TMI Blog2019 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... y the builder or on account of the reason for delay in allotment/construction of the flat, which are not attributable to the assessee. Undisputedly, the assessee had invested the amount for purchase of flat pursuant to illegally binding agreement. However, on account of withdrawal of NOC by HAL, project could not be completed and the flat was not allotted to the assessee. Section 54F is a beneficial legislation and has been inserted with a view to promote investment of the long term capital gains in the building of residential premises. On account of technical reasons, as mentioned above or on account of fraud or unscrupulous activities of the builder where said residential units without having proper clearance (not disclosed to the assessee at the time of booking or subsequent thereto) cannot be made a ground for denial of benefit of section 54F. In our view, the assessee is entitled to benefit of section 54F. However, on account of interdiction by Karnataka High Court, the possession had not been handed over to the assessee. We may fruitfully apply the mechanism that no order of the court was intending to harm any person. For no fault of the assessee, the assessee cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court directed the Chalet Hotel Pvt. Ltd not to carry out construction above 40 mtr. And the construction already made was subject to decision of the writ petition. On account of the Court order, construction of building beyond 10th floor was stayed by the Hon'ble High Court. Thereafter the company by letter dtd. 25.04.14 made a mitigation program requesting the customers either to exit from the purchase agreement beyond 10 floor or to agree for relocation of flat below 10th floor. The applicant thereafter by letter dtd. 23.05.14 opted for relocation of the flat in lieu of old location within 10 floor in the building and the location process of the flat is in process. Thus the allotment of flat as per writing dtd. 07.01.2011 still stands. Thus, it is clear the assessee has done all the efforts to procure possession of the flat from the builder against the payment of full sale price, but it was beyond control of assessee due to stay order of High Court, on account of which possession could not be delivered to assessee in time. However, the structure of the building up to 17th was already constructed by builder in time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OU, the builder was to deliver the possession of the flat by 30.07.2013. 2.3 After entering into the said agreement and after making the payments of ₹ 1,80,44,590/-, the assessee learnt that Hindustan Aeronautical Ltd. (HAL) earlier had issued a No Objection Certificate (NOC) on 28.10.2010. However, the said NOC was cancelled by the HAL vide their communication dated 16.08.2011. 2.4 Feeling aggrieved by the cancellation of NOC granted by HAL, the builder, namely, Chalet Hotels Pvt. Ltd. had preferred a writ petition before the Karnataka High Court at Bangalore vide W.P. No. 37571 of 2013. It was stated at Bar by the counsel for the assessee that the said writ petition is still pending adjudication and is now fixed for 24.07.2019. 2.5 It was the case of the assessee that on account of the matter being subjudice before the High Court of Karnataka (Revocation of NOC by HAL), the builder had not allotted flat No. E-1601, 16th Floor, Vivarea, at Koramangla Industrial Layout, Bangalore as per MOU. Till date, the possession is not given to the assessee on account of the court order and pendency of petition of the builder before the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 15.10.1986 and 16.12.1993 which have been relied upon by the Ld.AR for the appellant. 7.1 The assessee can derive no benefit from the provisions of circular No. 672 dated 16th December, 1993 in as much as the scheme contemplated in paragraph 2 of circular no. 471 is not available to the appellant. The appellant has not filed any allotment letter during appeal proceedings which confer title until the agreement for sale is registered. In the present case, however, it is not in dispute that no agreement for sale is registered. In the present case, however, it is not at dispute that the no agreement for sale was entered into within the period of three year from the date of sale of old residential house. Moreover, the developer had no approval for construction above 10th floor wherein the asseseee had booked his flat, as also Hon'ble Karnataka High Court stayed the construction above 40 meters. Thus, apparently the appellant has invested in a flat which was never to be allotted to the assessee in those apartments. It is also equally true that the in the reallocation plan also, the appellant did not get the flat within the stipulated time i.e. 15.04.2014. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the long term capital gain arose in favour of the assessee, the assessee had invested whole of the long-term capital gain in purchase of residential flat pursuant to MOU entered between the assessee and the builder. There was no mistake on the part of the assessee for investing in the said tenement where specific flat was allotted to the assessee by the builder. It was submitted that the MOU may not be nomenclatured as agreement to sale or allotment letter, but all the pre-requisite of a binding agreement and allotment of flats were there in the MOU dated 07.01.2011. It was further submitted that the said MOU was legally enforceable and on account of interdiction by the Karnataka High Court, the possession of the flat was not handed over to the assessee by the builder. The assessee has complied with the provisions of law and therefore, the benefit of 54F should be granted to the assessee. It was submitted that the delay in handing over the possession of the flat was on account of stay granted by Karnataka High court and pendency of writ petition for cancellation of NOC by HAL. The ld. AR relies upon the decision of Hon ble Supreme Court in the matter of Sanjiv Lal vs. CIT, 365 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PORT TO BE AN AGREEMENT FOR SALE. (a) Possession of the captioned Apartment shall not be transferred and is not being transferred nor is it being agreed to be transferred to me/us on the basis of this writing. I/We further confirm that possession of the captioned Apartment shall be handed over to me/us only as provided in the proposed Agreement for Sale and simultaneous with the execution of the Deed of Apartment. ONLY AN OPTION - TO EXERCISE THE RIGHT. (b) This writing is not and does not purport to be and shall not be deemed to be an Agreement for Sale in as much as the purpose of this writing/arrangement contemplated herein is, to reserve the said premises for me/us as and by way of an option to be exercised by me/us exclusively prior to entering into and executing the Agreement for sale, as envisaged herein. Consequently, I/we shall under this writing be deemed to have acquired a right only to exercise the option and enter into, execute and register the purposed Agreement for Sale with you in respect of the said premises on fulfillment of the terms and conditions recorded in this writing. Page 12 MOU : Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternative, it was submitted that the MOU is neither a titled document nor sale agreement in favour of the assessee. It was submitted that the assessee is not entitled to any relief from this Tribunal. 7. We have heard the rival contentions and perused the record. The undisputed facts before us are as under : (i). The long term capital gain of ₹ 91,95,570/- was accrued to the assessee on account of sale of residential plot. (ii). It is also not in dispute that the assessee had entered into a MOU on 07.01.2011 with the builder Chalet Hotels Ltd. (iii). It is also not in dispute that by MOU, the assessee was given flat No. E- 1601, 16th Floor, Vivarea, at Koramangla Industrial Layout, Bangalore. (iv). It is also not disputed that pursuant to MOU, the assessee made huge investment of ₹ 1.80 crores in the said residential flat. (v). The NOC initially granted by HAL was recalled by it by subsequent letter dated 16.08.2013. (vi). The Karnataka High Court has granted stay (as recorded by the AO) for not allotting the flat. 7.1 In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty out of sale consideration. 7.2 From the perusal of the above, it is clear that as the builder failed to adhere to the timeline given in the MOU. The Assessing Officer has denied the benefit of section 54F. It was not the case of the Assessing Officer that the assessee has not booked the flat with the builder. It is also not the case of the Assessing Officer that he has not made the payment to the builder in time. It is also not the case of the Revenue that there was no stay by the High Court and the matter is not sub-judice before the High Court. The only reason given by the AO is that in case the writ petition is disallowed and the relief sought is declined then the assessee would not be entitled to flat. In our view what is required to be seen is intention of the assessee at the time of making the investment in the building project. If there was no inhibition or embargo at the time of investment, at that time the assessee was entitled to the title of the residential unit, then the assessee is entitled to benefit of section 54F. In our view the assessee cannot be denied benefit of section 54F on account of delay by the builder or on account of the reason for de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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