2019 (6) TMI 531 - AT - Income Tax

Deduction u/s.54F - multiple flats acquired under a JDA - HELD THAT - We are of the view that the facts of the Assessee s case are identical to the case decided by the Tribunal in the case of Smt.Netravati 2018 (4) TMI 1617 - ITAT BANGALORE . Respectfully following the same, we hold that the Assessee is entitled to benefit of deduction u/s.54F of the Act, on the 13 flats which he got as his share of built up area from the developer under the JDA. The LTCG brought to tax by the revenue authorities is accordingly directed to be deleted. STCG or LTCG - sale of 14 flats out of 27 flats which were earmarked as share of the assessee under the JDA - HELD THAT - The share of 27 flats which were to be allotted to assessee was identified and it is shown as Item No. 2 in Schedule-B of the supplementary agreement. The admitted factual position is that the sum of ₹ 1,46,15,100/- was received as consideration of 14 flats by the assessee for giving up his rights in favour of the developer. The said sum was received within a period of three years from the date of JDA. In such circumstances, the 14 flats on which rights were given up in favour of the developer by the assessee were held by assessee for a period of less than 36 months and therefore, those flats assume the character of Short Term Capital Asset . The act of giving of rights over those 14 flats would amount to a transfer and since such transfer is of a Short Term Capital Asset, the gain on such transfer was rightly assessed by the Revenue authorities as STCG. Fair Market Value (FMV) as on 01-04-1981 of the 14 flats that were given up in favour of the developer - HELD THAT - It is no doubt true that the Revenue authorities claim for adopting FMV as on 01-04-1981 at ₹ 1/- per Sq. Ft., has the backing of the sale instance. We are however, of the view that in such matters, it is not possible to identify identical property as that of assessee for determination of FMV as on 01-04-1981, giving the benefit of doubt to assessee, We are of the view that it would be just appropriate in the given facts and circumstances of the case to adopt the FMV as on 0104-1981 at ₹ 50/- per Sq. Ft. AO is accordingly directed to compute STCG on sale of 14 flats by the assessee to the developer. Ground partly allowed Capital gain computation - Cost of improvement of land, the cost of improvement to the land which should be taken into consideration while determining the capital gain - HELD THAT - The admitted position is that no evidence in support of such claim was filed before the Revenue authorities or before the Tribunal. In the given facts and circumstances of the case, we are of the view that there is no merit in Ground raised by the assessee. Accrual of income - refundable deposit under the JDA - HELD THAT - The admitted factual position stated by the AO in para 7 of the assessment order is that this sum was never returned by the assessee to the developer. In these circumstances, we uphold the orders of Revenue authorities and find no merit in Ground raised by the assessee

Issues Involved:
1. Computation of Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG).
2. Entitlement to deduction under Section 54F of the Income Tax Act, 1961.
3. Fair Market Value (FMV) as on 01-04-1981.
4. Cost of improvement of the land.
5. Treatment of refundable deposit as income.
6. Year in which capital gain is to be taxed.

Detailed Analysis:

1. Computation of LTCG and STCG:
The assessee entered into a Joint Development Agreement (JDA) and received 27 flats in return for transferring 70% undivided share of his property. The assessee retained 13 flats (LTCG) and sold 14 flats (STCG) to the developer for ?1,46,15,100/-. The Tribunal affirmed the Revenue's assessment that the 14 flats were held for less than 36 months, thus constituting a Short Term Capital Asset, and the gain on their transfer was rightly assessed as STCG.

2. Entitlement to Deduction under Section 54F:
The assessee claimed deduction under Section 54F for the 13 flats received under the JDA. The Tribunal considered the legal claim based on existing facts and referenced the decision in Smt. Netravathi Vs. ITO, where similar claims were allowed. The Tribunal also referred to the Karnataka High Court's ruling in CIT Vs. K.G. Rukminiamma, which held that multiple flats received under a JDA could be considered as "a residential house" for the purpose of Section 54F. Consequently, the Tribunal allowed the deduction under Section 54F for all 13 flats, directing the deletion of LTCG brought to tax by the revenue authorities.

3. Fair Market Value (FMV) as on 01-04-1981:
The assessee claimed FMV as on 01-04-1981 at ?300/- per sq. ft. without evidence. The AO identified a comparable sale instance valuing the property at ?0.33 per sq. ft., and the CIT(A) adopted ?1/- per sq. ft. The Tribunal, giving the benefit of doubt to the assessee, directed the adoption of ?50/- per sq. ft. as the FMV as on 01-04-1981 for computing STCG.

4. Cost of Improvement of the Land:
The assessee claimed cost of improvement without providing evidence. The Tribunal upheld the Revenue's rejection of this claim due to the lack of supporting documentation, dismissing this ground.

5. Treatment of Refundable Deposit as Income:
The AO treated ?6 Lakhs, paid as a refundable deposit under the JDA, as income since it was not returned to the developer. The Tribunal upheld the Revenue's decision, finding no merit in the assessee's claim, and dismissed this ground.

6. Year in which Capital Gain is to be Taxed:
The assessee raised an issue regarding the year in which the capital gain should be taxed but did not press this ground. Consequently, the Tribunal dismissed it as not pressed.

Conclusion:
The appeal was partly allowed, with the Tribunal granting the deduction under Section 54F for the 13 flats, adjusting the FMV to ?50/- per sq. ft. for STCG computation, and dismissing other grounds related to STCG, cost of improvement, refundable deposit, and the year of taxation.

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