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TMI Blog2015 (7) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... essable only in the assessment year 2007-08 and certainly not in the year 2009-10. - Accordingly, we hold that no capital gain arises for assessment in the year under consideration. - Decided in favour of assessee. Entitlement to exemption under Section 54F - when the assessees received eight flats/residential units from the builder in lieu of cost of the land transferred to the builder, whether the assessees are entitled for exemption under Section 54F of the Act? - Held that:- The assessee entrusted the construction of the building to the builder in lieu of 60% of the landed area transferred to the builder. Therefore, the assessees, from the date on which the transfer was made by entering into agreement for joint development, are in the process of constructing the residential house. Therefore, this Tribunal is of the considered opinion that the assessees are entitled for exemption under Section 54F of the Act. We have gone through the judgment of Madras High Court in V.R. Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) wherein the assessee obtained five independent flats in a multi-storied construction and claimed exemption as independent unit under Section 54F of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the constructed area. According to the Ld. D.R., since a revised agreement was entered between the assessees and the builder extending the period of joint venture on 1.7.2008, the capital gain arose to the assessees only during the financial year 2008-09, which is relevant to the assessment year 2009-10. Accordingly, the Assessing Officer assessed the capital gain during the year under consideration. Since the assessees are having multiple flats as their shares from the builder, the Assessing Officer disallowed the claim under Section 54F of the Income-tax Act, 1961 (in short 'the Act'). 4. Placing reliance on the judgment of Bombay High Court in Bertha T. Almeida v. ITO (2015) 53 taxmann.com 522, the Ld. D.R. submitted that for the purpose of capital gain in respect of development agreement, the date of agreement on which possession was taken by the builder has to be taken as the date of transfer. Since the agreement was extended on 1.7.2008, according to the Ld. D.R., the possession was deemed to be given only on 1.7.2008. Therefore, the CIT(Appeals) is not justified in holding that no capital gain arises for the year under consideration. Referring to the orders of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permission. This Power of Attorney was executed on 14.12.2006. Referring to the agreement executed on 1.7.2008 for extension of period of joint venture agreement, the Ld. representative submitted that this is only an extension of period of agreement for 24 months and the terms and conditions agreed on 8.12.2006 were not changed at all. This agreement also refers to the area/portion of the flat allotted to the owners. Therefore, according to the Ld. representative, the transfer in fact took place on 8.12.2006 when the joint venture agreement was executed between the entire owners and the builder, Shanmuga Construction Services, and the vacant possession was handed over to the builder. Therefore, according to the Ld. representative, the CIT(Appeals) rightly found that there was no transfer of land for assessing the capital gain during the year under consideration, i.e. for assessment year 2009-10. 7. Coming to the claim of exemption under Section 54 of the Act, the Ld. representative submitted that the assessees transferred 60% of the total area in lieu of 40% of the constructed area. Therefore, the cost of construction of 40% area would be the sale consideration for transferring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees handed over the vacant physical possession of the property on 8.12.2006. The agreement dated 1.7.2008 is only for extension of the time for completing the construction. Hence, this Tribunal is of the considered opinion that the vacant possession was given to the builder on 8.12.2006 in pursuance to the joint venture agreement entered between the parties on 8.12.2006. 9. We have carefully gone through the provisions of Section 2(47) of the Act which defines transfer . Under the common law, transfer of immovable property valuing more than ₹ 100 would be made only by executing a registered sale deed. However, under Income-tax Act, Section 2(47) defines transfer in relation to capital asset. For the purpose of convenience, we are reproducing Section 2(47) hereunder:- 2(47) [ transfer , in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset ; or (ii) the extinguishment of any rights therein ; or (iii) the compulsory acquisition thereof under any law ; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The assessee cannot take back 60% landed area on which the builder has commenced construction. At the best, the assessees would get only 40% of the constructed area and 40% landed area proportionate to the constructed area. Therefore, the transaction between the assessees and the builder is by way of arrangement or agreement which has the effect of transferring the landed property for enjoyment of the builder. In other words, the assessees transferred 60% of the land area to the builder for its enjoyment. Therefore, this Tribunal is of the considered opinion that there was a transfer on 8.12.2006 within the meaning of Section 2(47)(i) and 2(47)(vi) of the Act. Therefore, the relevant transaction took place in the financial year 2006-07 which falls in the assessment year 2007-08. Hence capital gain, if any, is assessable only in the assessment year 2007-08 and certainly not in the year 2009-10. 11. The CIT(Appeals) proceeded to observe that the capital gain arises only on the date of completion of the construction of flats and its handing over to the assessees. This observation is totally contrary to the provisions of Section 2(47) of the Act. In fact, the assessees entered i ..... 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