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TMI Blog2017 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ee no reason to interfere with the order of the CIT (A) on this issue. Entitlement to deduction u/s 54F in respect of more than one residential flats received by virtue of a development agreement - Held that:- As by virtue of various decisions of the Tribunal and also the jurisdictional High Court in the case of Shri Syed Ali Adil (2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT) and also CIT vs.V.R. Karpagam (2014 (8) TMI 899 - MADRAS HIGH COURT) and CIT vs.Smt. K.G. Rukminiamma (2010 (8) TMI 482 - Karnataka High Court ), the assessee was entitled to deduction u/s 54F of the Act in respect of more than one residential flats received by virtue of a development agreement. Capital gain computation - applicability of the provisions of section 50C - Held that:- We find that the AO has adopted the SRO value of flats received by the assessee as consideration for the transfer of the land under the development agreement u/s 50C of the Act. In our opinion, this is not correct. The cost of the constructed area received by the assessee should be taken as the consideration received by the assessee in lieu of the development agreement and not the SRO value. The SRO value u/s 50C of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case. 6. The Learned Commissioner of Income- Tax(Appeals) erred in not appreciating the fact that the Hon'ble Tribunal could not have travelled beyond the assessment year which was being decided by it, i.e.- 2007-08 and give a direction for re- opening the assessment year for the A. Y. 2005-06, on the facts and in the circumstances of the case. 7. Without prejudice to the above contentions the Learned Commissioner of Income Tax (Appeals) erred in confirming the order of the Learned Income- Tax officer holding that the exemption under section 54F was not allowable to the appellant, on the facts and in the circumstances of the case. 8. The Learned Commissioner of Income-Tax (Appeals) erred in confirming the order of the Learned Income-Tax Officer holding that the provisions of the section 50C of the Income-Tax were applicable for determining at the consideration, on the facts and in the circumstances of the case. 9. The Learned Commissioner of Income-Tax (Appeals) erred in not appreciating fact that the Learned Income-Tax Officer did not afford an opportunity to the appellant before applying the provision of section 50C of the Income-Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilder would have rights to sell 55% of the area. It was stated by the assessee that they had entered into an MOU with M/s. Sreeji Builders on 11.03.2008, on which date the flats were handed over but that the MOU was not a registered document and the assessees stated that no capital gain arose on that day. The AO, however, relied upon the sale deeds dated 27.12.2006 and 13.11.2006 whereby the constructed flats were sold and the sale consideration was received to charge the capital gain in the hands of the respective assessees for the A.Y 2007-08. Aggrieved, the assessees carried the matter in appeal before the CIT (A), who held that that the very fact that the assessee and the co-owners are the main vendors indicated that they have sold their share of flats and that the fundamental issue is whether the transfer took place in the financial year relevant to A.Y 2007-08 or in the later year. The CIT (A) directed the AO to verify the extent of square yards of land owned by the respective assessees and also to estimate the value of the land as on 1.4.1981 for the purpose of computing the capital gains and denied the exemption u/s 54F in respect of the flats allotted to the respective ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has given a clear direction to assess the capital gain in the A.Y 2005- 06 and if the assessee has any grievance against the order of the ITAT, he or she should have taken the matter with the appropriate authorities and the AO has to follow the directions of the Hon'ble Tribunal. Further, with regard to the objection that sub-section (1) of section 150 shall not apply as per section 150(2) of the Act, the AO held that in view of the directions of the Tribunal, notice u/s 148 shall be issued notwithstanding anything contained in section 149, and further that as per the provisions of section 148, a notice under that section can be issued on or before 31.3.2012 for the A.Y 2005-06 and an order u/s 143(3) r.w.s. 144 r.w.s. 148 can be passed within one year from the end of the financial year in which the notices were served. The AO held that he could have reopened the assessment for the A.Y 2005-06 at the time of passing the order by the CIT (A) i.e. on 28.11.2011 for the A.Y 2007-08, which was subject matter of appeal before the Income Tax Appellate Tribunal and hence according to him, the provisions of sub section (2) do not apply to the assessee s case. 8. Thereafter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , according to the learned Counsel for the assessee, re-assessment notices are not valid. 10. The learned DR, on the other hand, supported the orders of the authorities below. 11. Having regard to the rival contentions and the material on record, we find that in the earlier proceedings, the Tribunal has held that the capital gain will arise in the year of executing the development agreement along with handing over of the possession of the property to the developer. Admittedly, the development agreement was entered on 31.12.2004 relevant to the A.Y 2005-06 and possession of the property was also handed over on the same day. Therefore, the AO has issued notice u/s 148 of the I.T. Act on 14.3.2013. Section 149 of the Act prescribes the time limit for issuance of notice u/s 148 while section 150 of the I.T. Act empowers the AO to issue a notice u/s 148, notwithstanding anything contained in section 149 of the Act, at any time, for the purpose of making an assessment, reassessment or recomputation in consequence or to give effect to any finding or direction contained in any order passed by any authority in any proceedings under the Act by way of appeal, reference or revision. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Shri Syed Ali Adil (352 ITR 0418) and also the decision of the Hon'ble Madras High Court in the case of CIT vs.V.R. Karpagam (373 ITR 0127) and the Hon'ble Karnataka High Court in the case of CIT vs.Smt. K.G. Rukminiamma (331 ITR 0211), the assessee was entitled to deduction u/s 54F of the Act in respect of more than one residential flats received by virtue of a development agreement. We find that this issue is now fairly covered by the decision of various High Courts in favour of the assessee. The relevant paragraphs are reproduced hereunder for ready reference: i) CIT vs. Smt. K.G. Rukminiamma : 12 . In the instant case, the facts are not in dispute. 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 eight flats are to be put up in that property and four flats representing 48% is the share of die assessee and the remaining 52% representing another four flats is the share of the builder. So, the consideration for selling 52% of the site is four flats representing 48%. AH the four fiats are situate in a resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression a residential house in section 54 (1) of the Act has to be understood in a sense that the building should be of residential nature and a should not be understood to indicate a singular number and where an assessee had purchased two residential flats, he is entitled to exemption under section 54 in respect of capital gains on sale of its property on purchase of both the flats, more so, when the flats are situated side by side and the builder has effected modification of the flats to make it as one unit, despite the fact that the flats were purchased by separate sale deeds. This decision was followed by the Karnataka High Court in CIT v. Smt. K.G. Rukminiamma [2011] 196 Taxman 87/[2010] 8 taxmann.com 121 (Kar.) where a residential house was transferred and four flats in a single residential complex were purchased by the assessee, it was held that all four residential flats constituted a residential house for the purpose of section 54 and that the four residential flats cannot be construed as four residential houses for the purpose of section 54. Admittedly the two flats purchased by the assessee are adjacent to one another and have a common meeting point. In the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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