Sri D Krishna Reddy, Hyderabad V. ITO., Ward-13(2), Hyderabad

ITA 1395/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5936 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: A V RAGHURAM
• Section: 54F

Judgement Text

ITA NO 1395 OF 2014 D KRISHNA REDDY HYDERABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1395/HYD/2014 (ASSESSMENT YEAR: 2009-10) SHRI D. KRISHNA REDDY HYDERABAD PAN: ANFPD 3715 R VS INCOME TAX OFFICER WARD 13(2) HYDERABAD FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI K.J. RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10. IN TH IS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A)-II, HYDERABAD, DATED 26.05.2014 IN UPHOLDING THE FINDIN GS OF THE AO THAT THE CAPITAL GAINS HAS ARISEN IN THE YEAR OF EX ECUTION OF THE DEVELOPMENT AGREEMENT AND NOT IN THE YEAR OF DELIVE RY OF CONSTRUCTED AREA. THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD, DISMISSING THE APPEAL OF THE APPELLANT IS PERVERSE, ILLEGAL AND UNSUSTAINABLE IN LAW. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ACTION OF ASSESSING OFFICER IN BRINGING TO TAX THE TRANSACTION OF THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE APPELLANT BY DATE OF HEARING : 30.11.2016 DATE OF PRONOUNCEMENT : 21.12.2016 ITA NO 1395 OF 2014 D KRISHNA REDDY HYDERABAD PAGE 2 OF 4 APPLYING PROVISIONS OF SECTION 2(47) OF THE INCOME TAX ACT. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT PROVISIONS OF SECTION 2(47) OF INCOME TAX ACT READ WITH SECTION 53A OF TRANSFER OF PROPERTY ACT, 1881 CANNOT BE APPLIED TO A CASE OF DEVELOPMENT AGREEMENT WHERE THE INTENTION WAS TO ALLOW THE DEVELOPER TO ENTER INTO THE LAND AS A LICENSOR. 3. WITHOUT PREJUDICE TO THE ABOVE, THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE TRANSACTION OF DEVELOPMENT, CAN BE BROUGHT TO TAX ONLY IN THE YEAR OF DELIVERY OF FLATS/CONSTRUCTED AREA AND NOT OTHERWISE. 4. WITHOUT PREJUDICE TO ANY OF THE ABOVE GROUNDS, THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER ERRED IN BRINGING TO TAX THE TRANSACTION OF DEVELOPMENT AGREEMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE ADVANCE IN RESPECT OF DEVELOPMENT AGREEMENT WAS RECEIVED IN THE F.Y 2007-08 AND THEREFORE IF AT ALL THE TRANSACTION OF DEVELOPMENT AGREEMENT WAS TO BE TAXED, THE SAME COULD HAVE BEEN DONE FOR AY 2008-09 AND NOT FOR THE YEAR UNDER CONSIDERATION. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 2. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THE ABOVE GROUNDS OF APPEAL ARE COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF POTLA NAGE SWARA RAO VS. DCIT IN ITTA NO.254 OF 2014 DATED 9.4.2014. THEREAF TER, THESE GROUNDS OF APPEAL ARE REJECTED. 3. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RAISED ADDITIONAL G ROUNDS OF ITA NO 1395 OF 2014 D KRISHNA REDDY HYDERABAD PAGE 3 OF 4 APPEAL BEFORE US SEEKING EXEMPTION OF THE LONG TERM CAPITAL GAIN U/S 54F OF THE ACT. THE ADDITIONAL GROUND RAISED IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES UNDER THE INCOME TAX ACT, FAILED TO APPRECIATE THAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S 54F OF THE ACT FOR THE INVESTMENT (DEEMED) IN 16 DUPLEX HOUSE UNITS. THE AUTHORITIES BELOW HAVING TAXED THE CAPITAL GAINS IN THE ASSESSMENT YEAR UNDER CONSIDERATION OUGHT TO HAVE ALLOWED DEDUCTION U/S 54F OF THE ACT AS PER THE SETTLED LEGAL POSITION BY THE DECISIONS OF VARIOUS TRIBUNALS AND HIGH COURTS. 4. IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE A SSESSEE THAT THE STAND OF THE ASSESSEE HAS ALWAYS BEEN THAT THE CAPITAL GAIN ARISES IN THE YEAR IN WHICH THE ASSESSEE RECEI VES THE CONSTRUCTED AREA AND NOT IN THE YEAR OF EXECUTION O F THE DEVELOPMENT AGREEMENT. SINCE THE ISSUE OF THE YEAR IN WHICH THE CAPITAL GAIN ARISES IS SETTLED BY THE DECISION OF T HE HON'BLE JURISDICTIONAL HIGH COURT (CITED SUPRA), THE ASSESS EE PRAYED THAT THE ASSESSEES CLAIM OF DEDUCTION U/S 54F BY VIRTUE OF THIS ADDITIONAL GROUND MAY BE ADMITTED AND REMANDED TO T HE FILE OF THE AO FOR ADJUDICATION. 5. THE LEARNED DR, HOWEVER, SUBMITTED THAT THE ASSE SSEE HAS NEVER RAISED THIS GROUND BEFORE THE AUTHORITIES BELOW AND THEREFORE, CANNOT BE RAISED AT THIS STAGE. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD AND HAVING GONE THROUGH THE ASSESSMENT OR DER, WE FIND THAT THE ASSESSEES CONTENTION HAS ALL ALONG BEEN T HAT THE TRANSFER HAS NOT TAKEN PLACE DURING THE RELEVANT FINANCIAL Y EAR AND THEREFORE, THE CAPITAL GAIN DOES NOT ARISE IN THE A .Y AS THE ITA NO 1395 OF 2014 D KRISHNA REDDY HYDERABAD PAGE 4 OF 4 ASSESSEE HAS NOT TAKEN THE POSSESSION OF THE CONSTR UCTED AREA. THEREFORE, WITHOUT THERE BEING CAPITAL GAIN, THE AS SESSEE COULD NOT HAVE MADE THE CLAIM OF DEDUCTION U/S 54F OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD. 229 ITR 283 (SC) HAS HELD THAT THE ASSESSEE CAN RAISE AN ADDITIONAL GROU ND BEFORE THE TRIBUNAL AND THE TRIBUNAL MAY, IF IT SO DEEMS FIT, ADMIT THE SAME AND REMIT IT TO THE FILE OF THE AO FOR ADJUDICATION OF THE SAME. RESPECTFULLY FOLLOWING THE SAME, WE ADMIT THE ADDIT IONAL GROUND OF APPEAL AND REMAND THE SAME TO THE FILE OF THE AO WI TH A DIRECTION TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. THE AS SESSEE SHALL COOPERATE WITH THE AO BY FURNISHING ALL THE RELEVAN T MATERIAL. 7. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2016. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 21 ST DECEMBER, 2016. VINODAN/SPS COPY TO: 1 A.V.RAGHU RAM, P.VINOD, ADVOCATES, 610 BABUKHAN E STATE, BASHEERBAGH, HYDERABAD-01 2 INCOME TAX OFFICER WARD 13(2) AAYAKAR BHAVAN, BAS HEERBAGH, HYDERABAD 500001 3 CIT (A)-II HYDERABAD 4 CIT I HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER