2021 (5) TMI 871 - AT - Income Tax

LTCG - Deduction u/s 54F - computation of LTCG arising out of the development agreement cum GPA - Assessing Officer has accepted that the assessee has acquired the flats as on 9.11.2009 and therefore, in the year 2012 when the assessee has sold the flat, the holding period has to be held as more than 3 years and the provisions of sub-section 3 of section 54F are not applicable - HELD THAT - As gone through the Development Agreement cum GPA, find that the assessees have given their landed property for development and their share of flats have been identified and allotted by way of the said agreement itself. Therefore, the respective CIT (A) s in the case of Smt. Devi Reddy Renuka and Smt. Nallapattu Saraswati have held that the assessees therein are deemed to have acquired the property on the date of development agreement itself and thus, the period of holding has to be held to be more than 3 years. In the case of coowners, the Revenue cannot take a different stand. If the Revenue has accepted the decision of the CIT (A) s, in the cases of Renuka and Saraswati, we are of the opinion that the same decision has to be taken in the case of the assessees before this Tribunal also. Therefore, by adopting the principles of consistency and uniformity, I hold that the exemption u/s 54F cannot be withdrawn in the relevant A.Ys and the capital gain arising out of sale of flat has to be treated as LTCG as done in the case of co-owners. Assessee s appeals are allowed.

Summary

Issues:
Appeals against CIT (A) orders related to exemption u/s 54F and capital gains treatment.

Analysis:
The appeals involved the assessees, a mother and son, who entered into a development agreement for constructing a residential apartment. The assessees did not file returns initially but later declared Long-Term Capital Gains (LTCG) exempt under section 54F of the Income Tax Act. The Assessing Officer allowed the exemption initially but later withdrew it when the assessees sold flats within a year of receiving them. The Assessing Officer treated the gains as Short-Term Capital Gains (STCG) and brought them to tax. The CIT (A) confirmed the assessment, leading to the assessees appealing before the ITAT Hyderabad.

The main contention revolved around the holding period of the property and the nature of capital gains. The assessees argued that the holding period should be considered more than 3 years, making the gains LTCG, not STCG. They also emphasized the need for uniformity in decision-making, citing similar cases where co-owners were treated favorably by CIT (A). The Revenue, however, supported the lower authorities' orders.

The ITAT Hyderabad, after considering the development agreement and previous decisions, held in favor of the assessees. It noted that the assessees had identified and allotted their share of flats in the agreement itself, implying ownership from the agreement date. Following the principle of consistency and uniformity, the ITAT ruled that the exemption u/s 54F should not be withdrawn and the gains from flat sales should be treated as LTCG. The appeals of both assessees were allowed, overturning the lower authorities' decisions.

In conclusion, the ITAT Hyderabad allowed the assessees' appeals, emphasizing the importance of uniformity and consistency in decision-making. The judgment clarified the holding period and capital gains treatment, ensuring that the assessees were not unfairly taxed and upholding their entitlement to exemptions under section 54F of the Income Tax Act.