2024 (5) TMI 1111 - AT - Income Tax

Correct head of income - Nature of gain on sale of property - business income OR capital gains - intention of assessee - consistency approach - assessee had entered into the JDA element of profit sharing between the assessee and the developer - assessee got 2.40% share of total Revenue - Scope of Circular issued by the Revenue and the MCQ replies given by the Revenue in the context of Section 45(5A) of the Act under the heading Joint Development Agreement HELD THAT - Once the co-ordinate Bench in the case of connected assessees whose rights are emanated from the same JDA, had decided the issue in favour of the assessee, then the said principle laid down by the co-ordinate Bench is required to be applied to all the assessees unless there is a change in law or facts. The Revenue in the instant case has failed to point out any change in law or facts in the case of assessee and therefore, we are left with no other option but to follow the decision of the co-ordinate Bench of the Tribunal in the case of Vinod Narapa Reddy 2020 (10) TMI 354 - ITAT BANGALORE - Department had accepted that the assessee in those cases was entitled for long term capital gain. In our view, the department is supposed to take coherent, consistent and uniform stand against all the assessees, who are similarly situated and whose rights are emanating from the very same agreement. In our view, the department cannot take the contrary view, which has been taken in a group of assessees to the determinant to the assessee before us. The law abhor uncertainty and selective approach against any individual. The assessee can opt for monetary consideration and receive the consideration in the shape of share in the sale of project. In the light of the above, though, the clarification and the MCQ(supra) had been issued subsequently, however, the circular and the MCQ are in the same line of reasoning as given by the co-ordinate Bench and therefore, the order passed by the CIT(A) with respect to treating the income received by the assessee as long term capital gain is permissible and was in accordance with law. Accordingly, we dismiss the grounds of the Revenue on this aspect. Deduction u/s 54F - AO while examining the case of the assessee has not decided on the entitlement of the assessee under section 54F of the Act, as the AO has considered the income received by the assessee as business income - Issue remanded back to the file of AO with a direction to decide the claim of allowability of the assessee u/s 54F in accordance with law after granting due opportunity of hearing to the assessee. The assessee also shall be at liberty to file documents, if any, as required for proving its case and the Assessing Officer shall consider such evidences, if any, filed by the assessee. Needless to say, the Assessing Officer shall examine those documents / evidence filed by the parties and thereafter pass a detailed speaking order.

Summary

Issues Involved:

1. Whether the revenue receipts from the Joint Development Agreement (JDA) should be treated as business income or capital gains.
2. Whether the assessee is entitled to the benefit of Section 54F of the Income Tax Act, 1961.

Summary of Judgment:

Issue 1: Treatment of Revenue Receipts

The Revenue contended that the income received by the assessee from the JDA should be treated as business income, arguing that the pooling of the assessee's land and the revenue-sharing model indicated an adventure in the nature of trade. The Revenue also argued that the assessee's participation in the JDA involved profit-sharing and risk, which are characteristics of a business.

The Tribunal, however, noted that the assessee had entered into a JDA with M/s. Shriram Properties Ltd. and received a share of the revenue from the sale of residential apartments. The Tribunal observed that the assessee's role was limited to transferring the land and receiving consideration, and the land was held as a capital asset. The Tribunal referred to a similar case (Vinod Narapa Reddy) where it was held that the receipt of consideration over a period does not change the nature of the transaction from capital gains to business income. The Tribunal also highlighted that the Revenue had accepted similar transactions as capital gains in other cases involving co-owners of the same JDA.

The Tribunal concluded that the amounts received by the assessee should be treated as long-term capital gains.

Issue 2: Entitlement to Benefit of Section 54F

The Assessing Officer had not examined the assessee's claim for deduction u/s 54F as the income was treated as business income. The CIT(A) also did not provide a detailed finding on the assessee's entitlement to the benefit of Section 54F but mentioned that the benefit should be extended to the assessee.

The Tribunal remanded the issue back to the Assessing Officer to decide the claim of allowability u/s 54F in accordance with the law, after granting due opportunity of hearing to the assessee.

Conclusion:

The appeals of the Revenue were partly allowed for statistical purposes. The Tribunal directed the Assessing Officer to treat the revenue receipts as long-term capital gains and to re-examine the assessee's claim for deduction u/s 54F.