2022 (4) TMI 221 - AT - Income Tax

Allowability of section 54F - consequential capital gains arising from the joint development agreement - HELD THAT - Assessee's joint development agreement involving receipt of developed area as sale consideration has already been held eligible for section 54F deduction in hon'ble jurisdictional high court's decision in CIT Vs. Syed Ali Adil 2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT . Appeal of assessee allowed.

Summary

Issues involved:
1. Interpretation of joint development agreement under section 2(47)(v) of the Act for assessing capital gains.
2. Eligibility for deduction under section 54F based on joint development agreement.

Issue 1: Interpretation of joint development agreement under section 2(47)(v) of the Act for assessing capital gains:

The case involved twin cross-appeals for assessment years 2008-09 and 2010-11 arising from separate orders of the CIT(A) related to the treatment of a joint development agreement. The lower authorities considered the agreement as part-performance under section 2(47)(v) of the Act, leading to long-term capital gains. However, the assessee contended that the agreement did not transfer any right or title, and hence, capital gains should only be assessed in the year of sale of developed housing units. The tribunal analyzed the agreements and found that the assessee did not transfer any rights to the developer, leading to a decision in favor of the assessee. The Revenue's argument based on a high court judgment was rejected, and the tribunal held that the lower authorities erred in treating the capital gains for the assessment year 2008-09. The assessee's appeal was partly allowed, and the Revenue's cross-appeals were dismissed.

Issue 2: Eligibility for deduction under section 54F based on joint development agreement:

The Revenue's cross-appeals sought to reverse the CIT(A)'s findings on the assessee's eligibility for section 54F deduction. The assessee claimed the deduction based on various judicial precedents and argued that the full value of consideration should be deemed for both assessing income and allowing deductions. The tribunal considered the legal submissions and judicial precedents cited by the assessee, concluding that the assessee was indeed eligible for the section 54F deduction. The tribunal highlighted a previous high court decision supporting the assessee's position. Consequently, the Revenue's substantive grievance in both appeals was dismissed, affirming the eligibility of the assessee for the section 54F deduction. The former appeal of the assessee was partly allowed, while the latter appeal was dismissed as infructuous.

In conclusion, the tribunal's judgment clarified the interpretation of the joint development agreement for assessing capital gains and upheld the eligibility of the assessee for the section 54F deduction based on the specific circumstances of the case and relevant legal provisions and precedents.