2020 (11) TMI 699 - AT - Income Tax

Deduction u/s.54F - Receipt of 10 flats in lieu of Joint development agreement (JDA) of land - assessee did not offer any long term capital gain (LTCG) on entering into joint venture agreement in respect of property - whether there is a transfer of the property within the meaning of section 2(47)(v)? - plea of the assessee was that it is only on delivery of the constructed area by the developer in all respects that a transfer would take place and since no such delivery of built up area had taken place during the previous year - AO was of the view that possession of the property had been delivered to the developer and therefore there was a transfer of the property on the signing of the development agreement dated 21.01.2010 and therefore capital gain was exigible to tax in Assessment Year 2010-11 - HELD THAT - In the case of K.G.Rukminiamma 2010 (8) TMI 482 - KARNATAKA HIGH COURT the facts were on a site measuring 30' x 110' the assessee had a residential premises. Under a joint development agreement she gave that property to a builder for putting up flats. Under the agreement 8 flats are to be put up in that property and 4 flats representing 48% is the share of the assessee and the remaining 52% representing another 4 flats is the share of the builder. So the consideration for selling 52% of the site was 4 flats representing 48% of built up area and the 4 flats are situated in a residential building. The Court held that the 4 flats constitute 'a residential house' for the purpose of sec 54. The 4 residential flats cannot be construed as 4 residential houses for the purpose of sec 54. It has to be construed as a residential house and the assessee is entitled to the benefit accordingly. In that view of the matter, the Court held that the Tribunal as well as the appellate authority were justified in holding that there is no liability to pay Capital Gains tax as the case squarely falls under sec. 54 of the Income Tax Act, 1961. Post amendment, viz., from 01.04.2015, benefit of s 54F will be applicable to one residential house in India. However, prior to said amendment, a residential house would include multiple flats/residential units. Similar decisions were rendered on identical facts by the Hon'ble Madras High Court in the case of CIT vs Gumanmal Jain 2017 (3) TMI 394 - MADRAS HIGH COURT . In the present case all the 13 flats were situate in the same premises and, therefore, the decision rendered in the case of Smt. K.G Rukminiamma (Supra) will apply. In the light of above judicial pronouncements on identical facts and circumstances of the case of the assessee, we are of the view that the Assessee is entitled to deduction u/s.54F of the Act on all the 13 flats and if the deduction is allowed then there would be no capital gain that would remain which is chargeable to tax in the hands of the assessee. We hold and direct accordingly and allow the appeal of the Assessee.

Issues Involved:
1. Whether there was a "transfer" of property under section 2(47)(v) of the Income Tax Act, 1961.
2. Whether the assessee is entitled to deduction under section 54F of the Act for all flats received under the Joint Development Agreement (JDA).

Issue-wise Detailed Analysis:

1. Transfer of Property under Section 2(47)(v):
The core issue was whether the execution of the Joint Development Agreement (JDA) dated 21.01.2010 constituted a "transfer" of property under section 2(47)(v) of the Income Tax Act, 1961. The assessee argued that a transfer would only occur upon the delivery of the constructed area by the developer, which had not taken place during the relevant assessment year (2010-11). Consequently, the assessee claimed that no capital gain was exigible to tax for that year.

The Assessing Officer (AO) disagreed, asserting that possession had been delivered to the developer upon signing the JDA, thus constituting a transfer. The AO referenced the Karnataka High Court's decision in CIT Vs. T. K. Dayalu, which held that the date of transfer is the date on which possession is handed over to the developer under a JDA. The AO computed the Long Term Capital Gains (LTCG) as follows:
- Market value of the super built-up area: ?2,59,45,113/-
- Less: Indexed cost of land surrendered: ?81,65,266/-
- Long Term Capital Gains: ?1,77,79,850/-

The CIT(A) upheld the AO's view, leading to the assessee's appeal to the Tribunal. The Tribunal found no delay in the appeal filing, rejecting the Registry's objection regarding a 128-day delay.

2. Deduction under Section 54F:
The second issue was whether the assessee could claim deduction under section 54F of the Act for all the flats received under the JDA. Initially, the assessee claimed deduction for only one of the ten flats. However, during the appeal, the assessee sought to extend the deduction to all ten flats.

The Tribunal considered the additional ground of appeal, which was a legal issue that could be decided based on existing facts. The Tribunal referenced several judicial pronouncements, including the Karnataka High Court's decision in CIT Vs. K. G. Rukminiamma, which held that multiple residential units received under a JDA could be considered as "a residential house" for the purpose of section 54F. This interpretation was supported by the General Clauses Act, which allows singular terms to include the plural.

Similarly, the Madras High Court in CIT Vs. Smt. V.R Karpagam and CIT Vs. Gumanmal Jain held that prior to the amendment effective from 01.04.2015, the term "a residential house" under section 54F could include multiple flats. The Tribunal concluded that the assessee was entitled to deduction under section 54F for all ten flats received under the JDA. Consequently, if the deduction was allowed, there would be no taxable LTCG remaining.

Conclusion:
The Tribunal allowed the assessee's appeal, granting deduction under section 54F for all ten flats received under the JDA. As a result, there was no necessity to decide the issue regarding the year of taxability of LTCG. The appeal was partly allowed, and the judgment was pronounced on 19th November 2020.

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