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TMI Blog2018 (8) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... lats are given to the owner whether deduction u/s.54F of the Act can be given, the decision of the Hon’ble High Court of Karnataka and the other decision cited before us supports the plea of the assessee that deduction u/s. 54F of the Act cannot be denied on the ground that multiple flats are obtained by the assessee. See COMMISSIONER OF INCOME-TAX VERSUS SMT. KG. RUKMINIAMMA [2010 (8) TMI 482 - KARNATAKA HIGH COURT] as held it has to be construed as "a residential house" and the assessee is entitled to the benefit accordingly. In that view of the matter, the Court held that the Tribunal as well as the appellate authority were justified in holding that there is no liability to pay Capital Gains tax as the case squarely falls under sec. 54 of the Income Tax Act, 1961. Also the conclusion of CIT(Appeals) that since the assessee did not file return of income making claim for deduction u/s. 54 of 54F of the Act, the same cannot be allowed, we are of the view that the CIT(Appeals) as an appellate authority cannot deny the benefit of deduction which the assessee is entitled to in law. As decided in DR. ASHWIN BALCHAND MEHTA VERSUS JOINT COMMISSIONER OF INCOME TAX, RANGE – 11 (2) , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet Roof, Mud wall, Mud flooring and Jungle Wood used for Doors and Windows without any civic amenities. 3. The assessee entered into a Joint Development Agreement (JDA) in respect of the aforesaid property dated 14.12.2005 with M/s. Vasthushree Developers, a partnership firm (the Developer). As per the JDA, the assessee was to receive 40% of the share of the land of the property and 40% of the super built-up area and proportionate car parking in the premises to be constructed over the old property. The Developer was entitled to 60% of the super built-up area + car parking. It appears that the assessee did not file return of income for the AY 2006-07. The JDA was entered into on 14.12.2005. 4. According to the revenue, by entering into the aforesaid JDA, the assessee had effected transfer of old property and the capital gain on such transfer was liable to be taxed in AY 2006-07. The proceedings u/s. 147 of the Act were initiated by the AO on the basis of copy of JDA which is a registered document, copy of which was in the possession of the AO. The notice u/s. 148 of the Act dated 27.03.2013 was sent to the assessee at Banashankari III Stage address, but the same was retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may also include the land which is the subject matter of transfer. 7. The CIT(Appeals) examined the claim of assessee for deduction u/s. 54 of the Act. There was also a claim made by the assessee before the CIT(Appeals) that a transfer within the meaning of section 2(47) of the Act would take place only in the previous year in which the assessee received her share of built-up area of construction from the builder as per the terms of the JDA and not in the previous year in which the JDA was entered into between the assessee and the builder. This issue was, however, decided against the assessee by the CIT(Appeals) by placing reliance on the provisions of section 2(47)(v) of the Act which deals with transaction involving allowing possession of immovable property to be taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. 8. As far as deduction u/s. 54 of the Act is concerned, the CIT(Appeals) took the following view:- 5.0 a) It is observed that the property sold was a piece of land and the description of the same is clear from the sale deed. Although the appellant has tried to show on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would not be eligible for deduction under Section 54F of the Act as the appellant herself has claimed the same to be a residential house. Further a perusal of the income tax return of the appellant for AY 2007-08 shows that the appellant was owner of a residential house at `BSK 3rd Stage', with a value of ₹ 4,83,100/-. In the statement of affairs as on 31.03.2011 (As enclosed with the return of income for AY 2011-12), the description of this property with value of ₹ 4,83,100/- is given as Houses(Flats) at BSK 3rd Stage. Thus the appellant would not satisfy the conditions laid down in the proviso to section 54F(1) of the Act and such she would not be eligible to claim any deduction under this Section. 10. Apart from the above, the AO adopted the cost of construction of the flats which the assessee was to receive from the builder as 40% of her share by applying the cost of construction rate at ₹ 1,800 per sq.ft. The CIT(Appeals) was of the view that as per clause 9 of the JDA, if the developer and the assessee want to adjust the built-up area over and above their respective shares, consideration for each sq.ft. of built-up area to e adjusted was fixed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee got the property that there was a residential house in the property which was subject matter of JDA. The CIT(Appeals), however, proceeded on the basis that the JDA does not make any reference to any building. We have perused the JDA and we find that the description as given in the schedule to JDA is as follows:- SCHEDULE All the piece and parcel of property bearing Bangalore Mahanagara Palike Old No.66 67, New No.17 situated at Ittamadu Village, Uttarahalli Hobli, Bangalore South Taluk, Bangalore 560 085, now coming under Bangalore Mahanagara Palike Ward No.55, in all measuring East to West : 60'-0 ( Sixty Feet) and North to South : 50'-0 ( Fifty Feet), totally measuring 3000 Sq. Feet or thereabout and bounded on:- EAST BY : Road. WEST BY : Property bearing No.65, NORTH BY : Road, SOUTH BY : Property bearing Nos.61 and 62. 16. From the above description, we cannot come to the conclusion that the subject matter of the JDA is only a land, because the reference is to property bearing Bangalore Mahanagara Palike Old No.66 67, New No.17 situated at Ittamadu Village, Uttarahalli Hobli, Bangalore South Taluk, Bang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement 8 flats are to be put up in that property and 4 flats representing 48% is the share of the assessee and the remaining 52% representing another 4 flats is the share of the builder. So the consideration for selling 52% of the site was 4 flats representing 48% of built up area and the 4 flats are situated in a residential building. The Court held that the 4 flats constitute 'a residential house' for the purpose of sec 54. The 4 residential flats cannot be construed as 4 residential houses for the purpose of sec 54. It has to be construed as a residential house and the assessee is entitled to the benefit accordingly. In that view of the matter, the Court held that the Tribunal as well as the appellate authority were justified in holding that there is no liability to pay Capital Gains tax as the case squarely falls under sec. 54 of the Income Tax Act, 1961. 20. As far as the decision of the Hon ble Madras High Court in the case of V.R. Karpagam, Income Tax Appeal No.301 of 2014. judgment dated 18/8/2014 is concerned, the facts were similar to the case of the assessee. The assessee in the case of V.R.Karpagam entered into an agreement with M for development of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronouncements referred to above, we are of the view that the CIT(Appeals) ought to have allowed deduction claimed by the assessee either u/s. 54 or 54F of the Act. Another aspect which needs to be considered is that the conclusion of CIT(Appeals) that since the assessee did not file return of income making claim for deduction u/s. 54 of 54F of the Act, the same cannot be allowed. On this aspect, we are of the view that the CIT(Appeals) as an appellate authority cannot deny the benefit of deduction which the assessee is entitled to in law. In this regard, the ld. counsel for the assessee has brought to our notice that the decision of the ITAT Mumbai Bench in the case of Dr. Ashwin Balchand Mehta v. JCIT, ITA No.5329 6923/Mum/2012, order dated 06.11.2015, wherein the Tribunal after considering the decision of the Hon ble Bombay High Court in the case of CIT v. Pruthvi Brokers Shareholders Pvt. Ltd., 349 ITR 336 (Bom), held that even if a claim is not made before the AO, it can be made before the appellate authorities. We are of the view that a lawful claim of deduction cannot be denied by the revenue authorities purely on technicalities. Tax is to be levied and collected in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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