2020 (9) TMI 1014 - AT - Income Tax

Appeal Partially Allowed: Exemption for Capital Gains on Land Transfer Upheld

Y.C. Gopinath Versus ITO Ward-6 (3) Bangalore

The Tribunal partially allowed the appeal, holding that the appellant was entitled to exemption under section 54F for capital gains arising from the ... Exemption u/s 54F - Denial of exemption as appellant received multiple number of flats - transfer of 60% of land for builders against cost of construction of flats for 40% share - assessee and co-owners of the property had entered into a joint development agreement - Assessee submitted capital gains is not assessable in the year of entering into joint development agreement but only when the flats are received by the assessee as per the joint development agreement - HELD THAT:- All the flats were situated in a residential building and the four residential flats constitute “a residential house”. Accordingly, view confirmed by the Hon’ble High Court in SMT. KG. RUKMINIAMMA [2010 (8) TMI 482 - KARNATAKA HIGH COURT]. As decided in SHRI. B.J. BADRINATH [2018 (11) TMI 1168 - ITAT BANGALORE] ratio of the judgement of the Hon’ble jurisdictional High Court in the case of CIT Vs. K.G. Rukminiyamma (supra) applies to also 54F of the Act since both section i.e. 54 & 54F of the Act are pari materia. Moreover, in the case of other co-owners, it has been submitted by the Ld. A.R. that claim of deduction u/s 54F of the Act was allowed by the A.O. This assertion made by the Ld. A.R. was not controverted by the Ld. D.R. Amendment to section 54 & 54F, restricting the claim of deduction to one residential unit was introduced by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 (i.e. from AY 2015-16). Since we are concerned with assessment year 2009-10, the amendment brought out by Finance (No.2) Act, 2014 does not have application for the instant case. Issues involved:1. Denial of exemption u/s 54F for capital gain on transfer of land for construction of flats.2. Applicability of High Court decision in CIT Vs. K.G. Rukminiyamma.3. Interpretation of joint development agreement for tax implications.4. Claim of deduction u/s 54F in the case of multiple flats received.5. Comparison of facts with relevant legal precedents.Issue 1: Denial of exemption u/s 54F for capital gain on transfer of land for construction of flats:The appellant contested the denial of exemption u/s 54F for capital gains arising from the transfer of 60% of land for builders against the cost of construction of flats for a 40% share. The CIT(A) held that the appellant was not entitled to exemption u/s 54F on multiple flats received, contrary to the appellant's claim.Issue 2: Applicability of High Court decision in CIT Vs. K.G. Rukminiyamma:The appellant argued that the decision in CIT Vs. K.G. Rukminiyamma was applicable to their case, emphasizing that the same principles should be extended to their situation where vacant land was given for joint development for construction of flats. The Tribunal referred to the High Court's decision in the Rukminiyamma case where the court upheld the benefit of section 54 of the Act for all flats received by the assessee.Issue 3: Interpretation of joint development agreement for tax implications:The case involved an inherited property subject to a joint development agreement. The A.O. calculated total long-term capital gains based on the agreement, leading to an assessment in the appellant's hands. The CIT(A) held that the capital gains were assessable in the year of entering into the agreement, rejecting the appellant's claim that gains should only be assessed upon receiving the flats.Issue 4: Claim of deduction u/s 54F in the case of multiple flats received:The appellant contended that they were entitled to the benefit of section 54F of the Act for the flats received as per the joint development agreement. However, the CIT(A) dismissed this claim, stating that the facts of the appellant's case were not squarely applicable to the precedent relied upon by the appellant.Issue 5: Comparison of facts with relevant legal precedents:The Tribunal compared the facts of the case with the precedent set by the High Court in the Rukminiyamma case. The Tribunal noted that the High Court had upheld the benefit of section 54 of the Act for all flats received by the assessee in that case, which supported the appellant's argument for similar treatment in their situation.In conclusion, the Tribunal partially allowed the appeal, considering the applicability of legal precedents and the specific circumstances of the joint development agreement. The Tribunal emphasized the importance of interpreting tax laws in alignment with relevant judicial decisions and clarified that the amendment restricting deduction to one residential unit did not apply to the assessment year in question.