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The Income Tax Officer, Chennai Versus Mrs. P.A. Sarala

2015 (7) TMI 832 - ITAT CHENNAI

Exemption u/s 54F - Capital gain - joint development agreement - Since the assessees are having multiple flats as their shares from the builder, the Assessing Officer disallowed the claim under Section 54F - whether gain arises for assessment on transfer of the land by all the assessees along with three others - Held that:- The assessees entered into an agreement and handing over the physical possession of the property to builder allowing it to enjoy 60% of the land in lieu of 40% of the constru .....

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inancial 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. - 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 .....

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mption 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. The Madras High Court, after referring to the amendment made with effect from 1.4.2015, found that the assessee is eligible for exemption under Section 54F of the Act. In view of the .....

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or The Respondent : Sh. P. Rajasekharan, CA ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: All the five appeals of the Revenue relating to independent assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals)-IV, Chennai, dated 29.3.2013 and pertain to assessment year 2009-10. Since common issue arises for consideration in all the five appeals, we heard the appeals together and disposing by common order. 2. Shri P. Radhakrishnan, the Ld. Departmental Representa .....

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three others entered into another agreement to extend the period of joint venture agreement for a period of twenty four months, on 1.7.2008. In the statement filed along with return of income, the assessees claimed that the sale consideration of the property was only to the extent of ₹ 59,02,664/-. 3. The Ld. D.R. further submitted that as per the joint development agreement, the assessees are entitled for 40% of the constructed area and the builder is entitled for 60% of the constructed .....

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he 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 .....

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d the CIT(Appeals) directed the Assessing Officer to consider the date of completion of the construction of flats and its handing over to the assessees as the date of transfer for the purpose of determining the capital gain. According to the Ld. D.R., since the assessees entered into a revised agreement dated 1.7.2008 with the builder for extending the joint venture agreement which falls in the financial year 2008-09, relevant to the assessment year 2009-10, capital gain has to be assessed only .....

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he land are having equal share in the land. As per the development agreement, the builder M/s Shanmuga Construction Services has to construct the building at its cost and 60% of the constructed area would be retained by the builder, namely, Shanmuga Construction Services, and 40% of the constructed area would be given to the assessees in lieu of proportionate 60% of the land area that would be given to the builder, Shanmuga Construction Services. Therefore, according to the Ld. representative, t .....

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ted that the builder was authorized to execute sale deeds in favour of prospective purchasers in respect of the constructed area of the land which was given to it and apply for local authorities like Corporation, Chennai Metropolitan Development Authority, etc. for planning 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 extensio .....

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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 60% of the area of the land. .....

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amended, which will come into effect only from 1.4.2015, which makes it clear that benefit of Section 54F of the Act will be applicable to construction of one residential house in India and that clarifies the situation in the present case, i.e. post amendment from 1.4.2015, the benefit of Section 54F will be applicable to one house in India. Prior to the said amendment, it is clear that a residential house would include multiple flats/residential units. Since these appeals belong to assessment y .....

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the agreement clearly says that the first party, namely, the assessees and three others shall hand over the possession of the property to the builder, namely, Shanmuga Construction Services. The period provided in the agreement is 18 months for completion of the construction. The agreement has provided for execution of the Power of Attorney in favour of the builder to enable him to deal with property for getting approval of concerned Government authorities and sale of the same to the prospective .....

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f 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 .....

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a business carried on by him, such conversion or treatment ;] [or] [(iva) the maturity or redemption of a zero coupon bond; or] [(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other as .....

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asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;] 10. Section 2(47)(i) of t .....

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. Therefore, it is an exchange of property between the parties. In other words, the assessees exchanged 60% of the landed area for 40% of the constructed area. Therefore, there is a transfer within the meaning of Section 2(47) (i) of the Act on the date on which the agreement dated 8.12.2006 was executed. Even otherwise, the joint venture agreement has the effect of transferring 60% of the landed area to the builder. The assessee cannot take back 60% landed area on which the builder has commence .....

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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. Th .....

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in which the construction was completed and the constructed area was handed over to the assessees. Accordingly, we hold that no capital gain arises for assessment in the year under consideration. 12. Now coming to the issue of exemption under Section 54F of the Act, the assessees 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 f .....

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