that the assessees, having multiple flats, were not entitled to the exemption under Section 54F. The Tribunal noted that the assessees had transferred 60% of the land area in exchange for 40% of the constructed area, effectively engaging in the process of constructing residential houses from the date of the joint venture agreement. The Tribunal referenced the Madras High Court judgment in CIT v. V.R. Karpagam, which clarified that the amendment to Section 54F, effective from 1.4.2015, specified that the benefit would apply to one residential house in India. However, for assessment years before this amendment, multiple flats could be considered under the exemption. The Tribunal concluded that the assessees were entitled to exemption under Section 54F, even though they received multiple flats, as the relevant assessment years were prior to the amendment. Conclusion: The Tribunal upheld the CIT(Appeals) orders, confirming that the capital gain should be assessed in the assessment year 2007-08 and that the assessees were eligible for exemption under Section 54F despite receiving multiple flats. Consequently, all five appeals of the Revenue were dismissed.
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