Smt. Kavitha Kamlesh Shah, Bangalore V. ACIT-Circle-6(1), Bangalore

ITA 1509/BANG/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1807 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA BENGALURU
• Assessee Lawyers: R CHANDRASHEKAR
• Keywords: Capital asset; Opportunity of being heard; Difference of opinion; Benefit of exemption; Reason to believe; Change of opinion; Capital Gains
• Section: 143(3); 54F; 234B; 143(1); 54EC; 48; 13(2); 13; 153; 22; 147; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER IT A NO S . 1508 & 1509/BANG/2016 ASSESSMENT YEAR S : 2007 - 08 & 2009 - 10 SMT. KAVITHA KAMLESH SHAH, NO.E-501, RENAISSANCE TEMPLE BELL, 25/1, INDUSTRIAL SUBURB, YESHWANTHPUR, BENGALURU 560 022. PAN: ALHPS 8530 P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : S HRI R. CHANDRASHEKAR, A D VO CATE RESPONDENT BY : SHRI PRIYADARSHI MISHRA, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 2 1 .0 6 .202 1 DATE OF PRONOUNCEMENT : 25 .0 6 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS ARE BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE CIT(APPEALS), BENGALURU-6, BENGALURU BOTH DA TED 13.05.2016 FOR THE ASSESSMENT YEARS 2007-08 & 2009-10. ITA NO.1508/BANG/2016 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LEARNED CIT (A) WITHOUT CONSIDERING THE CON TENTION IN REGARD TO JURISDICTION FOR ISSUE OF NOTICE U/S.1 48 OF THE ACT ITA NOS. 1508 & 1509/BANG/2016 PAGE 2 OF 22 ERRED IN DISMISSING THE APPELLANT'S APPEAL FOR THE ASSESSMENT YEAR 2007-08. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF RE- ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08. 3. THE LEARNED CIT(A) ERRED IN HOLDING THERE IS A T RANSFER OF PROPERTY BY THE APPELLANT IN FAVOUR OF THE DEVELOPE R ON 05-02- 2007, BEING THE DATE OF EXECUTION OF JOINT DEVELOPM ENT AGREEMENT AND G.P.A WITHOUT APPRECIATING THAT SECTI ON 2(47)((V) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE AP PELLANT'S CASE. 4. THE LEARNED CIT (A) WITHOUT ANY MATERIAL ON RECO RD HELD THE APPELLANT HAS GIVEN POSSESSION ON 05-02-2007 AN D SECTION 2(47)(V) OF THE ACT IS APPLICABLE AND THE TRANSACTI ON IS LIABLE TO TAX FOR THE ASSESSMENT YEAR 2007-08. 5. THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THA T IN ORDER TO BRING A TRANSACTION U/S.2(47)(V) OF THE ACT PART PERFORMANCE OUGHT TO HAVE BEEN PERFORMED BY THE TRANSFEREE AND THERE IS NO MATERIAL ON RECORD TO HOLD THERE WAS ANY PART PERFO RMANCE BY THE DEVELOPER DURING THE YEAR IN QUESTION IN ORDER TO B RING THE TRANSACTION U/S.2(47)(V) OF THE ACT. 6. THE LEARNED CIT(A) ERRED IN UPHOLDING THE COMPUT ATION OF CAPITAL GAIN IN THE ASSESSMENT YEAR 2007-08 BASI NG ON EVENTS THAT HAVE HAPPENED IN SUBSEQUENT YEARS. 7. THE LEARNED CIT(A) ERRED IN UPHOLDING THE VALUE OF TRANSFER AT RS.97,15,500/- FOR THE ASSESSMENT YEAR 2007-08. THE COST OF DEPRECIATED VALUE OF THE BUILDING IN COURSE OF TIME, JOINT OWNERSHIP AND OTHER DISADVANTAGES HAVE NOT BEEN CON SIDERED WHILE ARRIVING THE ABOVE VALUE AS AGAINST THE VALUE OF LAND PROPOSED TO BE TRANSFERRED BY THE APPELLANT. 8. ASSUMING FOR THE SAKE OF ARGUMENTS, THERE IS A T RANSFER AS CONTEMPLATED U/S. 2(47)(V) OF THE ACT DURING THE YE AR, THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE VALUE O F LAND AGREED TO BE TRANSFERRED ON THE BASIS OF GUIDELINE VALUES DETERMINED BY THE STATE GOVERNMENT FOR THE PURPOSES OF REGISTRATION AND OUGHT TO HAVE DIRECTED TO GRANT EX EMPTION U/S.54F OUT OF THE SAID SUM. ITA NOS. 1508 & 1509/BANG/2016 PAGE 3 OF 22 9. THE LEARNED CIT(A) HAVING UPHELD THAT THE COMPUT ATION OF CAPITAL GAINS IN THE YEAR IN QUESTION MADE BY TH E LEARNED ASSESSING OFFICER, BASING ON SUBSEQUENT YEARS' EVEN TS, OUGHT TO HAVE CONSIDERED THE DEDUCTIONS CLAIMED U/S.54F 81, 54 EC OF THE ACT IN SUBSEQUENT YEARS. 10. THE LEARNED CIT(A) ERRED IN RESTRICTING THE DED UCTION U/S.54F OF THE ACT TO RS.20,00,000/-. 11. THE LEARNED CIT(A) HAVING UPHELD THE ORDER OF ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10, OUGHT T O HAVE DELETED THE CONSIDERATION ASSESSED IN THAT YEAR FRO M OUT OF THE CONSIDERATION ADOPTED FOR THE YEAR IN QUESTION. 12. THE LEARNED CIT(A) FAILED TO APPRECIATE THE CAP ITAL GAINS IS ASSESSED ON DEEMING PROVISION AND FURTHER IT IS BASED ON EVENTS TAKEN PLACE IN SUBSEQUENT YEARS AND THE APPELLANT I N SUBSEQUENT YEARS HAS DISCLOSED THE CAPITAL GAINS AND IN SUCH C IRCUMSTANCES OUGHT TO HAVE HELD NO INTEREST IS LEVIABLE U/S.234B OF THE ACT. 13. THE LEARNED CIT(A) OUGHT TO HAVE HELD SINCE THE ASSESSMENT NOW MADE IS NOT A REGULAR ASSESSMENT AND NO INTERES T IS LEVIABLE AND ALSO ON THE GROUND THAT THE INCOME ASSESSED CAN NOT BE CONSIDERED AS CURRENT INCOME AND THERE WAS NO FAILU RE TO PAY ADVANCE TAX. APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL TO PERMIT TO ADD/ALTER/DELETE ANY GROUND OR GROUNDS AT THE TIME OF HEARING IN THE INTEREST OF JUSTICE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND RUNNING THE BUSINESS OF TRADING AND MANUFACTURING P ACKING MATERIALS. FOR THE AY 2007-08, HE FILED HER RETURN OF INCOME ON 31 .03.2008 DECLARING INCOME OF RS 1,84,180/-. FURTHER, THE AO ISSUED INT IMATION U/S 143(1) OF THE ACT ON 08.02.2009 BY ACCEPTING THE RETURN OF THE AP PELLANT. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/ S .148 OF THE ACT DATED 28.03.2014 ON THE GROUND THAT THE APPELLANT HAD ENT ERED INTO JOINT DEVELOPMENT AGREEMENT WITH M/S.. HOME CONCEPT ON 05 .02.2007 TO DEVELOP A MULTI-STOREYED RESIDENTIAL APARTMENT BUIL DING ON THE LAND OWNED ITA NOS. 1508 & 1509/BANG/2016 PAGE 4 OF 22 BY THE APPELLANT LOCATED IN KODIGEHALLI VILLAGE, YE LAHANKA, BANGALORE. FURTHER, THE JOINT VENTURE DEVELOPMENT AGREEMENT EN TERED INTO BY THE APPELLANT ENABLES THE APPELLANT TO CLAIM 45% OF SAL EABLE CONSTRUCTION AREA WHEREAS BALANCE 5% BELONGS TO THE DEVELOPER. THE AO WAS OF THE VIEW THAT THE POSSESSION OF THE LAND VEST WITH THE DEVEL OPER ON ACCOUNT OF JDA AND ON ACCOUNT OF CONSTRUCTION CARRIED ON AS PER JD A AND AS SUCH THERE IS TRANSFER OF PROPERTY OF 55% OF LAND FROM THE APPELL ANT TO M/S. HOME CONCEPT. FURTHER, THE ASSESSING OFFICER HAS ALSO OB SERVED THAT TO THE EXTENT OF LAND TRANSFERRED, THE APPELLANT IS LIABLE TO CAPITAL GAIN TAX IN THE YEAR IN WHICH JDA IS ENTERED INTO. SUBSEQUENTLY, TH E ASSESSMENT WAS COMPLETED U/S.143 (3) R.W.S.147 OF THE ACT BY HOLDI NG THAT THE APPELLANT IS LIABLE TO CAPITAL GAIN TAX IN THE YEAR IN WHICH JOI NT DEVELOP AGREEMENT TOOK PLACE SINCE THE POSSESSION OF LAND WAS HANDED OVER TO THE DEVELOPER. 4. DURING THE AY 2009-10 APPELLANT HAS SOLD 3 FLATS AND OFFERED FOR TAXATION. THE AO HAS MADE ASSESSMENT U/S 143(3) OF THE ACT AND AGGRIEVED BY THE SAID ORDER THE APPELLANT PREFERRED AN APPEAL BEFORE CIT(A) AND SAME IS PENDING FOR DISPOSAL. 5. THE LD. AR SUBMITTED THAT WITHOUT APPRECIATING T HE SUBMISSION OF THE APPELLANT THAT THE CLAUSE 8.1 OF THE JDA SUGGEST TH AT THE ASSESSEE WILL TRANSFER THE SHARE IN THE LAND COMPRISING THE SCHED ULE PROPERTY TO THE DEVELOPER OR PERSONS NOMINATED BY THE HIM AS AND WH EN REQUIRED BY THE DEVELOPER BY EXECUTING THE FRESH SALE DEEDS. IN OTH ER WORDS, THE DEVELOPER IF AND WHEN REQUIRES SHOULD APPROACH THE ASSESSEE F OR EXECUTION OF THE SALE DEED. THE DEVELOPMENT AGREEMENT DOES NOT SUGGE ST THE DEVELOPER TO BE TRANSFEREE. CONSEQUENTLY THE HANDING OVER OF THE POSSESSION OF LAND TO THE DEVELOPER FOR THE PURPOSE OF DEVELOPMENT WOULD NOT CONTEMPLATE TRANSFER IN PURSUANCE OF THE AGREEMENT OF TRANSFER AS PROVIDED U/S 53A OF THE TRANSFER OF PROPERTY ACT. THE AO ALSO LEVIED IN TEREST U/S.234A 86 234B OF THE ACT. ITA NOS. 1508 & 1509/BANG/2016 PAGE 5 OF 22 6. THE LD. AR SUBMITTED THAT IN THIS CASE THE ORIGI NAL ASSESSMENT WAS COMPLETED U/S. 143(1) OF THE ACT. ASSESSMENT WAS R EOPENED BY RECORDING REASONS AS FOLLOWS:- SMT. KAVITAKAMLESHSHAH ENTERED INTO JOINT DEVELOP MENT AGREEMENT DATED 5/02/2007 WITH M/S HOME CONCEPT FOR DEVELOPMENT OF THE IMMOVEABLE PROPERTY SITUATED AT SITE NO. 23,5URVEY NO. 223, BALAJI LAYOUT, KODIGEHALLI, YELA HANKA HOBLI, BANGALORE MEASURING 7,957 SQ.FT . AS PER THE TERMS OF THE JDA, IN CONSIDERATION OF TRANSFER OF 55% OF THE UNDIVIDED S HARE OF LAND, THE ASSESSEE WILL GET 45% OF THE SUPER BUILT UP ARE A. AS PER THE TERMS OF THE JDA, THE OWNERS UNDERTAKE TO CONVEY OR TRANSFER 55% OF THE UNDIVIDED SHARE OF LAND TO THE DEVELOPER OR THEIR NOMINEES AND GRANT THE DEVELOPERS THE EXCLUSIVE RIG HTS TO CONSTRUCT THE COMMERCIAL/RESIDENTIAL APARTMENTS AS PER THE SANCTIONED PLAN. THE OWNERS HAVE IRREVOCABLY GRANT THE PERMISSION AND LICENCE INCLUDING AUTHORITY TO THE D EVELOPERS TO ENTER UPON THE SCHEDULE PROPERTY FOR CONSTRUCTION O F THE APARTMENTS. THE OWNERS HAVE EXECUTED POWER OF ATTOR NEY IN FAVOUR OF NOMINEES OF THE DEVELOPERS AUTHORIZING SU CH NOMINEES TO DO ALL ACTS, DEEDS AND THINGS IN RELATION TO THE DEVELOPMENT OF THE SCHEDULE PROPERTY. THE ABOVE FACTS IN THE JOINT DEVELOPMENT AGREEMEN T INDICATE THAT THE OWNERS OF THE LAND HAVE GIVEN THE CONTROL OF THE LAND TO THE DEVELOPER. THE POSSESSION AS PER SECTIO N 2(47)(V) IS NOT EXCLUSIVE POSSESSION. THE DEVELOPER BY VIRTUE O F THE TERMS AND CONDITIONS MENTIONED IN THE AGREEMENT HAS OBTAI NED HAS ENABLED HIM TO EXERCISE GENERAL CONTROL OVER THE PR OPERTY AND TO MAKE USE OF IT FOR THE INTENDED PURPOSE. FURTHER BY VIRTUE OF TERMS AND CONDITIONS HAS THE SOLE RIGHT TO DEVELOP THE SAID LAND AND HAS RIGHTS TO MORTGAGE, SELL OR ALIENATE THE DE VELOPER'S SHARE IN THE SAID LAND. BY VIRTUE OF THE TERMS AND CONDIT IONS MENTIONED IN THE JOINT DEVELOPMENT AGREEMENT, 'TRANSFER' AS C ONTEMPLATED SUB-CLAUSE (V) OF SECTION 2(47) HAS TAKEN PLACE. TH E LAND MENTIONED IN THE JDA HAS BEEN TRANSFERRED AS PER TH E PROVISIONS OF THE SECTION 2(47)(V) OF THE INCOME TAX ACT, 1961 AND HENCE LIABLE FOR CAPITAL GAINS IN THE YEAR OF JOINT DEVEL OPMENT AGREEMENT. ITA NOS. 1508 & 1509/BANG/2016 PAGE 6 OF 22 7. THE LD. AR SUBMITTED THAT THE APPELLANT HAS OWN ED A PIECE OF LAND IN KODIGEHALLI, BANGALORE WHICH HAS BEEN HELD FOR A PERIOD OF MORE THAN 3 YEARS. THE LAND WAS GIVEN FOR DEVELOPMENT TO M/S HO ME CONCEPT BY ENTERING INTO JDA , WHO HAS AGREED TO CONSTRUCT 20 FLATS IN THE SAID LAND BY GIVING 45% (9 FLATS) TO THE APPELLANT AND TO RETAIN 55% (11 FLATS) TO BE TRANSFERRED BY HIM TO HIS NOMINEES TO WHOM THE APPE LLANT IS REQUIRED TO TRANSFER UNDIVIDED SHARE IN THE LAND. THE JOINT DEV ELOPMENT AGREEMENT WAS EXECUTED ON 5.2.2007. SIMULTANEOUSLY THE POWER ATTORNEY TO THE DEVELOPER WAS GIVEN TO ACT ON BEHALF OF THE APPELLA NT TO FELICITATE THE DEVELOPMENT. THE DEVELOPER HAS BY EXERCISING THE PO WER OF ATTORNEY HAS ENTERED INTO AGREEMENT TO SALE IN UNDIVIDED SHARE I N THE LAND IN RELATION TO ONE OF THE FLATS WHICH HAS FALLEN INTO THE DEVELOPE R'S SHARE ON 7.2.2007 FOR WHICH HE RECEIVED THE ADVANCE. THE REST OF THE FLAT S FELL INTO THE SHARE OF THE DEVELOPER APPEARED TO HAVE BEEN SOLD DURING F.Y . 2008-09. THE APPELLANT WAS GIVEN POSSESSION OF 9 FLATS DURING TH E ACCOUNTING YEAR 2008- 09, OUT OF WHICH APPELLANT HAS SOLD 3 FLATS, ONE IN AUGUST 2008 AND 2 IN SEPTEMBER 2008. THE REMAINING 6 FLATS ARE BEING HEL D BY HER. WITH REGARD TO 55% OF THE UNDIVIDED SHARE IN THE LAND THE TRANS FER HAS TAKEN PLACE WHEN THE UNDIVIDED SHARE OF LAND HAS BEEN TRANSFERRED TO THE VARIOUS FLAT OWNERS BY THE DEVELOPER BY USING THE POWER OF ATTORNEY GIV EN BY THE APPELLANT. ON PERUSAL OF THE JOINT DEVELOPMENT AGREEMENT IT COULD REASONABLY CONSTRUED THAT THE DEVELOPER HAD NO INTENTION TO PURCHASE. I N THIS REGARD, CLAUSE 8.1 OF THE AGREEMENT WAS REFERRED TO. 8. FURTHER, IT IS SUBMITTED THAT THE APPELLANT HAS CLAIMED THE EXEMPTION U/S 54F IN RESPECT OF COST OF INVESTMENT IN ONE OF THE FLATS AGAINST THE CAPITAL GAINS AND THE APPELLANT HAS ALSO CLAIMED EX EMPTION U/S 54EC OF THE ACT. 9. THUS, IT IS SUBMITTED THAT IN THE AGREEMENT THE TRA NSFEREE HAS NOT BEEN IDENTIFIED IN THE DOCUMENTS. IN THE CIRCUMSTAN CES, IT IS SUBMITTED THAT ITA NOS. 1508 & 1509/BANG/2016 PAGE 7 OF 22 THERE IS NO TRANSFER OR A DEEMED TRANSFER BY APPLYI NG THE PROVISIONS OF SEC.2(47)(V) OF THE ACT WHEN THE JDA WAS EXECUTED A ND ACCORDINGLY THERE IS NO INCIDENCE OF CAPITAL GAINS FOR THE ASSESSMENT YEAR 2007-08 WHICH REQUIRED TO BE OFFERED FOR TAXATION BY THE APPELLAN T. IT IS VERY CLEAR THAT THERE WAS NO IDENTITY OF THE TRANSFEREES IN THE JDA . THE CONTRACT BETWEEN THE PARTIES WOULD CLEARLY SHOW THAT THE DEVELOPERS WAS PROVIDED UNDIVIDED SHARE IN THE LAND TO BE TRANSFERRED TO ITS NOMINEES OR TO IT. THE DEVELOPERS WAS REQUIRED TO EXERCISE ITS OPTION WHETHER TO BUY THE UNDIVIDED SHARE IN THE LAND TO ITSELF OR TO THE IDENTIFIED VARIOUS TRA NSFEREES TO WHOM THE TRANSFER SHOULD BE MADE BY THE OWNERS. THUS, IN THE JDA, THE RE WAS NO SUGGESTION THAT THE DEVELOPER IS THE TRANSFEREE. THE JDA DID N OT SATISFY THE CONDITIONS PROVIDED U/S. 53A OF THE TRANSFER OF PROPERTY ACT. CONSEQUENTLY THE PROVISIONS OF SEC.2(47)(V) OF THE IT ACT WAS ALSO N OT APPLICABLE. CONSEQUENTLY, THERE IS NO LIABILITY TO CAPITAL GAIN S FOR THE ASSESSMENT YEARS 2007-08. THE CAPITAL GAINS WOULD ARISE WHEN THE SAL E DEED IS REGISTERED WITH RESPECT TO EACH OF THE TRANSFEREE SINCE THERE WAS NO DEEMED TRANSFER TO THE DEVELOPER, THE APPELLANT THEMSELVES WAS EXEC UTING THE SALE DEED IN RESPECT OF TRANSFER OF UNDIVIDED SHARE IN THE LAND TO THE ULTIMATE BUYERS. 10. IN THIS CONNECTION, IT IS SUBMITTED THAT THE JU DGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DR. T.K. DAYALU REPORTED IN 60 DTR (KAR) 403 / 202 TAXMAN 571 , WHEREIN THE HON'BLE COURT FOLLOWED THE JUDGMENT O F CHATURBHUJ DWARKADAS KAPADIA VS. CIT (2003) 260 ITR 491 (BOM) WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. THE LD. AR FURTHER SUBMITTED THAT THERE WAS NON -REFUNDABLE CONSIDERATION FOR THE ACQUISITION OF UNDIVIDED SHAR E IN THE LAND BY THE DEVELOPERS APART FROM GIVING SUPER-STRUCTURE FREE O F COST. NOWHERE IT IS PROVIDED THAT THE UNDIVIDED SHARE IN THE LAND WAS R EQUIRED TO BE TRANSFERRED TO VARIOUS PROSPECTIVE BUYERS ON THE CONSTRUCTION O F THE DEVELOPER. THERE IS NOTHING TO INDICATE THAT THE DEVELOPER WOULD BE THE ULTIMATE TRANSFEREE FOR ITA NOS. 1508 & 1509/BANG/2016 PAGE 8 OF 22 THE TRANSFER OF PROPERTY TO THE THIRD PARTY WITHOUT NOTICE TO THE APPELLANT. THE LD. AR SUBMITTED THAT IT WAS ON THE SPECIFIC FA CTS, AS FOUND BY THE HIGH COURT IN THE CASE OF DR. T.K. DAYALU (SUPRA) HAS COME TO THE CONCLUSION THAT THE TRANSFER HAD BEEN COMPLETED WHEN THE AGREE MENT WAS EXECUTED. THE FACTS ARE DISTINGUISHABLE WITH REGARD TO THE CA SE OF THE APPELLANT AND ACCORDINGLY THE SAID CASE WAS OF NO APPLICATION TO SUGGEST THAT THE CAPITAL GAINS WAS REQUIRED TO BE ASSESSED FOR THE ASSESSMEN T YEAR 2007-08. FURTHER THE JUDGMENT HAS NOT BEEN ACCEPTED AND THE SAME HAS BEEN PURSUED IN APPEAL BEFORE THE HON'BLE APEX COURT. 12. THE LD. AR SUBMITTED THAT FROM A READING OF CLA USE 48 OF THE DEVELOPMENT AGREEMENT, THE RIGHT TO TRANSFER WOULD OCCUR WHEN THE TRANSFEREE IS IDENTIFIED AND POSSESSION IS HANDED O VER TO HIM. UNTIL THEN THERE IS NO TRANSFER U/S.2(47) R.W.S.45 OF THE ACT. ON READING THE JDA IF THE DEVELOPER IS IDENTIFIED AS A TRANSFEREE, THEN BY VI RTUE OF THE CONDITION THAT ONLY WHEN THE POSSESSION OF THE OWNERS' SHARE OF SU PER STRUCTURE IS HANDED OVER TO THEM IN DECEMBER 2010, AT THE EARLIEST THE TRANSFER CAN BE CONTEMPLATED. IN SUCH CIRCUMSTANCES, THE CAPITAL GA INS WILL FALL FOR TAXATION FOR THE ASSESSMENT YEAR 2011-12. HOWEVER, FOR THE R EASONS STATED HEREINABOVE IT WAS SUBMITTED THAT TRANSFER IN ACCOR DANCE WITH SEC.2(47) OF THE ACT WOULD BE COMPLETE ONLY WHEN THE TRANSFEREE IS IDENTIFIED AND WITH WHOM AN AGREEMENT IS EXECUTED FOR TRANSFER OF UNDIV IDED SHARE IN THE LAND IN PURSUANCE OF WHICH HE/ SHE HAS BEEN PUT IN POSSE SSION EITHER DIRECTLY OR CONSTRUCTIVELY. UNTIL THEN NO CAPITAL GAINS FOR TAX ATION WOULD ARISE IN THE HANDS OF THE OWNERS. ACCORDINGLY IT IS PRAYED THAT THE ADDITION MADE BY AO FOR THE RELEVANT ASSESSMENT YEAR HAS TO BE DELETED. 13. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT OR IGINAL ASSESSMENT WAS COMPLETED U/S. 143(1) AND REOPENING WAS WITHIN FOUR YEARS. BEING SO, THERE IS NO INFIRMITY IN THE ORDER OF AO IN REOPENI NG THE ASSESSMENT AND THE SAME TO BE CONFIRMED. ITA NOS. 1508 & 1509/BANG/2016 PAGE 9 OF 22 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, ORIGINALLY THERE WAS NO ASSESSMENT U/ S. 143(3) OF THE ACT AND REOPENING WAS MADE WITHIN FOUR YEARS FROM THE END O F RELEVANT ASSESSMENT YEAR AND THE AO VALIDLY RECORDED REASONS FOR REOPEN ING THE ASSESSMENT AS RECORDED ABOVE. AT THE TIME OF REOPENING, THERE NE ED NOT BE CONCLUSIVE EVIDENCE FOR REOPENING AN ASSESSMENT. U/S 147 OF THE ACT, REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT WHERE THE CASE IS NOT COVERED BY THE PROVISIONS OF SECTION 143. INTIMATION U/S. 143(1) CANNOT BE TREATED AS A N ORDER OF ASSESSMENT AND THERE BEING NO ASSESSMENT U/S. 143(3), THERE IS NO QUESTION OF CHANGE OF OPINION ON THE ISSUE DEALT BY THE AO FOR REOPENI NG THE ASSESSMENT. 15. IN THE PRESENT CASE, THE AO HAS REASON TO BELIE VE THAT INCOME HAD ESCAPED ASSESSMENT. IT DOES NOT MEAN THAT THERE SH OULD HAVE BEEN FINAL ASCERTAINMENT ABOUT THE FACT BY LEGAL EVIDENCE AND CONCLUSION. WE ARE OF THE OPINION THAT THE AO HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HE DULY RECORDED THE REASONS ON THIS COUNT. BEING SO, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI V. ACIT, 284 ITR 593 (SC) , WE UPHOLD THE REASSESSMENT. 16. ON MERITS, THE ASSESSEE RAISED GROUNDS THAT THE RE IS NO TRANSFER IN THE ASSESSMENT YEAR UNDER CONSIDERATION AS JDA WAS ENTERED ON 5.2.2007 ALONG WITH GPA AND THERE WAS NO POSSESSION OF THE P ROPERTY HANDED OVER TO THE DEVELOPER. ACCORDING TO THE LD. AR, THE PRO VISIONS OF SECTION 2(47)(V) OF THE ACT IS NOT APPLICABLE AS THE ASSESSEE HAS ON LY GIVEN LICENCE TO THE DEVELOPER TO ENTER INTO THE LAND AND TO START CONST RUCTION. THERE WAS NO TRANSFER OR LEGAL OWNERSHIP OF THE PROPERTY TO THE DEVELOPER. HE DREW OUR ATTENTION TO CLAUSE 1.1, 1.2 & 1.3 OF THE JDA WHICH READS AS UNDER:- 1) PERMISSION FOR DEVELOPMENT: ITA NOS. 1508 & 1509/BANG/2016 PAGE 10 OF 22 1.1 THE OWNERS ARE IN POSSESSION AND ENJOYMENT OF THE SCHEDULE PROPERTY. THE OWNERS HEREBY AUTHORIZE THE DEVELOPMENT OF THE SCHEDULE PROPERTY. 1.2 THE OWNERS HEREBY AGREE NOT TO INTERFERE OR INTERRU PT IN THE COURSE OF CONSTRUCTION AND DEVELOPMENT OF THE SCHEDULE PROPERTY AND/OR COMMIT ANY ACT OR OMISSION HAVING THE EFFECT OF DELAYING OR STOPPING THE WORK THAT HAS TO BE DONE UNDER THIS AGREEMENT. HOWEVER, THE OWNE RS SHALL ALWAYS BE ENTITLED TO INSPECT THE PROGRESS OF THE WORK AND TYPE OF WORK WHICH IS BEING DONE ON THE SCHEDUL E PROPERTY. 1.3 THE OWNER HAS GIVEN UP HIS SHARE TO THE DEVELOPER O R HIS EMPLOYEES OR ARCHITECTURE TO CARRY OUT THE DEVELOPM ENTAL WORKS. THIS PERMISSIVE POSSESSION DOES NOT BE CONS TRUED AS POSSESSION GIVEN UNDER THE AGREEMENT AS PART PERFORMANCE OF THE CONTRACT UNDER SEC 53A OF TRANSF ER OF PROPERTY ACT. 17. HE ALSO DREW OUR ATTENTION TO CLAUSE 8 OF GPA WHICH READS AS UNDER:- 8. TRANSFER OF DEVELOPERS SHARE : 8.1) THE OWNER SHALL AGREE TO CONVEY/TRANSFER SHARE IN THE LAND COMPRISED IN THE SCHEDULE PROPERTY TO THE DEVELOPER OR PERSON/S NOMINATED BY THE DEVELOPER AS AND WHEN REQUIRED BY THE DEVELOPER BY EXECUTING FRESH SALE DEEDS. 8.2) THE DEVELOPER WILL BE ENTITLED TO ENTER INTO AGREEMENTS FOR SALE OF UNDIVIDED SHARES IN THE SCHEDULE PROPER TY TO THE EXTENT OF THEIR AGREED SHARE WITH PERSONS INTENDING TO OWN UNITS AND ENTER INTO CONSTRUCTION AGREEMENT WITH SUCH INT ENDING UNIT HOLDERS ENTIRELY AT THE RISK AS TO AND CONSEQUENCES OF THE DEVELOPER. 8.3) THE STAMP DUTY, REGISTRATION CHARGES AND EXPEN SES IN CONNECTION WITH THE PREPARATION AND EXECUTION OF TH E DEED/S OF CONVEYANCE AND/OR OTHER DOCUMENTS RELATING TO THE D EVELOPER SHARE IN THE LAND RIGHTS IN THE SCHEDULE PROPERTY A GREED TO BE ITA NOS. 1508 & 1509/BANG/2016 PAGE 11 OF 22 CONVEYED TO THE DEVELOPER OR DEVELOPERS NOMINEE/S SHALL BE BORNE BY THE DEVELOPER OR THE NOMINEE/S OF THE DEVE LOPER. 18. HE ALSO DREW OUR ATTENTION TO CLAUSE 9 OF THE GPA AS UNDER:- TO ENTER INTO AGREEMENTS FOR SALE OF UNDIVIDED SHA RE IN THE SCHEDULE PROPERTY TO THE EXTENT OF 55% OF DEVELOPER WITH OR WITHOUT CONSTRUCTION ANY INTENDING PURCHASER OF FLA TS IN TERMS OF JOINT DEVELOPMENT AGREEMENT. EXCEPT PRESENTING THE DOCUMENT RELATE TO THE CONVEYANCE OF THE FLAT BEFORE THE SUB REGISTRAR FOR WHICH THE EXECUTOR OWNER SHALL COME AND PRESENT T HE SAME BEFORE THE SUB-REGISTRAR AS FOR AS THE SHARE OF THE DEVELOPER IS CONCERN. 19. THUS, THE LD. AR SUBMITTED THAT GIVING LICENCE TO THE DEVELOPER TO ENTER INTO THE LAND CANNOT BE EQUATED WITH GIVING A BSOLUTE LEGAL TITLE OF THE PROPERTY TO THE DEVELOPER. HE THEREFORE SUBMITTED THAT IT CANNOT CONSTITUTE AS TRANSFER IN TERMS OF SECTION 2(47)(V) OF THE ACT . ACCORDING TO HIM, CAPITAL GAIN UNDER THE DEVELOPMENT AGREEMENT ARISES ONLY ON EXCHANGE OF BUILT-UP AREA BY THE DEVELOPER TO THE LANDLORD.. F URTHER, IT WAS SUBMITTED THAT THE CONSTRUCTION AREA OF THE PROPERTY IS NOT I N EXISTENCE ON THE DATE OF JDA OR ON THE DATE OF GPA AND IT IS SUBJECT TO MANY FACTORS LIKE SANCTION OF MUNICIPAL PLAN, CONSTRUCTION OF BUILDING, GETTING O CCUPANCY CERTIFICATE, ETC. ACCORDING TO THE LD. AR, THE ENTIRE ACT OF CONSTRUC TION IS UNDER UNCERTAINTY. TRANSFER CANNOT TAKE PLACE IN THE ASSESSMENT YEAR U NDER CONSIDERATION AND ALSO CONSTRUCTION BEING UNASCERTAINED, NO CAPITAL G AIN TO BE CHARGED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO HIM, ACCRUAL OF INCOME ITSELF FAILS, NO CAPITAL GAIN IS CHARGEABLE. AS TH ERE IS NO ACCRUAL OF CAPITAL GAIN, CHARGING SECTION 48 FAILS AND THERE IS NO COM PUTATION OF CAPITAL GAIN IN THE HANDS OF ASSESSEE. 20. FURTHER IT WAS SUBMITTED THAT THE VALUE OF CONS TRUCTED AREA WHICH WILL BE HANDED OVER TO THE ASSESSEE BY THE DEVELOPER IS NOT KNOWN IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND IT CANNOT B E DETERMINED AS THEY ARE NON-EXISTENT ON THE DATE OF ENTERING INTO JDA A ND THE CONSTRUCTION AREA ITA NOS. 1508 & 1509/BANG/2016 PAGE 12 OF 22 WHICH ACCRUES TO THE ASSESSEE IN FUTURE CANNOT BE P REDICTED AND IT CANNOT BE BROUGHT TO TAX. 21. THE LD. AR SUBMITTED THAT THE FACTS OF THE CASE IN THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SESHASAYEE STEELS P LTD VS ACIT REPORTED IN 421 ITR 4 6 IS DISTINGUISHABLE FROM THE ASSESSEE'S CASE AS IT WAS HELD THEREIN THAT MERE GIVING OF LICENCE TO THE DEVELOPER COULD NOT BE SAID TO BE 'POSSESSION' WITHIN THE MEANING OF SECTI ON 53A OF THE TRANSFER OF PROPERTY ACT, 1882, AND THE DEVELOPER HAS TO GET THE CONTROL OVER THE LAND AND NOT ACTUAL PHYSICAL OCCUPATION OF LAND. TH E HON'BLE SUPREME COURT OBSERVED THAT ON THE DATE OF AGREEMENT TO SEL L THE OWNERS RIGHTS WERE COMPLETELY INTACT AND THE FURTHER HELD THAT TH E ASSESSEE'S RIGHT IN THE IMMOVABLE PROPERTY WERE EXTINGUISHED ON THE RECEIPT OF LAST CHEQUE AND COMPROMISE DEED COULD BE STATED TO BE THE TRANSACTI ON WHICH HAD THE EFFECT OF TRANSFERRING THE IMMOVABLE PROPERTY IN QU ESTION. 22. IN THE CASE OF SESHASAYEE STEELS P LTD. (SUPRA) THE FACTS WERE THAT LANDLORD HAD ENTERED INTO AN AGREEMENT TO SELL COUP LED WITH GPA. SUBSEQUENTLY, THE PARTIES THERETO HAD ENTERED INTO A COMPRISE DEED TO RATIFY THE GPA AND THE AGREEMENT TO SELL. THE COMPROMISE D EED WAS EXECUTED FOR THE FACT THAT THE DEVELOPER HAD NOT ADHERED TO ALL THE TERMS AND CONDITION OF AGREEMENT TO SELL AND THEREFORE, PROVI SIONS OF SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 WERE NOT COMPLIED WI TH AND CONTRACT FOR SALE FELL INTO QUESTION. AS PER SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 CONTRACT CAN BE ASCERTAINED WHEN IN PART PERFORMANC E OF CONTRACT, A PERSON HAS TAKEN OVER THE POSSESSION AND HAS DONE IN FURTH ERANCE OF THE CONTRACT PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT. IN THE CASE OF SESHASAYEE STEELS THOUGH THE POSSESSION WAS TAKEN O VER, THERE WAS NO WILLINGNESS TO PERFORM HIS PART OF CONTRACT AS THE TRANSFEREE HAD NOT ADHERED TO THE TERMS AND CONDITIONS OF THE AGREEMEN T TO SELL AND THEREFORE, THE COMPROMISE DEED WAS EXECUTED TO RATIFY THE AGRE EMENT TO SELL AND ITA NOS. 1508 & 1509/BANG/2016 PAGE 13 OF 22 GPA. THE COMPROMISE DEED COULD BE STATED TO BE THE DOCUMENT TO EFFECT THE TRANSFER AND AS SUCH THE HON'BLE SUPREME COURT HELD THAT ON THE RECEIPT OF THE LAST CHEQUE MENTIONED IN THE COMPROM ISE DEED, THE ASSESSEE'S RIGHTS IN THE PROPERTY STOOD EXTINGUISHE D. 23. WHEREAS IN THE PRESENT CASE, THE ASSESSEE HAS P ERMITTED THE DEVELOPER TO ENTER UPON THE SCHEDULE PROPERTY AND P ERFORM ALL SUCH ACTS AS ARE NECESSARY TO DEVELOP THE SCHEDULE PROPERTY. THE JDA STATES THAT THE LANDLORD SHALL NOT REVOKE THE RIGHTS SO GRANTED TIL L COMPLETION OF DEVELOPMENT AND SALE OF BUILT-UP AREA. THE ACT OF A SSE AND DEVELOPER, CAN BEYOND ANY DOUBT OF UNCERTAINTY, BE CONCLUDED AS A CONTRACT WITHIN THE MEANING OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. THE ASSESSEE HAS GIVEN THE POSSESSION AND THE WILLINGNE SS TO PERFORM THE CONTRACT WAS ESTABLISHED SINCE THE STRUCTURE OF THE BUILDING/S GOT COMPLETED AND THERE WERE NO ENCUMBRANCES TO DISRUPT THE TERMS AND CONDITION OF JDA SO AS TO DRAW A COMPROMISE DEED TO RATIFY THE TERMS OF JDA. FOR THE AFOREMENTIONED REASONS, THE JUDGMENT OF SEHASAYEE STEELS (SUPRA) IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. 24. UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS PRAYED THAT THE CONSIDERATION DECLARED BY THE ASSESSEE AND SUBSEQUENTLY ENHANCED BY THE AO AND CONFIRMED BY THE CIT(APPEALS ) BE DELETED IN THE INTEREST OF JUSTICE. 25. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E PROVISIONS OF SECTION 2(47)(V) OF THE ACT HAS AN INCLUSIVE DEFINI TION AND SUBMITTED THAT THE ASSESSEE ENTERED INTO JDA AND GIVEN POSSESSION OF T HE PROPERTY. HE RELIED ON THE JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF DR. T.K. DAYALU (SUPRA) WHEREIN IT WAS HELD THAT WHEN POSSESSION OF THE PR OPERTY HAS BEEN HANDED OVER TO THE ASSESSEE AND THE CASH P ORTION OF THE AGREEMENT ALSO RECEIVED ON THAT DATE, THE APPROPRIA TE ASSESSMENT YEAR IN WHICH THE CAPITAL GAIN IS TO BE TAXED IS THE YEAR O F ENTERING INTO JDA AND NOT ITA NOS. 1508 & 1509/BANG/2016 PAGE 14 OF 22 THE YEAR WHEN THE PROJECT WAS COMPLETED. HE ALSO R ELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) WHEREIN IT WAS HELD AS UNDER:- HAVING REGARD TO THE FINDING OF FACT THAT POSSESSI ON OF THE PROPERTY HAS BEEN HANDED OVER ON 30 TH MAY, 1996, AND CASH PART OF THE AGREEMENT ALSO RECEIVED ON THAT DATE, APPROP RIATE ASSESSMENT YEAR IN WHICH THE CAPITAL GAIN IS TO BE TAXED IS 1997- 98 AND NOT IN THE YEAR WHEN THE ENTIRE PROJECT WAS COMPLETED IN 2003-04. 26. ACCORDING TO THE LD. DR, TRANSFER WAS COMPLETE AS THE DEVELOPER HAS COMPLETE CONTROL OVER THE PROPERTY SO AS TO CONSTRU CT THE BUILDING IN THAT LAND, THEREFORE, HE SUPPORTED THE ORDERS OF LOWER A UTHORITIES. 27. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE CONDITIONS LAID DOWN IN JDA AND GPA. THE ASSESSEE ENTERED INTO JDA ON 5.2.2007, THE FINA NCIAL YEAR ENDED ON 31.3.2007. GPA WAS ALSO ENTERED INTO ON 5.2.2007. WE HAVE ALSO GONE THROUGH THE CLAUSES NO. 1, 3, 6 & 8 OF JDA AND THE CLAUSES IN GPA, SPECIFICALLY CLAUSE NO. 9. A READING OF THE ABOVE CLAUSES MAKE IT CLEAR THAT THE ASSESSEE HAS ONLY GIVEN THE LICENCE TO THE DEVE LOPER TO ENTER INTO THE LAND AND TO CONSTRUCT THE BUILDING ON THE SAME. TH E ASSESSEE HAS TO COME FOR FINAL REGISTRATION IN FAVOUR OF FLAT OWNERS WHO HAS TO CONVEY THE OWNERSHIP IN THEIR FAVOUR. AS SEEN FROM THE DATE O F JDA, IT WAS ENTERED ON 5.2.2007 AT THE FAG END OF THE FY 2006-07 RELATING TO AY 2007-08. IN THIS YEAR UNDER CONSIDERATION, NO MUCH DEVELOPMENT HAS T AKEN PLACE. THE AO SOUGHT TO BRING CAPITAL GAIN ONLY ON THE REASON THA T THE ASSESSEE ENTERED INTO JDA WITH THE DEVELOPER. BUT THERE WAS NO PROG RESS IN THE DEVELOPMENT IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION. IT WAS THE SUBMISSION OF THE LD. AR THAT THERE WAS NO DEVELOPM ENT ACTIVITY UNTIL THE END OF FY 2006-07. COMMENCMENT OF BUILDING CONSTRU CTION HAS NOT BEEN ITA NOS. 1508 & 1509/BANG/2016 PAGE 15 OF 22 INITIATED A THE BUILDING APPROVAL WAS OBTAINED IN T HE NEXT FINANCIAL YEAR. THEREFORE, NO INCOME IS SAID TO HAVE ACCRUED AS LAI D DOWN IN SECTION 48 OF THE ACT. NOTHING IS BROUGHT ON RECORD BY THE AO TO SHOW THAT THERE WAS DEVELOPMENT ACTIVITY IN THE IMPUGNED LAND DURING TH E ASSESSMENT YEAR UNDER CONSIDERATION AND COST OF CONSTRUCTION INCURR ED BY THE DEVELOPER WAS NOT KNOWN. THEREFORE, IT IS TO BE INFERRED THAT TH ERE WAS NO CONSTRUCTION ACTIVITY BY THE DEVELOPER DURING THE ASSESSMENT YEA R IN THIS LAND. THE ASSESSEE ONLY RECEIVED A MEAGRE AMOUNT OF REFUNDABL E DEPOSIT OF RS.3 LAKHS DURING THE FINANCIAL YEAR AS ENUMERATED IN CL AUSE 13 OF THE JDA. BEING SO, THERE WAS NO TRANSFER OF PROPERTY UNDER T HIS JDA. ALSO WITHOUT ACCRUAL OF CONSTRUCTION TO THE ASSESSEE, ASSESSEE W AS NOT EXPECTED TO PAY CAPITAL GAIN ON THE JDA ENTERED BY THE ASSESSEE WIT H THE DEVELOPER. THE CONDITION LAID DOWN IN SECTION 2(47)(V) OF THE ACT R.W.S. 53A OF THE TRANSFER OF PROPERTY ACT IS NOT COMPLIED WITH AS THERE WAS N O WILLINGNESS OF THE DEVELOPER TO PERFORM HIS PART OF THE DUTY IN TERMS OF THE JDA. ACCORDINGLY IT IS HELD THAT THERE WAS NO TRANSFER FOR THE ASSESSME NT YEAR UNDER CONSIDERATION AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF SESHASAYEE STEELS P LTD. (SUPRA) . ACCORDINGLY, WE HOLD THAT THERE WAS NO TRANSFER IN AY 2007-08. ACCORDINGLY, THE OTHER GR OUNDS ARE ACADEMIC AND NOT ADJUDICATED. THUS, THE APPEAL FOR THE AY 2007- 08 IS PARTLY ALLOWED. AY 2009-10 28. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LEARNED CIT (A) ERRED IN UPHOLDING THE ADOP TION OF VALUE C CONSIDERATION AT RS.96,75,000/- BY THE LEAR NED ASSESSING AUTHORITY FOR THE ASSESSMENT YEAR 2009-10 AS DEEMED CAPITAL GAINS. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING DETERMINAT ION OF DEEMED CAPITA GAIN AT RS.94,30,223/- FOR THE ASSESS MENT YEAR 2009-10. ITA NOS. 1508 & 1509/BANG/2016 PAGE 16 OF 22 3. THE LEARNED CIT(A) ERRED IN UPHOLDING THE REJECT ION OF THE EXEMPTION CLAIMED OF THE ACT ON THE GROUND THAT TWO RESIDENTIAL FLATS ARE SITUATED AT DIFFERENT FLOORS. 4. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DETERM INATION OF INCOME UNDER THE HEAD 'PROFITS GAINS OF BUSINESS & PROFESSION AT RS.22,29,230/-. 5. THE APPELLANT SUBMITS THAT NO INCOME UNDER THE H EAD CAPITAL GAIN HAS AROSE IN THE ASSESSMENT YEAR 2009- 10. 6. THE LEARNED CIT (A) HAVING HELD THE CAPITAL GAIN IS TAXABLE IN THE ASSESSMENT YEAR 2007-08, OUGHT TO HA VE DELETED THE ENTIRE INCOME RETURNED UNDER THE HEAD 'CAPITAL GAIN ' BY THE APPELLANT FOR ASST. YEAR 2009-10. 7. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE LIABILITY TO PAY HIGHER TAX IS ON ACCOUNT OF REJECTION OF EXE MPTION CLAIMED U/S.54 OF THE ACT AND THE EXEMPTION CLAIMED IS SUPP ORTED BY JURIDICAL DECISIONS AND IN SUCH CIRCUMSTANCES OUGHT TO HAVE HELD NO INTEREST IS LEVIABLE U/S.234B OF THE ACT. 8. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT NO IN TEREST IS LEVIABLE SINCE REJECTION OF EXEMPTION CANNOT BE CON SIDERED AS CURRENT INCOME SO AS TO HOLD THERE IS FAILURE TO PA Y ADVANCE TAX. APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL TO PERMIT TO ADD/ALTER/DELETE ANY GROUND OR GROUNDS AT THE TIME OF HEARING IN THE INTEREST OF JUSTICE. 29. GROUND NO.4 IS NOT EMANATING FROM THE ORDER OF CIT(APPEALS) AND AS SUCH THE SAME IS DISMISSED. 30. GROUND NO.5 IS NOT PRESSED AND ACCORDINGLY THE SAME IS DISMISSED. 31. REGARDING GROUND NOS. 1, 2 & 6, WE HAVE ALREADY HELD THAT THERE WAS NO CAPITAL GAIN IN THE AY 2007-08 AND THE ASSES SEE HERSELF HAS OFFERED CAPITAL GAIN IN THE AY 2009-10 AND SUBMITTE D THAT IN THIS AY CHARGING OF CAPITAL GAIN BY LOWER AUTHORITIES MAY B E CONFIRMED. MORE SO, THE CONSTRUCTION WAS COMPLETED AND ASSESSEES SHARE OF CONSTRUCTED AREA ITA NOS. 1508 & 1509/BANG/2016 PAGE 17 OF 22 WAS RECEIVED AND THE ASSESSEE HAS TO PAY CAPITAL IN THE RELEVANT ASSESSMENT YEAR. BEING SO, THERE IS NO MERIT IN TH IS GROUND AND IT IS ACCORDINGLY DISMISSED. 32. GROUND NOS.3 & 7 IS WITH REGARD TO GRANT OF EXE MPTION U/S. 54/54F OF THE ACT. THE GRIEVANCE OF THE ASSESSEE IS THAT THE AO HAS GRANTED DEDUCTION U/S. 54/54F ONLY ON SINGLE FLAT AND ASSES SEE CLAIMED EXEMPTION ON TWO FLATS BUILT UP ON TWO DIFFERENT FLOORS. IN OUR OPINION, THIS ISSUE IS COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ARUN K. THIAGARAJAN V. CIT, ITA NO.25 OF 2011, JUDGMENT DAT ED 18.6.2020 WHEREIN IT WAS OBSERVED AS UNDER:- 7. LEARNED SENIOR COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT CLAIM OF THE ASSESSEE IN THIS APPEAL RELATES T O EXEMPTION UNDER SECTION 54 OF THE ACT IN RESPECT OF INVESTMEN T MADE IN TWO RESIDENTIAL PROPERTIES. IT IS ARGUED THAT THERE IS NO DISPUTE WITH REGARD TO COMPUTATION OF CAPITAL GAINS OR FACTUM OF INVESTMENTS IN TWO PROPERTIES. IT IS POINTED OUT THAT SECTION 5 4(1) WAS AMENDED BY FINANCE ACT, 2014 WITH EFFECT FROM 1-4-2 015, BY WHICH THE WORDS 'CONSTRUCTED A RESIDENTIAL HOUSE' W ERE SUBSTITUTED AND THE WORDS 'CONSTRUCTED ONE RESIDENTIAL HOUSE IN INDIA' WAS SUBSTITUTED. IT IS ARGUED THAT THE EXPRESSION 'A RE SIDENTIAL HOUSE' USED IN SECTION 54 OF THE ACT REFERS TO THE NATURE OF HOUSE AND THE NUMBER OF RESIDENTIAL UNITS TO BE PURCHASED BY THE ASSESSEE AND THEREFORE, THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON CIRCULAR NO . 1/2015 ISSUED BY CENTRAL BOARD OF DIRECT TAXES DATED 20-1- 2015 AND IT IS ARGUED THAT THE AFORESAID AMENDMENT IS PROSPECTIVE IN NATURE. IT IS ALSO URGED THAT SEVERAL COURTS INCLUDING A BENCH OF THIS COURT HAS INTERPRETED THE EXPRESSION 'A RESIDENTIAL HOUSE' AN D HAVE HELD THAT THE LETTER 'A' IN THE CONTEXT, IN WHICH IT IS USED SHOULD NOT BE CONSTRUED AS SINGULAR BUT THE EXPRESSION ALSO PERMI TS USE OF PLURAL. IN SUPPORT OF AFORESAID SUBMISSION, RELIANC E HAS BEEN PLACED ON THE FOLLOWING DECISIONS IN K G RUKMINIAMM A (SUPRA), B. SRINIVAS V. ITO [IT APPEAL NO. 1134 OF 2008, DAT ED 4-7- 2014], CIT V. LATE KHOOBCHAND M. MAKHIJA [IT APPEAL NO. 496 ITA NOS. 1508 & 1509/BANG/2016 PAGE 18 OF 22 OF 2007, DATED 18-12-2013], CIT V. SMT. JYOTHI K. M EHTA [2011] 12 TAXMANN.COM 440/201 TAXMAN 79 (MAG.) (KAR.), TIL OKCHAND & SONS V. ITO [2019] 105 TAXMANN.COM 151/263 TAXMAN 713/413 ITR 189 (MAD.), CIT V. GITA DUGGAL [2014] 5 2 TAXMANN.COM 246/[2015] 228 TAXMAN 62 (SC), CIT V. G ITA DUGGAL [2013] 30 TAXMANN.COM 230/214 TAXMAN 51/357 ITR 153 (DELHI), D. ANAND BASAPPA (SUPRA), CIT V. SMT. V.R. KARPAGAM [2014] 50 TAXMANN.COM 55/226 TAXMAN 197 (MAG.)/[2015] 373 ITR 127 (MAD.), CIT V. SYED ALI A DIL [2013] 33 TAXMANN.COM 212/215 TAXMAN 283/352 ITR 418 (AP), G. CHINNADURAI V. ITO [2016] 74 TAXMANN.COM 227 (MAD.) . 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE REV ENUE SUBMITTED THAT THE WORD USED 'A RESIDENTIAL HOUSE' HAS TO BE INTERPRETED IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. IT IS FURTHER SUBMITTED THAT ASSESSEE IN THE FACTS OF THE CASE IS NOT ENTITLED TO THE BENEFIT OF SECTION 54(1) OF THE ACT AND THE SAM E WOULD AMOUNT TO ABUSE OF LAW. IT IS FURTHER SUBMITTED THA T AN ATTEMPT IS MADE BY THE ASSESSEE TO EVADE THE TAX. LEARNED COUN SEL FOR THE REVENUE HAS INVITED OUR ATTENTION TO THE DECISION R ELIED BY LEARNED SENIOR COUNSEL FOR THE ASSESSEE IN THE CASE OF SMT. K.G RUKMINIAMMA (SUPRA) AND HAS POINTED OUT THAT ON A S ITE A RESIDENTIAL PREMISES EXISTED, WHICH WAS DEMOLISHED AND WAS GIVEN TO A BUILDER UNDER A JOINT DEVELOPMENT AGREEM ENT FOR PUTTING UP FLATS. IN THE AFORESAID FACTUAL BACKGROU ND, IT WAS HELD THAT ALL FOUR FLATS ARE SITUATE IN A RESIDENTIAL BU ILDING AND THEREFORE, CONSTITUTE 'A RESIDENTIAL HOUSE' FOR THE PURPOSES OF SECTION 54 OF THE ACT. SIMILARLY, IT IS POINTED OUT THAT IN ALL THE CASES RELIED UPON BY THE ASSESSEE IN THE FACT SITUA TION OF THE CASES REFERRED TO BY THE COUNSEL FOR ASSESSEE, IT WAS HEL D THAT ASSESSEE IS ENTITLED TO BENEFIT TO SECTION 54(1) OF THE ACT. TH EREFORE, THE AFORESAID DECISION IS OF NO ASSISTANCE TO THE ASSES SEE. 9. BY WAY OF REJOINDER, LEARNED SENIOR COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO FINDING BY ANY OF THE AUTHORITIES THAT ASSESSEE HAD ENGAGED EITHER IN TAX PLANNING OR TAX EVASION AND IN VARIOUS DECISIONS, THE EXPRESSION 'A RESIDENTIAL HOUSE' HAS BEEN INTERPRETED AND THE RATIO LAID DOWN IN THE AFORESAID DECISION APPLIES TO THE FACT SITUATION OF THE INSTANT CASE. 10. WE HAVE CONSIDERED THE SUBMISSIONS MADE ON BO TH THE SIDES AND HAVE PERUSED THE RECORD. IN ORDER TO APPR ECIATE THE RIVAL ITA NOS. 1508 & 1509/BANG/2016 PAGE 19 OF 22 SUBMISSIONS MADE AT THE BAR, WE DEEM IT APPROPRIATE TO REPRODUCE SECTION 54(1) OF THE ACT, WHICH READ, PRIOR TO ITS AMENDMENT BY FINANCE (NO.2) ACT, 2014, AS UNDER: 54(1) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), WHERE, IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEING BUILDINGS OR LA NDS APPURTENANT THERETO, AND BEING A RESIDENTIAL HOUSE, THE INCOME OF WHICH IS CHARGEABLE UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY' (HEREAFTER IN THIS SECTION REF ERRED TO AS THE ORIGINAL ASSET), AND THE ASSESSEE HAS WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON W HICH THE TRANSFER TOOK PLACE PURCHASED OR HAS WITHIN A PERIO D OF THREE YEARS AFTER THAT DATE CONSTRUCTED, A RESIDENT IAL HOUSE, THEN, INSTEAD OF THE CAPITAL GAIN BEING CHAR GED TO INCOME-TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE, IT SHALL BE DEALT WITH IN ACCO RDANCE WITH THE FOLLOWING PROVISIONS OF THIS SECTION. 11. FROM CLOSE SCRUTINY OF THE AFORESAID PROVISIO N, IT IS AXIOMATIC THAT PROPERTY SOLD IS REFERRED TO AS ORIG INAL ASSET AND THE ORIGINAL ASSET IS PRESCRIBED AS BUILDINGS AND LANDS APPURTENANT THERETO AND BEING A RESIDENTIAL HOUSE. THE EXPRESSI ON 'A RESIDENTIAL HOUSE' THEREFORE, INCLUDES BUILDING OR LANDS APPURTENANT THERETO. IT CANNOT BE CONSTRUED AS ONE RESIDENTIAL HOUSE. 12. A BENCH OF THIS COURT IN CASE OF SMT. KG RUKM INIAMMA (SUPRA) DEALT WITH THE MEANING OF EXPRESSION 'A RES IDENTIAL HOUSE' USED IN SECTION 54(1) OF THE ACT WHILE TAKING INTO ACCOUNT SECTION 13(2) OF THE GENERAL CLAUSES ACT, 1897 HELD THAT UN LESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT, THE W ORDS IN SINGULAR SHALL INCLUDE THE PLURAL AND VICE VERSA. I T WAS FURTHER HELD THAT CONTEXT IN WHICH THE EXPRESSION 'A RESIDE NTIAL HOUSE' IS USED IN SECTION 54 MAKES IT EVIDENT THAT IT IS NOT THE INTENTION OF THE LEGISLATURE TO CONVEY THE MEANING THAT IT REFER S TO A SINGLE RESIDENTIAL HOUSE. IT WAS ALSO HELD THAT AN ASSET N EWLY ACQUIRED AFTER SALE OF ORIGINAL ASSET CAN ALSO BE BUILDINGS OR LANDS APPURTENANT THERETO, WHICH ALSO SHOULD BE RESIDENTI AL HOUSE, THEREFORE, THE LETTER 'A' IN THE CONTEXT IT IS USED SHOULD NOT BE CONSTRUED AS MEANING SINGULAR, BUT THE EXPRESSION S HOULD BE READ IN CONSONANCE WITH OTHER WORDS VIZ., BUILDINGS AND LANDS. ITA NOS. 1508 & 1509/BANG/2016 PAGE 20 OF 22 ACCORDINGLY, THE CONTENTION RAISED BY THE REVENUE W AS REJECTED. SIMILAR VIEW WAS TAKEN BY A BENCH OF THIS COURT IN KHOOBCHAND M. MAKHIJA SUPRA, B. SRINIVAS SUPRA AND IN THE CASE OF SMT. JYOTHI K MEHTA SUPRA. THE MADRAS HIGH COURT WHILE D EALING WITH SECTION 54 OF THE ACT AS IT STOOD PRIOR TO AMENDMEN T BY FINANCE ACT NO. 2/2014 IN THE CASE OF TILOKCHAND & SONS SUP RA TOOK THE SIMILAR VIEW AND HELD THAT THE WORD 'A' WOULD NORMA LLY MEAN ONE BUT IN SOME CIRCUMSTANCES IT MAY INCLUDE WITHIN ITS AMBIT AND SCOPE SOME PLURAL NUMBERS ALSO. THE DELHI HIGH COUR T ALSO TOOK THE SIMILAR VIEW IN CASE OF GITA DUGGAL SUPRA. 13. IT IS WELL SETTLED IN LAW THAT AN AMENDING AC T MAY BE PURELY CLARIFICATORY IN NATURE INTENDED TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT, WHICH WAS ALREADY I MPLICIT. [SEE: DECISION OF THE SUPREME COURT IN CIT V. RAM KISHAN DAS [2019] 103 TAXMANN.COM 414/263 TAXMAN 657/413 ITR 3 37. IN VIEW OF AFORESAID ENUNCIATION OF LAW BY DIFFERENT H IGH COURTS INCLUDING THIS COURT AND WITH A VIEW TO GIVE DEFINI TE MEANING TO THE EXPRESSION 'A RESIDENTIAL HOUSE', THE PROVISION S OF SECTION 54(1) WERE AMENDED WITH AN OBJECT TO RESTRICT THE P LURALITY TO MEAN SINGULARITY BY SUBSTITUTING THE WORD 'A RESIDE NTIAL HOUSE' WITH THE WORD 'ONE RESIDENTIAL HOUSE'. THE AFORESAI D AMENDMENT CAME INTO FORCE WITH EFFECT FROM 1-4-2015. THE RELE VANT EXTRACTS OF EXPLANATORY NOTE TO PROVISIONS OF FINANCE (NO. 2 ) ACT, 2014 READS AS UNDER: 20.3 CERTAIN COURTS HAD INTERPRETED THAT THE EXEMPT ION IS ALSO AVAILABLE IF INVESTMENT IS MADE IN MORE THAN O NE RESIDENTIAL HOUSE. THE BENEFIT WAS INTENDED FOR INVESTMENT IN ONE RESIDENTIAL HOUSE WITHIN INDIA. ACCORDINGLY, SUB-SECTION (1) OF SECTION 54 OF THE I NCOME- TAX ACT HAS BEEN AMENDED TO PROVIDE THAT THE ROLLOV ER RELIEF UNDER THE SAID SECTION IS AVAILABLE IF THE I NVESTMENT IS MADE IN ONE RESIDENTIAL HOUSE SITUATED IN INDIA. 20.5 APPLICABILITY:- THESE AMENDMENTS TAKE EFFECT F ROM 1ST APRIL, 2015 AND WILL ACCORDINGLY APPLY IN RELAT ION TO ASSESSMENT YEAR 2015-16 AND SUBSEQUENT ASSESSMENT YEARS. THUS IT IS AXIOMATIC THAT THE AFORESAID AMENDMENT W AS SPECIFICALLY APPLIED ONLY PROSPECTIVELY WITH EFFECT FROM ASSESSMENT YEAR 2015-16. ITA NOS. 1508 & 1509/BANG/2016 PAGE 21 OF 22 14. THE SUBSEQUENT AMENDMENT OF SECTION 54(1) ALS O FORTIFIES THE FACT THAT THE LEGISLATURE FELT THE NEED OF AMEN DING THE PROVISIONS OF THE ACT WITH A VIEW TO GIVE A DEFINIT E MEANING TO THE EXPRESSION 'A RESIDENTIAL HOUSE', WHICH WAS INT ERPRETED AS PLURAL BY VARIOUS COURTS BY TAKING INTO ACCOUNT THE CONTEXT IN WHICH THE AFORESAID EXPRESSION WAS USED. THE SUBSEQ UENT AMENDMENT OF THE ACT ALSO FORTIFIES THE VIEW TAKEN BY THIS COURT AS WELL AS MADRAS HIGH COURT AND DELHI HIGH COURT. IT IS TRITE LAW THAT THE PRINCIPLE UNDERLYING THE DECISION WOUL D BE BINDING AS PRECEDENT IN A CASE. IN HALSBURY LAWS OF ENGLAND , VOLUME 22, PARA 1682, PAGE 796, THE RELEVANT EXTRACT READS AS UNDER: THE ENUNCIATION OF THE REASONS OR PRINCIPLE ON WH ICH A QUESTION BEFORE A COURT HAS BEEN DECIDED IS ALONE B INDING AS A PRECEDENT. THIS UNDERLYING PRINCIPLE IS OFTEN TERME D THE RATIO DECIDED, THAT IS TO SAY, THE GENERAL REASONS GIVEN FOR THE DECISION OR THE GENERAL GROUNDS ON WHICH IT IS BASED, DETACH ED OR ABSTRACTED FROM THE SPECIFIC PECULIARITIES OF THE P ARTICULAR CASE WHICH GIVES RISE TO THE DECISION. [ALSO SEE: 'STATE OF HARYANA V. RANBIR @ RANA', [20 06] 5 SCC 167 & 'GIRNAR TRADERS V. STATE OF MAHARASHTRA', [20 07] 7 SCC 555]. 15. THIS COURT AS WELL AS MADRAS AND DELHI HIGH C OURT HAVE INTERPRETED THE EXPRESSION 'A RESIDENTIAL HOUSE' AN D HAVE HELD THAT THE AFORESAID EXPRESSION INCLUDES PLURAL. THE RATIO OF THE DECISIONS RENDERED BY COORDINATE BENCH OF THIS COUR T ARE BINDING ON US AND WE RESPECTIVELY AGREE WITH THE VIEW TAKEN BY THIS COURT WHILE INTERPRETING THE EXPRESSION 'A RESIDENTIAL HO USE'. THEREFORE, THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF EXEMPTION UNDER SECTION 54(1) OF THE ACT IN THE FACTS OF THE CASE DOES NOT DESERVE ACCEPTANCE. IN VIEW OF PRECEDING ANALYSIS, THE SUBSTANTIAL QU ESTION OF LAW FRAMED BY THIS COURT IS ANSWERED IN FAVOR OF TH E ASSESSEE AND AGAINST THE REVENUE. IN THE RESULT, THE ORDER PASSE D BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME-TAX (A PPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL INSOFAR AS IT DEP RIVES THE ASSESSEE OF THE BENEFIT OF EXEMPTION UNDER SECTION 54(1) OF THE ACT ARE HEREBY QUASHED AND THE ASSESSEE IS HELD ENT ITLED TO BENEFIT ITA NOS. 1508 & 1509/BANG/2016 PAGE 22 OF 22 OF EXEMPTION UNDER SECTION 54(1) OF THE ACT. IN THE RESULT, THE APPEAL IS ALLOWED. 33. BEING SO, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 54/54F ON TWO FLATS IN PRINCIPLE, THOUGH THEY ARE IN DIFFERENT FL OORS, PROVIDED IT SATISFIES ALL THE CONDITIONS LAID DOWN IN SECTION 54/54F. ACCORD INGLY, THIS ISSUE IS REMITTED BACK TO THE FILE OF AO FRESH CONSIDERATION , AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 34. GROUND NO.8 IS REGARDING CHARGING OF INTEREST W HICH IS MANDATORY AND TO BE COMPUTED ACCORDINGLY. 35. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. 36. THUS, BOTH THE APPEALS BY THE ASSESSEE ARE PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF JUNE, 2021. SD/- SD/- ( BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH JUNE, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.