2019 (1) TMI 644 - AT - Income Tax

Charging of interest u/s 234A and 234B - Held that - The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT . Thus uphold the action of the AO in charging the assessee the aforesaid interest u/s 234A and 234B - Decided against the assessee Capital gain computation - assessee along with his mother and siblings entered into a JDA - Transfer as per section 2(47)(v) - Held that - As per the details that emanate from the record, the assessee along with his mother and siblings entered into a JDA on 03.12.2007 with M/s. Sai Deep Estates, which, find, is a registered document. in the case of Dr. T. K. Dayalu ( 2012 (6) TMI 405 - KARNATAKA HIGH COURT ) has held that on entering into a JDA, there is a transfer as per the provisions of section 2(47) of the Act and consequently capital gains is attracted. In that view of the matter, this issue is covered in favour of the Revenue and against the assessee. Claim of Exemption u/s 54/54F - multiple units/ flats i.e., the 2 flats in the same apartment building received by him in lieu of entering into the JDA dated 03.12.2007 with M/s. Sai Deep Estates - Held that - There was a structure/building on the said property before the JDA was entered into on 03.12.2007, it is of the considered opinion that the issue for consideration in this ground i.e., the assessee s claim for exemption u/s 54/54F of the Act in respect of 2 flats in the same residential building complex; is squarely covered in favour of the assessee by the decision of the Hon ble Karnataka High Court in the case of CIT Vs. Smt. K. G. Rukminiamma 2010 (8) TMI 482 - KARNATAKA HIGH COURT . As decided in COMMISSIONER OF INCOME TAX VERSUS SMT. VR. KARPAGAM 2014 (8) TMI 899 - MADRAS HIGH COURT Amendment to section 54F of the Act being para materia to section 54 of the Act with regard to substitution of a residential unit by Finance (No.2) Act, 2014 was operative only w.e.f. 01.04.2015, whereby exemption for more than one unit/flat (residential house) is to be withdrawn. However, prior to the aforesaid Amendment (supra), a residential house would include multiple flats/residential units in the same apartment building. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction on re-opening of assessment u/s 148 of the Act.
2. Event of 'transfer' as per Section 2(47)(v) of the Act.
3. Justification of cost of construction as the full value of consideration of land.
4. Non-granting of correct cost of acquisition of the land.
5. Non-granting of Section 54/54F exemption.
6. Levy of interest under Section 234A and 234B.

Issue-wise Detailed Analysis:

1. Jurisdiction on Re-opening of Assessment u/s 148 of the Act:
The assessee contended that the assessment order passed u/s 147 r.w.s. 143(3) was invalid as the reasons for reopening were not communicated despite a request. The Tribunal had previously remanded the matter to the CIT(A) to verify if the reasons were communicated. The CIT(A) upheld the validity of the assessment, stating that the show cause notice dated 20.01.2012, which mentioned the reasons for reopening, was sufficient compliance. The Tribunal dismissed the grounds related to jurisdiction, supporting the CIT(A)'s conclusion.

2. Event of 'Transfer' as per Section 2(47)(v) of the Act:
The assessee argued that there was no 'transfer' as defined in Section 2(47)(v) since no possession was handed over to the developer. However, the Tribunal noted that the Joint Development Agreement (JDA) entered into by the assessee was a registered document, and following the Karnataka High Court's decision in Dr. T. K. Dayalu, it held that entering into a JDA constitutes a 'transfer'. Consequently, this ground was dismissed.

3. Justification of Cost of Construction as the Full Value of Consideration of Land:
This issue was rendered academic due to the Tribunal's decision on the exemption u/s 54/54F and was not adjudicated.

4. Non-granting of Correct Cost of Acquisition of the Land:
Similar to the previous issue, this was rendered academic and was not adjudicated.

5. Non-granting of Section 54/54F Exemption:
The assessee claimed exemption u/s 54/54F for two flats received under the JDA. The CIT(A) had denied this exemption, but the Tribunal found that the case was covered by the Karnataka High Court's decision in CIT vs. Smt. K. G. Rukminiamma, which allowed exemption for multiple units in the same residential building. The Tribunal also referred to similar decisions by the Madras High Court and its own previous rulings, concluding that the assessee was entitled to exemption for both flats. This ground was allowed.

6. Levy of Interest under Section 234A and 234B:
The assessee's challenge to the levy of interest was dismissed. The Tribunal upheld the AO's action, citing the mandatory nature of interest under these sections as established by the Supreme Court in Anjum H. Ghaswala. However, the AO was directed to re-compute the interest while giving effect to the Tribunal's order.

Conclusion:
The appeal was partly allowed, with the Tribunal granting the exemption u/s 54/54F for the two flats and dismissing other grounds either as academic or without merit.

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