TaxTMI 
TaxTMI 
2026 (1) TMI 445
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....op a new building after demolishing the old house. Altogether, seven (7) floors were agreed to be built. The developer was entitled to three (3) no. of flats i.e. on the 2nd, 3rd and 4th floors and 11 car parking spaces with the undivided proportionate share in all common parts, portions, areas, facilities and also the undivided proportionate share in the land comprised in the said premises attributable to those flats. An area of 1121 Sq ft was set apart out of total construction of 45270 Sq. ft. for the Original Lessor pursuant to the terms of the Lease Deed dated 19/01/1974. The assessee was entitled to four (4) no. of flats i.e. on 1st, 5th, 6th and 7th floors and remaining car parking spaces. However, before construction, the assessee entered into an Agreement for sale in respect of flat on the 1st floor and two car parking spaces on 24th February, 2012 and a tripartite agreement was executed with the developer as a party with obligation to complete the flat as per specifications and hand over possession thereof directly to the buyer on completion of construction. 3.2. The construction of the building was completed on 30/11/2013. In terms of the Development Agreement, on com....
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....the transfer of residential house. The assessee was entitled to flats on four floors being 1st, 5th, 6th and 7th floors, out of which the assessee agreed to sell 1st floor unit to another party before the construction thereof i.e. before the new asset came into existence. Thus, at the time of earlier agreement, the assessee did not yet own a constructed flat- he only had a right to receive a specified portion from the developer under the Development Agreement dated 3rd April, 2007. So, when he entered into the agreement with the buyer, what he transferred was 'a right to obtain a specified constructed flat from the Developer. The developer was a confirming party under the said agreement with obligation to complete the construction as per specifications stated therein and to hand over the possession directly to the buyer. Right in Property is a capital asset, having been acquired since the date of development agreement and therefore is a long-term capital asset. 3.6. Capital Gain on transfer of 1st Floor Flat was computed as under: - As per Assessee As per Asst Order Long Term Capital gain Short term Capital Gain Consideration (as per Stamp duty....
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....ard the rival contention and perused the materials as placed before us. We note that the assessee claimed deduction u/s 54 only in respect of the cost of construction of the 5th, 6th and 7th floors, having been utilized for construction of said 'new asset'. The cost of construction of 1st floor, not being the 'new asset', was specifically reduced from the total relatable cost of construction of assessee's allocation while claiming the exemption u/s 54 of the Act. We also note that the said agreement for sale was entered much prior to completion of the building and even before the assessee was given possession of his allocation. However, the Ld AO has considered capital gain on transfer of undivided share in land proportionate to developer's allocation as exempt u/s 54 as having been appropriated against construction of owner's allocation, being 1st, 5th, 6th & 7th floors. Thus, Flat on 1st floor has been considered as a part of 'new asset', and income on sale thereof has been assessed to be in the nature of short term capital gains, after reducing proportionate amount of capital gains from cost as per Section 54(1) (ii) of the Act for transfer within a period of three years of its ....
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....e u/s 48 which was incurred by the assessee on the construction of area provided to the lesser as per the term of indenture of lease of property under development. 4.1. The facts in brief are that as per the Indenture of Lease dated 19/01/1974, the assessee had an existing obligation to the original lessor to provide an area of 1250 Sq. Ft. fully completed and furnished with all fittings and fixtures and usual amenities on ownership basis, in the event of the assessee constructing a new building on the demised premises after demolishing the existing building. At Pg no 15 clause 7 of the Lease Deed dated 19th January, 1974, it is specifically expressed that In the event of the Lessee constructing a new building or buildings on the demised premised after demolishing the existing building, the lessor shall have the priority and first chance and facility to choose and select at his pleasure one flat containing an area of 1250 Sq. Ft. to 1500 Sq. Ft. of the said building. 4.2. However, as per the construction plan, only an area of 1121 Sq Ft. could be provided for which a total cost of Rs. 44,26,906/- was incurred by the Developer and paid by the assessee. The said amount should h....
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....r of ld. CIT(A) on this issue and direct the AO to delete the addition. The ground no. 3 is allowed. 5. The issue raised in ground no. 4 is against the order of ld. CIT(A) confirming the action of the AO in disallowing and denying the exemption claimed by the assessee of Rs. 1,50,00,000/- u/s 54(2) of the Act. 5.1. In calculating the taxability of long-term Capital Gains, the assessee claimed an exemption of Rs. 1,50,00,000/- u/s 54(2) of the Act. The assessee has deposited the amount of Capital Gain remaining unutilized (as per assessee's computation) in a nationalized bank in three term deposits of Rs. 50,00,000/- each aggregating to Rs. 1,50,00,000/- to be utilized for construction by way of extension of certain area on eighth floor of the new building and for super finishes of construction on 5th, 6th & 7th floors and claimed deduction U/s 54(2) of the Act. However, the said claim for deduction of Rs. 1,50,00,000/- was disallowed by the Ld. AO, being not as per law u/s 54(2) of the I.T.Act, 1961. 5.2. The ld CIT(A) after taking in to account the submission of the assessee upheld the order of AO on this issue by observing and holding as under: "The ground no. 3....