TMI Blog2015 (12) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. Denial of exemption u/s. 54F - Held that:- The provisions of Section 54F(3) contemplates that the amount of capital gain arising from the transfer of original asset not charged u/s. 45 on the basis of the cost of such new asset shall be deemed to be income chargeable under the head ‘Capital Gains’ relating to long term capital assets of the previous year in which such new asset is transferred. Consequently, assessee can not denied the deduction u/s. 54F in the year under consideration even if the asset stands sold subsequently. If the asset is sold the consequential action has to be taken in the year of sale. We are of the opinion that the denial of deduction by CIT(A) is not correct and therefore, for computation of deduction u/s. 54F, the matter is restored to the file of AO for working out the capital gains along eligible deduction u/s. 54F to assessee. Decided in favour of assessee for statistical purposes. Direction of the CIT(A) to assess the development of plots as Short Term Capital Gain on sale of plots - Held that:- The order of CIT(A) pre-judges the issue and CIT(A) is not empowered to traverse beyond the year under consideration in appeal. In fact, he has v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant is eligible for the same. 5. The Learned CIT Appeals erred in his finding and working that the Capital Gains arising on the sale of developed plots is to be assessed as short term gains while it has to be assessed as Long term Gains since the appellant was always owner of the plot. 6. The Learned Assessing Officer erred in holding the view that Capital Gains arising on the sale of plots no. 38, 39 and 50 should be assessed as Short term Gains while it has to be assessed as Long Term Gains since the Appellant was always the owner of the plots . 2. Briefly stated, Shri A. Sanjeev Rao, originally purchased agricultural land bearing survey No. 7 at Kondapur Village admeasuring 17 Acres and 7 guntas which was partitioned in a family division. Assessee-HUF along with others have entered into a development agreement with M/s. Bhavya Constructions Pvt. Ltd., on 10th July, 2003 [stated as dt. 05-04-2003 in the order of CIT(A)]. According to the development agreement, 6.08 guntas of land was to be developed into plots and villas and assessee was to get three plots and three houses/villas as per the development agreement. As and when assessee received the villa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Agreement cum GPA] which falls in AY. 2004-05, immediately there after approval from HUDA was obtained on 13-10-2003. Thereafter, plots were ready for allotment and assessee has in fact offered some capital gains in AY. 2005-06 and construction of houses were also started. As rightly held by the Ld. CIT(A), it is evident from the sequence of events that the development agreement was willingly executed and was taken up in right earnst by the developer and work has commenced. Thus, as assessee has handed over the land to the developers and the developer had clearly accepted their willingness to perform and do the development work and had proceeded accordingly, the capital gains arise on the date of development agreement in terms of Section 45 r.w.s. 2(47)(v). The facts are similar to the facts in the case of Potla Nageswara Rao Vs. DCIT [365 ITR 249 (AP)] wherein Hon'ble Jurisdictional High Court analysed and upheld the levy of capital gains in the year of development agreement. It was held: On March 7, 2003, the assessee entered into an agreement with a developer and the plan of the building was approved on March 31, 2003. These dates fell in the previous year 2002-03, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- as sale consideration received and taxed the entire sale consideration, without giving any deduction for cost of land even, as Long Term Capital Gain. This aspect of computation of capital gain was corrected by the Ld. CIT(A) to certain extent but the issue of deduction u/s. 54F was considered by the CIT(A) in his order for the first time. Assessee s contentions were extracted in para 23.2 and 23.3. However, the Ld. CIT(A) did not consider the claim of deduction on the reason that House No. 60 on which appellant had claimed deduction u/s. 54F was completed and handed over after three years, no benefit can be given in AY. 2004-05 on that house. With reference to other two houses, Ld. CIT(A) even though acknowledges that they were constructed within the time, but since assessee sold the houses it was considered that they are hit by the provisions of Section 54F(3) of the Act. Since the acquisition and sale took place in the same year, he was of the opinion that it would not be eligible for deduction u/s. 54F. 5.2. After considering the contentions, we are of the opinion that the opinion of CIT(A) is not correct. Since the capital gains is taxed in AY. 2004-05, and since asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for statistical purposes. 6. Ground Nos. 5 6 pertain to direction of the CIT(A) to assess the development of plots as Short Term Capital Gain on sale of plots. 6.1. As briefly stated above, Ld. CIT(A) while allowing assessee s appeal partly and working computation of capital gain, however went on to determine the Long Term Capital Gain and Short Term Capital Gain in other assessment years, which are not before him. In fact, we are not even aware whether the AO undertaken any proceedings in those years. Therefore, the order of CIT(A) pre-judges the issue and CIT(A) is not empowered to traverse beyond the year under consideration in appeal. In fact, he has virtually fixed how much is the Long Term Capital Gain and how much is the Short Term Capital Gain with out examination by AO or objections from assessee. In the process, the sale of plots allotted to assessee were termed to be Short Term Capital Gain, ignoring his own finding that assessee is owner of the plots and what he has got in bargain was only benefit of development cost, which was directed to be the value for capital gains working as sale consideration. Since assessee is owner of the plots, sale of plots will also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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