2021 (1) TMI 213 - AT - Income Tax

Entitlement to deduction u/s 54 - built-up area received from the builder as per the JDA - (LTCG) arising from Joint Development Agreement (JDA) - HELD THAT - In the present case all the flats for which the assessee is claiming exemption u/s 54 of the I.T.Act are situated in the same premises. Therefore the judgment rendered in the case of Smt.K.G.Rukminiamma 2010 (8) TMI 482 - KARNATAKA HIGH COURT will squarely apply. In the light of the above judicial pronouncements on identical facts we are of the view that the assessee is entitled to deduction u/s 54 of the I.T.Act on the entire built-up area received from the builder as per the JDA dated 28.04.2008.

Summary

Issues:
Reopening of assessment for assessment year 2009-2010 based on Long Term Capital Gains (LTCG) arising from Joint Development Agreement (JDA) executed in 2008.
Taxability of LTCG in assessment year 2009-2010.
Claim of deduction u/s 54 of the Income Tax Act for the entire built-up area received from the builder as per the JDA.

Reopening of Assessment:
The Assessing Officer issued a notice u/s 148 for reopening the assessment year 2009-2010 due to the JDA executed in 2008. The assessee argued that the possession of the property from JDA was received in 2012-2013, and thus, the capital gain was admitted in that year. The assessee contended that there was no transfer u/s 2(47)(v) during 2009-2010. However, the AO rejected these objections, citing various conditions indicating transfer of control to the developer and invoking sec.53A of the Transfer of Property Act, 1882. The AO concluded that the contract implied transfer of ownership rights, making 2009-2010 the year of chargeability.

Taxability of LTCG:
The AO held that all conditions for transfer under Chaturbuj Dwarkadas Kapadia's case were satisfied, and the income was chargeable in 2009-2010. The AO also denied exemption u/s 54 for the entire built-up area except for the self-occupied flat. The CIT(A) upheld these findings, leading the assessee to appeal to the Tribunal. The Tribunal referred to similar cases where deductions were allowed for multiple flats in a single premises. Relying on these precedents, the Tribunal held that the assessee was entitled to deduction u/s 54 on the entire built-up area received from the builder, thereby partly allowing the appeal.

Claim of Deduction u/s 54:
The CIT(A) rejected the claim of deduction u/s 54 for the entire built-up area, following a Special Bench order. The assessee contended that if the deduction was allowed, other issues raised in the appeal would become academic. The Tribunal, considering judicial pronouncements, concluded that the assessee was entitled to deduction u/s 54 for all the flats received under the JDA. As a result, the Tribunal did not adjudicate on other issues raised by the assessee, ultimately partly allowing the appeal.

In conclusion, the Tribunal's judgment partly allowed the appeal by the assessee, granting the deduction u/s 54 of the Income Tax Act for the entire built-up area received from the builder as per the JDA. This decision was based on precedents where deductions were allowed for multiple flats in similar scenarios. The Tribunal's ruling highlighted the importance of legal interpretations and precedents in tax matters, ultimately providing relief to the assessee in this case.