TMI Blog2018 (2) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... f proportionate un-divided share of land and short term capital gain on the sale of super structure/flat can only be brought to tax in the year under consideration. Accordingly, AO is directed to re-work out the capital gains only that extent and the share of assessee, Dr. Sudhir Naik in that can only be brought to tax in his case. Claim of 54F/54 - contention that assessee has sold all the flats allotted to him and therefore, at the time of investing in the new house, he has no other house except this house - Held that:- As seen from the agreements all the apartments received in the development agreement would become one house technically, even though they are of independent units. But, when the claim is made, it was the contention of assessee that all those flats were sold. Therefore, assessee does not own any other house, except the house in which he has invested. This aspect has not been considered by the AO or by the CIT(A) in the correct perspective. Therefore, this matter has to be re-examined by the AO keeping in mind the date of sale of various apartments and the claim u/s. 54F/54. Accordingly, the ground is considered allowed for statistical purposes. - ITA No. 1463, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have sold some of the areas to which they were entitled to. In the process Assessee, Dr. Sudhir Naik has sold all the area available to him as per the development agreement. Like-wise, other members also have sold areas available to them. The developers have finally handed over the completed project in January 2003, as per the final agreement dt. 06-01-2003. Assessees herein have filed returns admitting NIL capital gains after claiming certain deductions u/s. 54F/54. The issue in these appeals is with reference to computation of capital gains and claim of deduction u/s. 54F. 3. For detailed discussion, the facts in the case of Dr. Sudhir Naik are discussed which also equally apply to all other persons, as they have common share in the property and assessment orders are identically passed. ITA Nos.1463/Hyd/2016 1467/Hyd/16 Dr. Sudhir Naik (HUF): 4. Assessee-HUF declared total income of ₹ 2,45,240/-and declared long term capital gain of ₹ 19,53,754/- before claiming exemption u/s. 54F and net capital gains were declared at NIL. During the course of proceedings, assessee offered revised computation of long term capital gains which was increased to ₹ 29,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in ITA Nos.266 and 222/Hyd/05 dated 24.10.08. In the entire proceedings, due opportunity of being heard be given to the assessee. 6. In the re-assessment proceedings, AO completed the assessment more or less on the basis of the original assessment, however, bifurcating the long term capital gains and short term capital gains. It was the contention of assessee that AO is bound to follow the directions of the Tribunal and compute the income following the principles laid down in the case of Dr. Maya Shenoy Vs. ACIT in ITA Nos. 266 222/Hyd/2005 dt. 24-10-2008 [23 DTR 140]. It was the contention that the long term capital gain on transfer of land for development does not pertaining to the year under consideration and only long term capital gain/short term capital gain on the sale of flats during the year can only be considered for computation and accordingly, the directions of ITAT have not been followed. 7. Before the Ld.CIT(A), assessee has raised grounds, mainly on the working of long term capital gain and short term capital gain and also the claim of 54F. It was also contended that AO has mis-directed himself in not following the directions of ITAT, particularly, the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in support of its claim during the course of assessment proceedings: I have purchased a residential house, bearing No.8-2293/82/A (Plot No.120 New), Road No.l0, Jubilee Hills, Hyderabad through sale deed dated 08-07-2002 for a consideration of ₹ 1,00,00,000/-, ₹ 8,00,000/- as Stamp Duty and ₹ 5,50,000/- as registration expenses. During the course of assessment proceedings, the Applicant submitted that to claim deduction U/s.54F, he has purchased a portion of residential house at Gowliguda, Hyderabad from Smt. Nalini Prabhakar for ₹ 14,75,505/- on dated 29-04-2002. To sum up, the Applicant has already flats in Vidyanagar Complex and also purchased property in Jubilee Hills and Gowliguda, Hyderabad. The Applicant has not fulfilled second criteria. Therefore, in no way the Applicant is eligible for exemption U/s.54F . 8. In the meantime, AO after passing the assessment order realised that the development agreement has taken place in the year 1994 and accordingly, allowing the indexation cost for the year 2003-04 was not correct and after giving an opportunity, revised the computation by taking the indexation cost for some portion in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) is liable to be quashed along with cost u/s. 254, as the order is passed in contravention of directions of the Hon'ble Tribunal . Ground Nos. 1 5 are general in nature. 10. In the course of proceedings, assessee has raised additional ground, which is as under: Without prejudice to the above ground and without accepting, at best the AO could have brought to tax the capital gains on sale of five flats jointly sold by the two groups of the HUF and could have assessed only the share that is falling to the assessee and ought to have allowed the deduction u/s. 54 . 11. Ld. Counsel submitted that the ITAT has clearly directed the AO to follow the principles laid down in the case of Dr. Maya Shenoy Vs. ACIT (supra), wherein the Hon ble Bench has clearly held that (i) the capital gain on transfer of land in a development agreement will arise in the year of agreement, provided the agreement is fulfilled subsequently (ii) sale of property which was received in lieu of development agreement would be a separate capital gains transaction. Ignoring the above direction of the Tribunal, it was the contention that AO brought to tax the long term capital gain ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 413 767.74 5,50,000 11 06-02-2003 Shashikanth Bagoji 514 894.20 5,48,000 12 07-03-2003 S. Prabhakar Shailaja 519 1208.99 7,11,000 13 27-03-2003 Seetharam Singh 503 1157.12 6,00,000 14 21-05-2003 K. Balraj Goud 213 767.74 5,50,000 15 12-09-2003 R. Vyakunta Uma 113 767.74 5,00,000 16 16-04-2004 Urunda Dattatreya 414 894.20 5,50,000 11.2. It was the submission that only five flats sold to Ramsetty Viday Rani, R. Uma Vyakunta, Shashikanth Bagoji, S. Prabhakar Shailaja and Seetharam Singh, at Sl. Nos. 9, 10, 11, 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, referred to the computation filed by assessee in the course of assessment proceedings and the return filed to submit that assessee has voluntarily offered the capital gains in the year, therefore, AO followed the same in bringing to tax the capital gains. Ld. DR defended the orders. 13. I have perused the rival contentions and various orders on record. I also notice that Ld.CIT undertook proceedings u/s. 263 on the so called compensation receivable as per the agreement, which proceedings were set aside by the ITAT as they are not arising from the impugned assessment order. It is also surprising to see that AO has passed modification order, restricting the cost of indexation to the years 1993-94 and 1994-95 which clearly demonstrates that AO is aware that the property was given on development, not in the impugned assessment year but much earlier. The principles laid down in the decision of Dr. Maya Shenoy Vs. ACIT (supra) with reference to working of capital gains is as under: The moment the transferee gets the right to make use of the land or to enjoy its usufructs, the transfer is complete. Under the TP Act, if the intention is that property should pass on regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to tax in the year in which the transfer took place. Since the transfer took place in December, 1999, the capital gain is chargeable to tax in the asst. yr. 2000-01. It was contended by the counsel that if the taxable event was the entering into the development agreement, which was in 1995, then also there would be no tax liability as no consideration was received in that year. What the assessee had received was merely a right to receive 4-1/2 flats which were not in existence at the time of entering into agreement. The same argument may be raised by him in connection with asst. yr. 2000-01. Well, it is well established that it is enough if the assessee has received the right to receive the consideration. It may be quantified later or it may be received later, but these factors do not retard or stall the accrual and hence the gain has to be taxed in the year of its accrual only. Capital gains accrued in the previous year relevant to asst. yr. 2000-01. May be, the AO might have had to resort to estimating the consideration but the same would have been subject to modification later. Thus, the capital gain arising on the transfer of land is not chargeable to tax in asst. yr. 2001-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion : Assessee owner of land having parted with possession of land under a development agreement for construction of flats having handed over possession of vacant land to developer on promise to be handed over 45 per cent of constructed area, it was a case of transfer by exchange within the meaning of s. 2(47)(i); property was handed over in part performance under s. 53A of the TP Act and it could not be said that the transaction was without consideration; possession of land being handed over to developer only in December, 1999, the transfer took place in December, 1999, hence capital gain accrued and was chargeable in asst. yr. 2000-01 and not in asst. yr. 2001-02; transfer of land and transfer of flats allotted in consideration of transfer of land are two transactions and not one for purposes of charge of capital gains . 13.1. The same principle regarding year of taxability was upheld by the Hon ble AP High Court in the case of Potla Nageswara Rao vs. DCIT (supra), wherein it was held that: 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 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4. As far as the sale in Block-B is concerned, as per the details the capital gains arise in AYs. 2002-03, 2003-04 and 2004-05. As stated by the Ld. Counsel for assessee, only five flats in Block-B are sold in financial year relevant to the impugned assessment year. Therefore, any long term capital gains in those five flats on sale of proportionate un-divided share of land and short term capital gain on the sale of super structure/flat can only be brought to tax in the year under consideration. Accordingly, AO is directed to re-work out the capital gains only that extent and the share of assessee, Dr. Sudhir Naik in that can only be brought to tax in his case. 13.5. Another contention is about claim of 54F/54. It was the contention that assessee has sold all the flats allotted to him and therefore, at the time of investing in the new house, he has no other house except this house. As seen from the agreements and the principles of law involved, all the apartments received in the development agreement would become one house technically, even though they are of independent units. But, when the claim is made, it was the contention of assessee that all those flats were sold. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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