TaxTMI 
TaxTMI 
2018 (2) TMI 180
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....akrishna Naik and Shri Ramachandra Naik had 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 o....
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....dential unit and hence the condition of 54F is not satisfied; 5. The matter was taken in 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 ....
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....,75,505/-. The claim was disallowed for reasons below: As per the section, for allowing exemption under this section 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 pe....
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....ncorrect, as such short term capital gain is to be added to returned income. The contention of the Applicant is that cost of indexing has been taken for as 259 points which is relevant to previous year 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 an....
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.... D. Krishnaiah 504 1227.38 6,91,000 2 05-03-2002 Srikantha Bagoji Rao 203 1157.12 5,85,000 3 05-03-2002 Sridhar Bagoji 403 1157.12 6,00,000 4 26-03-2002 Vinay Phadke 301 1396.00 9,00,000 5 26-03-2002 Sangeetha Bhagonkar 313 767.74 5,50,000 6 30-03-2002 Adjusted against Security Deposit 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 07-03-200....
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.... issue i.e., deduction u/s. 54F was adjudicated in the main appeal. 11.4. With reference to contention under section 54, it was submitted that assessee does not own any house in the impugned year and accordingly, the investment made in the house is eligible for deduction, if any capital gain is taxable in the year under consideration. It was the submission that AO has not followed the directions of ITAT and has brought the capital gains pertaining to earlier years wrongly in this assessment year. Hence the various grounds. 12. Ld.DR, however, while admitting that the details are available with the AO about various agreements of sale of properties, however, referred to the computation filed by assessee in the course of assessment proceedings and the return filed to submit that assessee has voluntarily offered the capital gains in the year, therefore, AO followed the same in bringing to tax the capital 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 the....
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....in 1995, it did not give rise to any rights to either party as the implementation of the agreement did not start till as late as December, 1999. The intention of the parties, as it emanates from the agreement, is to effect transfer of land from the assessee to the developer and on handing over the. possession, the assessee actually gave shape to the intention. This handing over of the possession was towards the part performance of the agreement. Therefore, as per cl. (v) of s. 2 (47), transfer took place in December, 1999, the effective assessment year being 2000-01. As per s. 45(1), capital gain arising from the transfer of a capital asset shall be chargeable to tax in the year in which the transfer took place. Since the transfer took place in December, 1999, the capital gain is chargeable to tax in the asst. yr. 2000-01. It was contended by the counsel that if the taxable event was the entering into the development 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 ....
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....would be like this. As per the development agreement she has no claim over the land which has been given to the developer and she may not sell any of the flats coming to her share. In that case, despite there being transfer of land as per s. 2(47), the assessee could escape the liability of capital gains tax. Therefore, the stand of the assessee to treat the two transactions as one is too fallacious. It does not merit acceptance. Accordingly, transfer of land in consideration of the flats constitute one transaction giving rise to capital gains and the sale of flats by the assessee constitutes another transaction giving rise to capital gains. (Para 16) Conclusion : Assessee owner of land having parted with possession of land under a development agreement for construction of flats having handed over possession of vacant land to developer on promise to be handed over 45 per cent of constructed area, it was a case of transfer 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 devel....
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.... by the Hon'ble Jurisdictional High Court in Potla Nageswar Rao [365 ITR 249] (supra), I hold that the capital gains on the transfer of land for development did not arise in the year under consideration and accordingly direct the AO to exclude the capital gains on the transfer of land given for development. 13.3. Coming to the capital gain on transfer of constructed area, which was considered as a second transaction, as can be seen from the details placed on record, most of the semi-constructed structures in Block-A were sold in August, 2001, which pertains to AY. 2002-03. Therefore, as far as the capital gains on Block-A (entirely) does not pertain to the year under consideration. 13.4. As far as the sale in Block-B is concerned, as per the details the capital gains arise in AYs. 2002-03, 2003-04 and 2004-05. As stated by the Ld. Counsel for assessee, only five flats in Block-B are sold in financial year relevant to the impugned assessment year. Therefore, any long 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. ....