TaxTMI 
TaxTMI 
2026 (8) TMI 372
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....ues/grounds of appeal raised by the assessee in the memoranda of appeal for all four assessment years are identical and are primarily technical in nature, revolving around the question of whether the income arising from the JDA is taxable in the hands of the HUF or in the individual capacity of the assessee. In addition, the assessee has raised an additional ground of appeal for Assessment Years 2014-15, 2018-19, and 2019-20, challenging the validity of the assessments framed under section 153A of the Act. 4. Without going into the technical or legal grounds raised by the assessee, we proceed to adjudicate the issue on the merits of the additions made in the relevant assessment years, namely Assessment Years 2014-15 and 2018-19 to 2020-21, on account of income arising from the JDA. 5. The facts in brief are that Sri Gurappa purchased land measuring 9 acres and 28 guntas, bearing Survey No. 92, in the year 1951. Sri Gurappa had four sons, namely: (1) Sri Pilappa, (2) Sri Veerappa, (3) Sri Munireddy, and (4) Sri Hanumantha Reddy. 6. The eldest son, Sri Pilappa, executed a release deed dated 22 July 1955 in favour of his father, Sri Gurappa....
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....der section 139(1) of the Act, declaring a total income of Rs. 23,26,290/-, which included income from house property amounting to Rs. 1,68,000/-, short-term capital gains of Rs. 11,08,542/-, long-term capital gains of Rs. 11,33,953/-, and income from other sources of Rs. 1,971/- only. The assessee also claimed a deduction under Chapter VIA of the Act amounting to Rs. 86,173/- only. 11. Similarly, for Assessment Year 2019-20, the assessee filed a return of income under section 139 of the Act, declaring a total income of Rs. 1,75,24,910/-, which included income from house property of Rs. 1,68,000/-, short-term capital gains of Rs. 1,55,59,066/-, and income from other sources of Rs. 19,71,844/- only. The assessee claimed deduction under Chapter VIA of the Act amounting to Rs. 1,74,000/- only. 12. Thereafter, a search under section 132 of the Act was carried out in the case of the assessee on 5 February 2020, and in consequence thereof, notices under section 153A of the Act were issued for Assessment Years 2014-15, 2018-19, and 2019-20. In response to the notices issued under section 153A of the Act, the assessee filed returns of income declaring nil income for Assessment Year 2....
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....4 flats, i.e., during Assessment Year 2018-19. As the assessee had not offered income arising from the JDA either in Assessment Year 2014-15 or in Assessment Year 2018-19, the Assessing Officer proceeded to compute long-term capital gains as on the date of receipt of the occupancy certificate for the 44 flats. 17. However, while doing so, the Assessing Officer changed the approach for adopting the sale consideration. Whereas for Assessment Year 2014-15, the guidance value of the land was adopted as the sale consideration, for Assessment Year 2018-19, the Assessing Officer adopted the cost of construction incurred by the developer being Rs. 1585 per sq. ft. as the sale consideration. Accordingly, the AO computed the gross sales consideration of Rs. 8,44,82,085/- and after deducting deemed cost of acquisition of Rs. 1 lakh arrived at long term capital gain of Rs. 8,43,82,085/-. Hence the AO added long term capital gain of Rs. 8,43,82,085/- to the total income of the assessee. 18. Besides the above, the Assessing Officer also computed long-term capital gains on the sale of one flat sold by the assessee during Assessment Year 2018-19 for a consideration of Rs. 50,44,000/-. After ....
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....to the total income. 24. The AO also added the income from other sources for Rs. 19,71,844/- as offered by the assessee while filing return under section 139(1) of the Act for A.Y. 2019-20. 25. Similarly, for Assessment Year 2020-21, deemed rental income in respect of the five flats that remained unsold was computed at Rs. 8,50,271/- and added to the total income of the assessee. 26. The aggrieved assessee preferred an appeal before the learned CIT(A) against the assessment made by the AO for A.Y. 2014-15, 2018-19, 2019-20 and 2020-21 by contending the income if any is chargeable to tax, then the same should be taxable in the hands of HUF and not in the individual capacity of the appellant assessee. However, the learned CIT(A) confirmed the addition made by the AO for the respective assessment years. 27. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 28. The learned Authorised Representative (AR) appearing before us made various legal contentions. Apart from the legal submissions, the learned AR contended that no consideration was received from the developer at the time of entering into the Joint Development Agreement (JDA). ....
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....apital gains became chargeable to tax in that year itself, irrespective of the fact that the constructed flats were to be received at a later point of time. 29.3 The learned DR also submitted that the assessee was not entitled to claim exemption under sections 54 or 54F of the Act in the year under consideration, as the conditions prescribed under the said sections were not fulfilled in the relevant assessment year. According to the learned DR, mere entitlement to receive flats in the future cannot be equated with investment in a residential house for the purpose of claiming exemption under the said provisions. 29.4 With regard to the issue of deemed rental income, the learned DR contended that the flats received by the assessee under the JDA were capable of being let out and, therefore, the Assessing Officer was justified in bringing to tax the notional rental income under the head "Income from house property", irrespective of whether the assessee actually let out the flats or treated them as stock-in-trade. Accordingly, the learned DR prayed that the appeal filed by the assessee be dismissed and the orders of the lower authorities be upheld. 30. We have heard the rival c....
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....ndivided Families entering a JDA for development of land or building. Under this scheme, notwithstanding anything contained in section 45(1) of the Act, capital gains are chargeable to tax in the year in which the competent authority issues a completion certificate for the whole or part of the project. The full value of consideration is deemed to be the stamp duty value of the owner's share in the project on the date of issue of such completion certificate, plus any monetary consideration received. Thus, taxation is aligned with the stage when the landowner actually receives the developed property and is in a better position to discharge the tax liability. The provision also provides clarity and certainty by deferring the point of taxation and by prescribing a clear mechanism for valuation of consideration, thereby reducing litigation. 30.4 In substance, prior to section 45(5A) of the Act, taxation under a JDA was linked to the concept of "transfer" under section 2(47) of the Act, often resulting in early and notional taxation at the time of execution of the agreement. After the introduction of section 45(5A) of the Act, a specific and beneficial regime applies to eligible lando....
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.... Rs. 45 Lakh as non-refundable advance and in addition also entitled to receive 5500 sq.ft. of built-up area in the project to be developed by the developer on the subject land property. The property was handed over to the developer as on 30th May 1996 and developer completed the project in F.Y. 2002-03. In the given facts, the dispute arises in which year capital gain should be levied. The Hon'ble High Court held that the possession of the property was transferred in the year 1996-97 relevant to the A.Y. 1997-98 for a part consideration of 45 Lakh. Hence, the capital gain is chargeable in the A.Y. 1997-98 when possession was given and not in the year when project was completed. The relevant finding of the Hon'ble High Court in DR TK Dayalu reads as under: 7. So far as other substantial questions of law are concerned, it is clear that the finding of fact arrived at by the Tribunal is based upon the material on record. The contents of the agreement dated 26-1-1996, the second supplementary agreement dated 14-10-1998, the third supplementary agreement dated 26-11-1999 and also the affidavit filed by the assessee stating that the actual possession of the schedule property was....
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.... 15. A combined reading of Clauses 3.1 and 13 shows that parties have specifically agreed that assessee shall continue to own entire JD property until conveyance deed took place. Clause 13 is in consonance with clause 3.1. There is no material on record to show that any conveyance had taken place in A.Y. 2014-15. Unless, there is material to establish that there was any conveyance, the view taken by the A.O. is perverse and the said view has rightly been reversed by both CIT(A) and ITAT. 30.11 Furthermore, as per the amended provision of section 45(5A) of the Act applicable w.e.f. A.Y. 2018-19 as discussed above, the capital gain on transfer of land under the scheme of JDA is taxable in the year in which the competent authority issues a completion certificate for the whole or part of the project. The provision of section 45(5A) of the Act is beneficial provision introduced with intention to mitigate undue hardship to the assessee. 30.12 In view of the above detailed discussion, we hold that there is no transfer of property taking place in the year 2013-14 relevant to A.Y. 2014-15 within the meaning of section 2(47)(v) of the Act r.w.s. 53A of Transfer of property Act. Theref....
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....5) of the Act has adopted stamp duty/guidance value at Rs. 3530/- per sq. ft. Therefore, in our considered opinion, the sale consideration for transfer of land should be Rs. 3530 per sq. ft for built up area received by the assessee. At this point it is also pertinent to note that AO has adopted cost of construction of developer as consideration which stands at Rs. 1585/- per sq. ft. which is less than the stamp duty value. A question may arise; can the Tribunal enhance the sale consideration adopted by the AO. In general, the Tribunal may confirm, reduce or set aside the order from lower authorities or remand the case for fresh assessment but cannot enhance the addition made by the lower authority. However, here we are not enhancing the addition made by the AO. We are only dealing with here what should be the correct value of sale consideration adopted in the given facts and circumstances. 31.2 Accordingly, we hold that sale consideration for the transfer of 60% of land to the developer in pursuance to the JDA should calculated adopting stamp duty value of built-up area (total 53301 sq. ft.) received by the assessee which stand at Rs. 3530 per sq ft. Thereafter, it is necessary....
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....r to the correct understanding. The expression 'a residential house' should be understood in a sense that building should be residential in nature and 'a' should not be understood to indicate a singular number. [Para 6] That when an HUF's residential house is sold, the capital gain should be invested for the purchase of only one residential house, is an incorrect proposition. After all, the property of the HUF is held by the members as joint tenants. 31.4 The ratio of the Hon'ble Karnataka High Court in the above-mentioned case was subsequently followed by the Hon'ble Delhi High Court in the case of CIT vs. Gita Duggal reported in 30 taxmann.com 230. In the said case the assessee was owner of property comprising of the basement, ground floor, first floor and second floor. She was deriving rental income from the property. On 08.05.2006 she entered into a collaboration agreement with M/s Thapar Homes Ltd. for developing the property. According to its terms, the assessee being desirous of getting the property redeveloped/reconstructed and not being possessed of sufficient finance and lacking in experience in construction, approached the builder to devel....
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....ve view that is questioned by the revenue and it is contended that the interpretation placed by the Tribunal gives rise to a substantial question of law. The assessee strongly relies upon the judgment of the Karnataka High Court (supra) which, it is stated, has become final, the special leave petition filed by the revenue against the said decision having been dismissed by the Supreme Court as reported in the annual digest of Taxman publication. The judgment of the Karnataka High Court supports the contention of the assessee. An identical contention raised by the revenue before that Court was rejected in the following terms : "A plain reading of the provision of section 54(1) of the Income-tax Act discloses that when an individual-assessee or Hindu undivided family- assessee sells a residential building or lands appurtenant thereto, he can invest capital gains for purchase of residential building to seek exemption of the capital gains tax. Section 13 of the General Clauses Act declares that whenever the singular is used for a word, it is permissible to include the plural. The contention of the Revenue is that the phrase "a" residential house would mean one resident....
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....build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited. 31.5 Therefore, respectfully following the ratio laid down by the Hon'ble Karnataka High court and Hon'ble Del....
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....ection 23(5) of the Act for A.Y. 2018-19, 2019-20 and 2020-21. In this regard it is pertinent to refer to the provision which reads as follows: 5) Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to two years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. 33.1 From the bare perusal of the above provision, it transpired that the concept of deemed rental under section 23(5) of the Act is applicable to property being any building or land appurtenant thereto is held as stock in trade. In the present case, there is no material on record to suggest that the 44 flats allotted to the assessee in terms of the JDA were held as stock in trade by the assessee. As such, the assessee has treated the same as capital assets and AO also computed long term capital gain on sale of flats by treating the same as capital asset. Hence in....