2020 (2) TMI 1524 - AT - Income Tax

Deduction u/s 54F - Assessee claimed exemption under section 54F on the value of the 35% of constructed area which was denied by Ld. AO and confirmed by Ld. CIT(A) - HELD THAT - As per JDA registered on 23/05/2005, assessee received 35% of total built up area, i.e, 35% of apartments constructed along with 35% of car parking and 35% of terrace and garden rights earmarked for private use as against common use in consideration for transferring 65% of undivided interest. Amendment to section 54F with regard to a by Finance (No.2) Act, 2014 w.e.f. 01/04/2015 withdrawing deduction for more than one flat (residential house). Courts have consistently held that post amendment benefit of section 54F will be applicable only to one residential house in India whereas prior to the amendment residential house would include multiple residential house/units. We are of the opinion that assessee is entitled to deduction under section 54F of the act in respect of 35% of constructed property received by her. Accordingly, this ground raised by assessee stands allowed.

Summary

Issues:
Assessment of capital gains under joint development agreement, denial of benefit under section 54F, interpretation of "residential house" for exemption.

Capital Gains Assessment:
The appellant, an individual, entered into a joint development agreement (JDA) for land development but failed to disclose details in the income tax return. The Assessing Officer (AO) computed long-term capital gains and denied benefit under section 54F as the appellant allegedly had more than one residential house. The AO's order was challenged before the CIT(A), citing similar cases where the benefit was granted. However, the CIT(A) upheld the AO's decision, stating that the residential houses received under the JDA did not qualify as a "residential house" under section 54F.

Benefit under Section 54F:
The appellant contended that she was eligible for exemption under section 54F for 35% of the constructed area received in exchange for the land. The appellant relied on precedents from the Madras and Karnataka High Courts, which clarified that post-amendment, section 54F applies to one residential house only. The Tribunal agreed with the appellant, citing the consistent view of various High Courts, and allowed the deduction under section 54F for the 35% of the constructed property received.

Interpretation of "Residential House":
The Tribunal's decision was based on the amendment to section 54F by the Finance Act, 2014, limiting the deduction to one residential house. The Tribunal concurred with the High Courts' interpretation that post-amendment, section 54F benefits apply to a single residential house only. Consequently, the appellant was deemed entitled to the deduction under section 54F for the 35% of constructed property received.

Conclusion:
The Tribunal partially allowed the appeal, granting the benefit under section 54F for the portion of the constructed property received. Other grounds were deemed academic or general in nature and did not require adjudication. The decision was pronounced on 19th February 2020.