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Sri A. Ram Prasad Versus Deputy Commissioner of Income Tax, Central Circle-5, Hyderabad

2015 (12) TMI 132 - ITAT HYDERABAD

Computation of capital gain - CIT(A) taking the date of development agreement as the point of time for accrual of Capital Gains while the assessee has offered the Capital Gains for taxation based on factual accrual of gains in the respective years - Held that:- 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 developm .....

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e brought to tax in AY. 2004-05 and accordingly the ground is rejected.

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, assess .....

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rposes.

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 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 terme .....

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ed in directing the AO to tax the amount as Short Term Capital Gain. Since those years are not before the CIT(A) and the directions given are also not according to the facts, we therefore, set aside the computation of capital gains as was done by the CIT(A) on Phase-2- Table 2, Table 3 and Table 4 and also directions in para 28 for AY 2009-10. However, we make it clear that AO is free to take necessary steps to compute necessary capital gains as applicable in those years without being governed b .....

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has raised the following grounds: 2. The Hon'ble Commissioner (Appeals-VII) erred in taxing the Capital Gains in the AY. 2004-05 taking the date of development agreement as the point of time for accrual of Capital Gains while the assessee has offered the Capital Gains for taxation based on factual accrual of gains in the respective years. 3. The Learned Commissioner held in his finding that the Assessing Officer is within his jurisdiction for invoking the provisions of Section 153C of the In .....

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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 Pv .....

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ed up by the developer. While bringing to tax the capital gains, AO adopted Sub-Registrar valuation and determined the capital gains arising on the sale of 42% of 1/3rd of land at ₹ 7,000/- per sq. yd., totaling to ₹ 2,90,47,200/-. In addition, cost of three houses to be constructed were also brought to tax at ₹ 95,40,000/-, thereby determining the capital gains at ₹ 3.86 Crores. while doing so, AO also denied the claim of 54F made by assessee in investment of houses. 3. .....

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2013 which was extracted by the Ld. CIT(A) in para 8.2 of the order. Assessee also raised additional ground before the Ld. CIT(A) which Ld. CIT(A) admitted and noted that additional ground is only an extension of argument of double transaction of the same transaction. Ld. CIT(A) gave different findings, i) On the computation of capital gain; ii) Year of taxability; iii) Justification of proceedings u/s. 153C and iv) Claim of 54F. In doing so, Ld. CIT(A) in fact computed the capital gains year-wi .....

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the date of development agreement as the point of time for accrual of capital gains. As briefly stated earlier, assessee has entered into development agreement on 05- 04-2003 [10-07-2003 as per the Development 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 .....

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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, relevant to the A.Y. 2003-04. Thus, the Tribunal held that the land being a capital asset was tran .....

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sideration mentioned in agreement for sale had to be taken into consideration for purpose of assessment of income for the assessment year when agreement was entered into and possession was given. In the case of the assessee, factually it was found that both the aspects took place in the previous year relevant to the assessment year 2003-04. Hence, the assessee was liable to pay tax on the capital gains for the assessment year 2003- 04. 4.1. In view of the above, we uphold the order of CIT(A) and .....

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receivable was deemed to have been delivered to assessee and invested in house. Even though, assessee has claimed deduction u/s. 54F on one house, House No. 60 in fact, assessee was eligible for claiming the deduction on three houses, House No. 14, House No. 59 and House No. 60 as they are to be considered as a house, following the co-ordinate Bench decision of ITAT in the case of Vittal Krishna Conjeevaram Vs. ITO [144 ITD 325 (Hyd)] following the principles laid down by the Hon'ble Karnata .....

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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 .....

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ed any monitory consideration, the sale consideration is deemed to have been invested in plots and houses. Consequently, whatever gains is being taxed in this year as Long Term Capital Gain, the same is eligible for deduction u/s. 54F as proportionate consideration stands invested in the house. Provisions of Section 54F(3) are as under: Sec. 54F (1)…………………………………….. (2)………&hellip .....

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the head Capital gains relating to long-term capital assets of the previous year in which such new asset is transferred.] 5.3. As per the above provision, it contemplates that capital gains to the extent claimed as deduction will be brought to tax in the year in which such new asset is transferred. If assessee has sold House No. 14 and House No. 59 in the year 2005-06, in that case, the deduction allowed in the year 2004-05 will be brought to tax in that year along with any other capital gains t .....

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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 de .....

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