Tribunal grants 35% benefit under section 54F for joint development agreement

The Tribunal partially allowed the appeal, granting the benefit under section 54F for 35% of the constructed property received under a joint development agreement. The appellant's contention that the residential houses received did not qualify as a "residential house" under section 54F was rejected. The Tribunal relied on precedents from various High Courts and the amendment to section 54F by the Finance Act, 2014, limiting the deduction to one residential house. The decision was pronounced on 19th February 2020.

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Issues:
Assessment of capital gains under joint development agreement, denial of benefit under section 54F, interpretation of "residential house" for exemption.

Capital Gains Assessment:
The appellant, an individual, entered into a joint development agreement (JDA) for land development but failed to disclose details in the income tax return. The Assessing Officer (AO) computed long-term capital gains and denied benefit under section 54F as the appellant allegedly had more than one residential house. The AO's order was challenged before the CIT(A), citing similar cases where the benefit was granted. However, the CIT(A) upheld the AO's decision, stating that the residential houses received under the JDA did not qualify as a "residential house" under section 54F.

Benefit under Section 54F:
The appellant contended that she was eligible for exemption under section 54F for 35% of the constructed area received in exchange for the land. The appellant relied on precedents from the Madras and Karnataka High Courts, which clarified that post-amendment, section 54F applies to one residential house only. The Tribunal agreed with the appellant, citing the consistent view of various High Courts, and allowed the deduction under section 54F for the 35% of the constructed property received.

Interpretation of "Residential House":
The Tribunal's decision was based on the amendment to section 54F by the Finance Act, 2014, limiting the deduction to one residential house. The Tribunal concurred with the High Courts' interpretation that post-amendment, section 54F benefits apply to a single residential house only. Consequently, the appellant was deemed entitled to the deduction under section 54F for the 35% of constructed property received.

Conclusion:
The Tribunal partially allowed the appeal, granting the benefit under section 54F for the portion of the constructed property received. Other grounds were deemed academic or general in nature and did not require adjudication. The decision was pronounced on 19th February 2020.

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