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TMI Blog2020 (9) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Income Tax (Appeals)-58, Mumbai [in short CIT(A) ] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The grounds of appeal filed by the assessee read as under: 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in confirming the denial of exemption u/s. 54 of the Act and consequently adding Long term capital gain of ₹ 22,75,000/-- treating the same as ''Income from Other Sources . 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in not accepting the letter of allotment, ignoring the fact that the appellant acquired the right of ownership in the flat, which came into existence by virtue of allotment letter dated 10.01.2005 and also by the receipts of payments of ₹ 10,00,000/- and ₹ 20,00,000/- both dated 10.01.2005, issued by the builder viz., Vardhaman Estate Corporation. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in confirming the Income from Other Sources at ₹ 22,75,000/-, instead of ₹ 18,75,000/- by adopting the compensation received against cancellation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer (AO) asked the appellant to explain why the benefit received on cancellation of deal with the builder i.e. Vardhaman Estate Corporation with respect to property at Vardhaman Heights, Byculla, Mumbai should not be treated as income from other sources, instead of long term capital gains, as no purchase as well as sale agreement has been entered into by the assessee with the builder. In response to it, the appellant vide letter dated 20.03.2015 explained to the AO that a capital asset in the form of interest in the flat came into existence by virtue of allotment letter issued by the builders, M/s Vardhaman Estate Corporation, when payment was made of ₹ 10,00,000/- on 08.01.2005. However, the AO was not convinced with the above explanation of the assessee and came to a finding that the gain which the appellant received from the builder on cancellation of deal has resulted in benefit of compensation of ₹ 18,75,000/- and the same is nothing but income from other sources. Further on analysis of the bank account of the appellant, the AO noticed that the assessee has actually received from the said builder total amount of ₹ 52,75,000/- on the following dates : 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that during the year under consideration, the appellant cancelled the booking of the aforesaid flat vide cancellation letter dated 12.09.2011. Against the cancellation of booking of the flat, the appellant received consideration of ₹ 48.75 lakhs from the builder and since the period of holding of the appellant s rights in the said flat exceeded 36 months, the assessee treated the gain on surrender of the rights in the said flat as long term capital gains. Further, it is stated that the appellant purchased a residential flat at Lodha Primerro for ₹ 1,01,95,357/- and claimed exemption u/s 54/54F of the Act and therefore, no capital gain is chargeable to tax. The Ld. counsel further submits that the AO has incorrectly computed compensation at ₹ 52.75 lakhs instead of ₹ 42.75 lakhs, the details of which are as under : 1. On 13/09/2011 ₹ 25,00,000/- 2. On 16/09/2011 ₹ 10,00,000/- 3. On 26/11/2011 ₹ 17,75,000/- Total ₹ 52,75,000/- Less : Receipt of excess amount returned to the Builder on 16.12.2011 (₹ 4,00,000/-) Net Consideration received ₹ 48,75,000/- Also it is explained that in the light of provisions of section 2(14) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he building upto 17th floor. Under such circumstances, the assessee surrendered the right to receive the flats and the builder cancelled the allotment of the above flats and agreed to pay the compensation for an amount of ₹ 1,10,00,000/- on account of surrender of such flats. In addition to the above, the builder transferred the initial advance of ₹ 50,00,000/- to the new flat in the same project which the assessee agreed to buy. The assessee then invested the said money to acquire a flat in the same project on the 3rd floor for ₹ 1,53,03,800/- vide agreement dated 28.02.2012 registered on 29.02.2012. The AO did not accept the claim of the assessee and treated the compensation on surrender of flats amounting to ₹ 1,10,00,000/- as income from other sources. On appeal by the assessee, the Ld. CIT(A) accepted his claim. On appeal by the Revenue, the Tribunal held as under : The CIT(A) accepted the claim of the assessee vide Para 3.3 and deleted the addition by observing as under: - 3.3 I have considered the appellant's submissions. Appellant was allotted 3 flats in B-wing of Shubh Residency, D.N. Nagar, Andheri, on 20.6.2008. Appellant had acquired right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et and cost of improvement was not deductible - Whether since right of acquiring of property by assessee amounted to capital asset, improvement cost was eligible for exemption alongside cost of investments - Held, yes [in favour of assessee]. In the above CBDT circular and also in the above case it is held that surrendering of allotment of flat has to be considered as a right in property which is a capital asset and any capital gain arising from that capital asset and if appellant purchases new flat then appellant is eligible for exemption u/s 54. Here in this case appellant had already obtained allotment letter for the 3 flats in Shubh Residency. Later, after 3 years it was surrendered and appellant had earned a differential surplus amount of ₹ 1,10,00,000/- after indexation of capital gain by the appellant of ₹ 92,56,014/- and after surrendering the first property appellant purchased another property on which appellant had claimed exemption u/s 54 for ₹ 92,56,014/-. In view of the above Delhi High Court decision, appellant is eligible for claiming of exemption u/s 54 of the Act. Hence, AO is directed to compute the surplus amount received from surrender of flat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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