TMI Blog2017 (4) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... the property in question is a commercial property, which is not entitled for exemption u/s 54F of the Act. The CIT(A), after considering the relevant facts, and also by following certain judicial precedents has rightly directed the A.O. to allow exemption claimed u/s 54F of the Act. We do not find any reasons to interfere with the order of the CIT(A). Hence, we uphold the CIT(A) order and reject the ground raised by the revenue. Computation of long term capital gain in pursuance of joint development agreement and adoption of consideration for transfer of property - Held that:- Once the issue has been decided that the assessee is eligible for exemption u/s 54F of the Act, in respect of all the flats, the other issues, i.e. computation of capital gains and adoption of guidance value for the purpose of determination of capital gain becomes academic, as the assessee is eligible for exemption towards all the flats received in pursuance of a joint development agreement and hence computation of capital gain and adoption of guidance value for the purpose of determination consideration has no impact on the total income. Clubbing of income of the minor children in the hands of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ratio 17:23. The agreement with the builder for development and construction of flats is in the nature of transfer within the meaning of section 2(47) r.w.s. 53A of the Transfer of Property Act, 1882 and also fact that the assessee has not admitted resultant capital gain on transfer of land in pursuance of joint development agreement in the return of income filed on 22.2.2010, a notice u/s 148 of the Act, was issued to the assessee on 20.4.2011 requiring the assessee to file return of income for the assessment year 2009-10. Meanwhile, the assessee has filed a revised return on 18.5.2011 admitting total income of ₹ 4,35,260/- as against income admitted in the original return of ₹ 4,28,790/- besides declared agricultural income of ₹ 1 lakh. The assessee also filed a letter on 18.5.2011 stating that the return filed on 18.5.2011 may be treated as return filed in response to notice issued u/s 148 of the Act. 3. Subsequently, the case has been selected for scrutiny and accordingly, notice u/s 143(2) of the Act was issued. In response to notice, the authorized representative of the assessee appeared from time to time and furnished the information as called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the above decisions submitted that in case of joint development agreements, if property is given for development, the assessee is eligible for deduction u/s 54F of the Act on all the flats received in pursuance to joint development agreement, even if the flats are located in different floors. 5. The A.O. after considering the explanations of the assessee and also referring to certain judicial precedents, held that as per the provisions of section 2(47)(v) of the Act, transfer includes any transfer involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Since, the development agreement entered into with the developer is in the nature of transaction allowing possession of any immovable property, which comes under the definition of transfer as defined u/s 2(47) r.w.s. 53A of the Transfer of Property Act, 1882 and hence, capital gain is chargeable on the transaction. The A.O. further observed that in so far as computation of capital gain on flats received in pursuance of joint development agreement, the A.O. has adopted cost of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the status and observed that the assessee s family was consisting of assessee and her two children and accordingly, the claim of HUF status is in order. The CIT(A) further observed that the A.O. was erred in determining the assessee s status as individual, ignoring the fact that the property in question was inherited from the assessee s ancestors and hence the assessee has rightly claimed the HUF status. In so far as computation of long term capital gain towards share of constructed flats, the CIT(A) observed that as the land belongs to the assessee, it would not form part of the consideration received from the builder, hence, its value needs to be deleted from the capital gains as worked out by the A.O. 8. In so far as claim of exemption u/s 54F of the Act, the CIT(A) observed that it has to be stated here that it is not relevant to refer to the agreement between builder and the future tenant to decide whether the property is residential or commercial. The flats were allotted to site owner by the builder on the basis of agreement and let out by the owner to the tenant. The A.O. has not brought on record any agreement between the assessee and tenant to prove that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. The D.R. further submitted that the Ld. CIT(A) erred in allowing exemption u/s 54F of the Act, as the assessee got his share of flats in different blocks and each block consist separate residential units having separate entrances and by no stretch of imagination, constitute a single residential unit. 10. On the other hand, the Ld. A.R. for the assessee strongly supported the order passed by the CIT(A). The A.R. further submitted that the CIT(A) has rightly allowed exemption u/s 54F of the Act, in respect of flats received by the assessee in pursuance of joint development agreement, as the legal position prior to the amendment of section 54F of the Act by the Finance Act, 2014 w.e.f. 1.4.2015 is very clear on the eligibility of exemption towards all flats received in pursuance of joint development agreement. The A.R. referring to the decision of Hon ble High Court of Madras, in the case of CIT Vs. Gumanmal Jain in TCA No.33 of 2017 (2017) 98 CCH 0093 (Chennai HC) submitted that when the assessee received his share of flats in pursuance of joint development agreement, the assessee is eligible for all the flats, even if flats/apartments are in different blocks and different tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (supra), wherein the Hon ble High Court observed that all the flats are a product of one development agreement of the same piece of land being said land, hence even if flats are in different blocks and different towers, as long as they are in same address/location, it does not disentitle the assessee from getting the benefit of section 54F of the Act. In yet another case, the Hon ble High Court of Madras in the case of CIT Vs. V.R. Karpagam (2015) 373 ITR 127, held that prior to amendment u/s 54F by Finance Act, 2004 w.e.f. 1.4.2015, with regard to word a , a residential house include multiple flats/residential units, where under the development agreement assessee was entitled to receive certain built-up area, which got translated into five flats, exemption u/s 54F in respect of five flats in a multi-storey construction would be available. 13. Thus, the legal proposition before the amendment of section 54F of the Act, by the Finance Act, 2014 w.e.f. 1.4.2015, in the case of development agreement, is very clear that if the land owner receives number of flats, even though they are located in different blocks and different towers, once they are in same address/location and all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital gain becomes academic, as the assessee is eligible for exemption towards all the flats received in pursuance of a joint development agreement and hence computation of capital gain and adoption of guidance value for the purpose of determination consideration has no impact on the total income. 16. In so far as clubbing of income of the minor children in the hands of the assessee, we are of the view that even though section 64(1)(a) of the Act, applies for clubbing of income of minors in the hands of the assessee, before clubbing of income, the normal procedure for computation of capital gain has to be adopted. Therefore, before arriving at net income for the purpose of clubbing in the hands of the assessee, the deduction available u/s 54F of the Act has to be considered separately in the hands of the minor children. The CIT(A) has rightly considered the issue and we do not find any reasons to interfere with the order of the CIT(A). Accordingly, we uphold the CIT(A) order and reject the ground raised by the revenue. 17. In the result, the appeals filed by the revenue in ITA Nos.498, 499 500/Vizag/2013 are dismissed. 18. The assessee has filed cross objections in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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