TaxTMI 
TaxTMI 
2018 (2) TMI 180
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.... properties in Vidya Nagar, Hyderabad, bearing H.Nos. 1-9-698 and 1-9-1087. Shri Balakrishna Naik branch consists of Shri Balakrishna Naik, his wife Smt. Kamalabai Naik and sons Shri Govind Naik, Shri Ramesh Naik and Shri Suresh Naik. The matters pertaining to these persons are not before us. 2.1. Shri Ramachandra Naik expired on 09-07-1994. His branch consists of four members i.e., wife Smt. Uttara Bai Naik, Sons- Dr. Sudhir Naik, Sachitananda Naik and Satish Naik, assessees in the present appeals. The group has entered into agreement with M/s. Siri Sampada Constructions & other and has given 8,365 Sq. Yds., of land for development vide agreement dt. 05-03-1995. The developer has constructed thirty flats in Block-A and hundred flats in Block-B. All the thirty flats constructed in Block-A was allotted to the land owners. Out of the hundred flats constructed in Block-B, the owners got twenty-one flats towards their share. Thus, they got fifty-one flats out of one hundred and thirty flats constructed by the developer. Out of the fifty-one flats, the owners have sold twenty-four flats before March, 2003. The constructed area in the share of completed flats was to be handed-over by th....
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....n appeal to the CIT(A). The matter was decided against assessee by CIT(A) and further carried to ITAT. The ITAT set aside the assessment with the following observations/directions: "Without going much into the merits about the availability of relief U/s.54F of the Act, we are of the view that the computation of capital gain itself is faulty. It has to be appreciated that there are two sets of transactions. The first set consists of transfer of land in consideration of which the assessee received flats from the new property. On this set of transaction, capital gain arising on account of transfer of land has to be worked out. The other set of transactions is the sale of new flats allotted to the assessee. Capital gains, either short term or long term, have to be worked out separately on transfer of these flats. This would constitute a different and a distinct capital gain from the earlier one. When there is transfer of two assets, there has to be two separate capital gain and the two cannot be integrated into one to compute only one capital gain. Accordingly, we restore the matter back to the file of the Assessing Officer with the direction to recompute the capital gain separately ....
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....ion i.e.54F, two conditions are to be satisfied. 1. It is allowable to individual & HUF only. 2. The assessee does not have more than one residential house on the date of transfer of the original asset, exclusive of the one purchased claiming exemption u/s.54F. Assessing Officer submitted, in this case, of the assessee, the first condition is satisfied. Regarding the second one, the assessee has received his share of flats in Block 'A' in August, 2001 itself. This is confirmed by M/s. N.R. Constructions & Engineering, who are the builders of M/s.Siri Sampada Constructions and M/s Pradeep Constructions, the developers of the property, vide their letter dated 14-03-2001. Hence, by that date of purchase of property, the assessee owned more than one house. (Since a flat/residential unit in a complex is treated as a residential house). Hence is not entitled for exemption U/s.54F. Before me, it is seen that the developmental agreement of the land was made on 05-03-1995. The first set of capital gains arose in 1995- 96. As per letter dated 14-03-2001 of M/s.N.R.Consultants, Architects & Engineers stated that 15 flats in Block-A were given possession in the month of August,....
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....ar 1994-95. It is purely calculation mistake apparent from the record and the Assessing Officer has rectified the same U/s.154. The Applicant has made no submission as to why this mistake to be rectified. In light of above, I accept calculation made by the Assessing Officer". 9. Assessee has raised the following grounds in the appeal: "2. The learned CIT(A) erred in confirming the orders of the Assessing Officer computing Capital Gains, without appreciating the fact that he has not followed the directions of the Honourable tribunal of keeping in mind the decision in the case of Maya Chenoy as per which the Capital gains arising on account of development agreement is to be assessed only in the year of entering into development agreement and the assessment year before the learned CIT(A) is not the one. 3. The learned CIT(A) further failed to appreciate that such decision of the Tribunal has become final in view of monetary limits fixed by the CBDT and further that once the Capital gains arising on account of development agreement is not be considered in this year, the deduction u/s. 54 claimed is in order and the AO ought to have allowed the same, and thereby erred in confirmi....
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....it by the Developer 103 1157.12 10,00,000 7 30-03-2002 Adjusted against Security Deposit by the Developer 303 1157.12 10,00,000 8 30-03-2002 Adjusted against Security Deposit by the Developer 104 1227.38 12,00,000 9 14-11-2002 Ramsetty Rani Viday 314 894.20 5,85,000 10 27-01-2003 R. Vyakunta Uma 413 767.74 5,50,000 11 06-02-2003 Shashikanth Bagoji 514 894.20 5,48,000 12 07-03-2003 S. Prabhakar & Shailaja 519 1208.99 7,11,000 13 27-03-2003 Seetharam Singh 503 1157.12 6,00,000 14 21-05-2003 K. Balraj Goud 213 767.74 5,50,000 15 12-09-2003 R. Vyakunta Uma 113 767.74 5,00,000 16 16-04-2004 Urunda Dattatreya 414 894.20 5,50,000 11.2. It was the submission that only five flats sold to Ramsetty Viday Rani, R. Uma Vyakunta, Shashikanth Bagoji, S. Prabhakar & Shailaja and Seetharam Singh, at Sl. Nos. 9, 10, 11, 12 & 13, are only the flats which are sold during the year on which the proportionate long term capital gain on sale of entitled share of land and short term capital gain on sale of the structure can be brought to tax. It was submitted that the Hon'ble A....
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....l gains. Ld. DR defended the orders. 13. I have perused the rival contentions and various orders on record. I also notice that Ld.CIT undertook proceedings u/s. 263 on the so called compensation receivable as per the agreement, which proceedings were set aside by the ITAT as they are not arising from the impugned assessment order. It is also surprising to see that AO has passed modification order, restricting the cost of indexation to the years 1993-94 and 1994-95 which clearly demonstrates that AO is aware that the property was given on development, not in the impugned assessment year but much earlier. The principles laid down in the decision of Dr. Maya Shenoy Vs. ACIT (supra) with reference to working of capital gains is as under: "The moment the transferee gets the right to make use of the land or to enjoy its usufructs, the transfer is complete. Under the TP Act, if the intention is that property should pass on registration, the sale is complete as soon as the deed is registered irrespective of whether the price has been paid. However, under the IT Act, as per s. 2(47), any transaction involving the allowing of the possession of any immovable property in part performance of....
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....ent agreement, which was in 1995, then also there would be no tax liability as no consideration was received in that year. What the assessee had received was merely a right to receive 4-1/2 flats which were not in existence at the time of entering into agreement. The same argument may be raised by him in connection with asst. yr. 2000-01. Well, it is well established that it is enough if the assessee has received the right to receive the consideration. It may be quantified later or it may be received later, but these factors do not retard or stall the accrual and hence the gain has to be taxed in the year of its accrual only. Capital gains accrued in the previous year relevant to asst. yr. 2000-01. May be, the AO might have had to resort to estimating the consideration but the same would have been subject to modification later. Thus, the capital gain arising on the transfer of land is not chargeable to tax in asst. yr. 2001-02.- T.V. Sundaram Iyengar & Sons Ltd. vs. CIT (1959) 37 ITR 26 (Mad), CIT vs. Rohtak Textile Mills Ltd. (1982) 30 CTR (Del) 151 : (1982) 138 ITR 195 (Del), Smt. Jeejeebai Shinde vs. CIT (1983) 33 CTR (MP) 241 : (1983) 144 ITR 693 (MP), Addl. CIT vs. G.M. Omarkh....
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.... by exchange within the meaning of s. 2(47)(i); property was handed over in part performance under s. 53A of the TP Act and it could not be said that the transaction was without consideration; possession of land being handed over to developer only in December, 1999, the transfer took place in December, 1999, hence capital gain accrued and was chargeable in asst. yr. 2000-01 and not in asst. yr. 2001-02; transfer of land and transfer of flats allotted in consideration of transfer of land are two transactions and not one for purposes of charge of capital gains". 13.1. The same principle regarding year of taxability was upheld by the Hon'ble AP High Court in the case of Potla Nageswara Rao vs. DCIT (supra), wherein it was held that: "On March 7, 2003, the assessee entered into an agreement with a developer and the plan of the building was approved on March 31, 2003. These dates fell in the previous year 2002-03, relevant to the A.Y. 2003-04. Thus, the Tribunal held that the land being a capital asset was transferred by the assessee to the developer during the A.Y. 2003-04, for construction and it was enough if the assessee had received the right to receive consideration on a later ....
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....ng term capital gains in those five flats on sale of proportionate un-divided share of land and short term capital gain on the sale of super structure/flat can only be brought to tax in the year under consideration. Accordingly, AO is directed to re-work out the capital gains only that extent and the share of assessee, Dr. Sudhir Naik in that can only be brought to tax in his case. 13.5. Another contention is about claim of 54F/54. It was the contention that assessee has sold all the flats allotted to him and therefore, at the time of investing in the new house, he has no other house except this house. As seen from the agreements and the principles of law involved, all the apartments received in the development agreement would become one house technically, even though they are of independent units. But, when the claim is made, it was the contention of assessee that all those flats were sold. Therefore, assessee does not own any other house, except the house in which he has invested. This aspect has not been considered by the AO or by the CIT(A) in the correct perspective. Therefore, I am of the opinion that this matter has to be re-examined by the AO keeping in mind the date of sa....