TMI Blog2018 (5) TMI 1887X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,00,000/- to new flat in the same project which the assessee agreed to buy - HELD THAT:- The facts clearly show that the extinguishment of assessee s right in Flat No. 1703, 1704 and 1705 proposed building known as shubh Residency allotted vide allotment letter dated 20.06.2008 is actually extinguishment of any right in relation to capital asset in view of the provisions of section 47 of the Act and falls in the definition of transfer and hence, result in capital gain chargeable under section 45 of the Act. It is a fact that assessee held this right for more than 3 years for a reason that this flats were subject to allotment vide allotment letter dated 20.06.2008 and assessee received compensation of ₹ 1.10 crores and in lieu of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is against the order of CIT(A) accepting the claim of the assessee that extinguishment of rights in the capital asset is a transfer of capital asset and directing the AO to assessee the same as capital gains and consequent allowance of claim of deduction under section 54 of the Act. For this Revenue has raised the following grounds: - a. Whether the Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee by accepting the claim of the assessee that there involved a transfer of a Capital Asset, without appreciating that for creating any right in a Capital Asset, the Asset should first be in place, which is not the case here as at no point of time, the asset was allowed to be built or even pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the said flats, when there was no necessity or legal requirement to pay any such compensation as the rights, if any, had already been surrendered by the assessee without seeking any compensation for the same. e. Without prejudice to the above, whether the Ld.CIT(A) has erred on facts and in law in allowing the appeal of the assessee by accepting the claim of the assessee u/s 54 of the Act, without realizing that provisions of section 54 applies to the transfer in a non-existing asset. f. Whether the Ld. CIT(A) has erred on facts and in law in allowing the appeal of the assessee and thereby failing to consider the substance of the case wherein the assessee has advanced loan to the Developer and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the above, builder has transferred the initial advance of ₹ 50,00,000/- to new flat in the same project which the assessee agreed to buy. The assessee then invested the said money to acquire Flat No. 301/305 in the same project at 3 floor in the 8-Wing of Shubh Residency admeasuring 1500 sq. ft. @ 10200/sq. ft. at ₹ 1,53,03,800/- vide agreement dated 28.02.2012 registered on 29.02.2012. The above facts result in extinguishment of assessee s right in Flat No. 1703/1704/1705. As per Sec 2(47) of the Act, extinguishment of any right in relation to capital asset falls in the definition of transfer and hence will result in the Capital Gain chargeable to tax under section 45 of the Act. Since the above right was held for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant states that by paying the advance for the flats and obtaining allotment letter on 26.6.2008 they have acquired the right to the property and right to property is capital asset and when it is transferred and if any surrender amount is received it has to be assessed under capital gain. Appellant is of the view that AO's observation that as builder has not build the flats it does not come under the purview of extinguishment of rights u/s 2(47)(ii) of the act is erroneous and according to the appellant as he has paid advance for the flats and acquired right to the proposed flats, this will come under the purview of acquiring right to the property. Appellant has relied on CBDT Circular No.471 dated 15.10.1986 where it is held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Shubh Residency. Later, after 3 years it was surrendered and appellant had earned a differential surplus amount of ₹ 1,10,00,000/- after indexation of capital gain by the appellant of ₹ 92,56,014/- and after surrendering the first property appellant purchased another property on which appellant had claimed exemption u/s 54 for ₹ 92,56,014/-. In view of the above Delhi High Court decision, appellant is eligible for claiming of exemption u/s 54 of the Act. Hence, AO is directed to compute the surplus amount received from surrender of flat as capita' gain and also allow exemption claimed by the appellant u/s 54 in view of the above case Law and CBDT's circular. Hence, AO's addition of ₹ 1,10,00,000/- is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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