TaxTMI 
TaxTMI 
2013 (10) TMI 601
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....hat the residential property allotted to the assessee was in lieu of the sale consideration receivable by the assessee towards the transfer of development rights to the developer and by no means, could it be said that the developer was constructing the property for the assessee. 5. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that as per the agreement, the developer was entitled to enter into any agreement of sale, mortgage, lease or transfer in respect of his share of property which substantiates that the developer had acquired rights to deal with the said property without any encumbrance from the assessee. 6. In the aforesaid circumstances, the learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that the assessee has thus purchased a residential property and had not constructed or entered into an agreement to construct, a house property. Therefore, she was required to possess the property within two years as per the provisions of sub-section (1) to sec. 54F of the Income-tax Act, 1961, which she failed to do. 2. The Assessing Officer disallowed the deduction u/s.54 of the Act as no evidence was produced....
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.... in substance between both the parties was that of construction of house property. Therefore, the period of 3 years should be considered in this situation. The relevant portion of submission of the assessee is reproduced below: "2.Ground No. 3 -Exemption u/s 54 of the ITA, 1961 The assessee has claimed exemption of Rs, 33,83,190 being the cost of the residential flats acquired under the Development Agreement dated 21st May 2004. In this regard, the appellant has to submit as under. The same has been rejected by the learned AO on the analogy that possession the new house property, being two adjoining flats, was taken after two (2) years. The learned AO, at Para 27 of his order has observed that the telephone was installed at the new house property only on 7/12/2006 i.e. after thirty one (31) months. It will be relevant to note that as per clause no. 9 on page no. 10 of the Development Agreement dated 21st May 2004, the possession of the new house was to be extended within thirty (30) months (with a need based extention of 6 months). a) Construction of the house and not Purchase - As per the development agreement, the appellant is to share the constructed area with the developer. ....
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....nderlying in both these decisions is the same, i.e. domain over property. As the domain over the new house properly is assumed anyway, the appellant may please be granted the appropriate relief u/s 54 of the ITA, 1961. Kindly allow the appeal considering the above submissions and oblige." 4. In this background, after considering the submission of the assessee, the CIT(A) allowed the claim of assessee u/s.54 of the Act. Same has been opposed before us by way of arguments in grounds of appeal mentioned above. On the other hand, Ld. Authorised Representative supported the order of the CIT(A) and submitted that decision of the CIT(A) is supported by decision of the ITAT, Mumbai Bench 'I', in the case of Jatinder Kumar Madan vs. ITO in ITA.No.6921/Mum/2010 order dated 25.04.2012, wherein it has been held as under: "In this case, the assessee had exchanged old flat with new flat to be constructed by the builder under development agreement which amounts to transfer under s. 2 (47) of the Act. Thus, the only other condition which is required to be satisfied is that assessee either purchases a new residential flat within the prescribed limit or constructs a new residential flat within a ....
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....5.2004. As per this agreement, the assessee transferred the entire property at H.No.4-3-540 to the developer. She accepted the construction in respect of this property in the form of house and commercial area to be constructed by the developer. These properties stood transferred to the developer as on 31.05.2004. As per development agreement, developer was to actually construct residential and commercial property for the assessee, which was found apparent from the perusal of clause 5(a) and (b) of the development agreement, which are reproduced as under: 5. (a) The Developer shall develop and construct the Residential-cum-Commercial Building Complex on the above said House properties. (b) The Developers shall construct the entire complex with their own cost and resources in all respects. That, after construction of the entire Residential-cum- Commercial Building complex the Landowners and the Development shall share the constructed areas with common areas such as staircase; open places, balconies, landing, terrace together with the undivided share of land in the following manner: - Commercial Parking Residential The Landowners (jointly) 45% 45% 41% The Developer ....