ITO, CHENNAI V. A.V.Chandramohan, CHENNAI

ITA 2931/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96158 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: P RAJASEKARAN
• Keywords: Capital asset
• Section: 143(3); 54F; 147; 148; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ , % ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.2931/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) THE INCOME TAX OFFICER NON-CORPORATE WARD-16(2), AAYAKAR BHAVAN,CHENNAI-34. VS MR. A.V.CHANDRAMOHAN, 43/48, PUDUPET STREET, ALANDUR,CHENNAI-600 016. PAN:AAJPC4063E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.B.NISCHAL, JCIT /RESPONDENT BY : MR. P.RAJASEKARAN, C.A. /DATE OF HEARING : 18 TH AUGUST, 2015 /DATE OF PRONOUNCEMENT : 23 RD SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS-V), CHENNAI DATED 12.08.2014 FOR THE ASSESSMENT YEAR 2007-08. THOUGH THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, T HE CRUX OF THE ISSUE IS THAT THE INCIDENCE OF CAPITAL GAINS I .E THE YEAR IN WHICH CAPITAL GAINS SHOULD BE ASSESSED AND ALLOWANC E OF DEDUCTION UNDER SECTION 54F OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL A LONG WITH OTHER SEVEN CO-OWNERS ENTERED INTO JOINT VENTURE A GREEMENT WITH M/S. SHANMUGA CONSTRUCTION SERVICES ON 8.12.2 006 FOR 2 ITA NO.2931/MDS/2014 JOINT DEVELOPMENT OF PROPERTY FOR CONSTRUCTION OF M ULTISTORIED BUILDING WITHIN A PERIOD OF 18 MONTHS. AS THE BUILD ER M/S.SHANMUGA CONSTRUCTION SERVICES COULD NOT COMPLE TE THE CONSTRUCTION WITHIN 18 MONTHS ANOTHER AGREEMENT WAS ENTERED INTO ON 18.7.2008 TO EXTEND THE PERIOD OF J OINT VENTURE AGREEMENT FOR A PERIOD OF 24 MONTHS. THE AS SESSING OFFICER FOUND THAT SINCE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME OFFERING CAPITAL GAINS UNDER SECTION 45 O F THE ACT FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT Y EAR 2007- 08, ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDE R SECTION 148 OF THE ACT. THE ASSESSMENT WAS COMPLETE D UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON 28.03.2013 ASSESSING THE CAPITAL GAINS TO TAX IN THE ASSESSMEN T YEAR 2007-08, THOUGH ASSESSEE CONTENDED THAT INCIDENCE O F TAX ACCORDING TO THE ASSESSEE IS IN THE ASSESSMENT YE ARS 2008- 09 TO 2010-11. THE ASSESSING OFFICER WHILE COMPLETI NG THE ASSESSMENT ALSO DENIED EXEMPTION UNDER SECTION 54F OF THE ACT FOR THE REASON THAT ASSESSEE RECEIVED NINE FLAT S AS CONSIDERATION FOR TRANSFERRING SHARE OF LAND TO THE DEVELOPER. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HEL D THAT EFFECTIVE DATE OF TRANSFER WILL BE THE DATE ON WHIC H THE BUILDER 3 ITA NO.2931/MDS/2014 COMPLETES ITS OBLIGATION OF CONSTRUCTION OR HANDING OVER POSSESSION OF FLATS TO LAND OWNERS WHICHEVER IS EAR LIER. IT IS FURTHER HELD THAT IF THE ASSESSEE SELLS HIS SHARE OF FLATS BEFORE CONSTRUCTION OR RECEIVING POSSESSION SUCH DA TE OF SALE WILL BE THE DATE ON WHICH ASSESSEE IS DEEMED TO HAV E RECEIVED THE CONSIDERATION ON ACCOUNT OF TRANSFER O F THE LAND UNDER JOINT DEVELOPMENT AGREEMENT. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER HELD THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE ALONG WITH SEVEN CO-OWNER S RECEIVED THEIR SHARE OF NINE FLATS EACH DURING THE FINANCIAL YEAR 2010-11 AND 2011-12 AND THE ASSESSEE RETAINED THOSE FLATS. THEREFORE COMMISSIONER OF INCOME TAX (APPEAL S) WAS OF THE VIEW THAT SINCE ALL THE FLATS WERE RECEIVED BY THE OWNERS OR RETAINED BY THEM THE DATE OF RECEIVING OF FLATS IS THE DATE FOR DETERMINING TRANSFER OF 60% OF UDS UNDER J OINT DEVELOPMENT AGREEMENT AND THUS ASSESSING OFFICER IS REQUIRED TO COMPLETE THE CAPITAL GAINS DURING THE F INANCIAL YEARS 2010-11 AND 2011-12. INSOFAR AS DEDUCTION UND ER SECTION 54F IS CONCERNED, COMMISSIONER OF INCOME TA X (APPEALS) HELD THAT ASSESSEE IS ELIGIBLE FOR DEDUCT ION UNDER SECTION 54F OF THE ACT. 4 ITA NO.2931/MDS/2014 3. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ISS UE IN APPEAL HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN OTHER CO-OWNERS CASE IN ITA NOS. 1396, 1397, 1493 TO 1495/MDS/2013 DATED 15.05.2015, A COPY OF WHICH IS PLACED ON RECORD. DEPARTMENTAL REPRESENTATIVE SUBM ITS THAT THE TRIBUNAL HELD THAT INCIDENCE OF CAPITAL GAINS A RISE ONLY IN THE ASSESSMENT YEAR 2007-08 AND COMING TO THE DEDUC TION UNDER SECTION 54F, EVEN THOUGH THE ASSESSEE RECEIVE D MULTIPLE FLATS THE TRIBUNAL FOLLOWING THE MADRAS HI GH COURT DECISION IN THE CASE OF V.R.KARPAGAM IN TAX CASE ( APPEAL) NO.301 OF 2014 HELD THAT ASSESSEE IS ELIGIBLE FOR D EDUCTION UNDER SECTION 54F OF THE ACT EVEN THOUGH MULTIPLE F LATS WERE ALLOTTED TO THE ASSESSEE IN LIEU OF COST OF 60% OF THE LAND ALLOTTED TO THE BUILDER. 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. HEARD BOTH SIDES AND PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON. THE CO-ORD INATE BENCH OF THE TRIBUNAL IN OTHER CO-OWNERS CASE IN IT A NOS. 1396, 1397, 1493 TO 1495/MDS/2013 DATED 15.05.2015 5 ITA NO.2931/MDS/2014 ALREADY DECIDED THE ISSUE I.E. INCIDENCE OF CAPITAL GAINS THE YEAR IN WHICH IT HAS TO BE TAXED AND ALLOWABILITY O F SECTION 54 OF THE ACT HOLDING THAT CAPITAL GAIN HAS TO BE ASSE SSED IN THE ASSESSMENT YEAR 2007-08 AND THE ASSESSEE IS ENTITLE D FOR DEDUCTION UNDER SECTION 54F THOUGH THE ASSESSEE REC EIVED MULTIPLE FLATS IN LIEU OF COST OF 60% OF THE LAND A LLOTTED TO THE BUILDER OBSERVING AS UNDER:- 2. SHRI P. RADHAKRISHNAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ALL THE FIVE ASSESSE ES ALONG WITH THREE OTHERS ENTERED INTO AN AGREEMENT FOR JOI NT DEVELOPMENT OF LAND ON 8.12.2006 WITH ONE SHANMUGA CONSTRUCTION SERVICES. ACCORDING TO THE LD. D.R., THE JOINT VENTURE AGREEMENT WAS FOR CONSTRUCTION OF A MULTI-S TORIED BUILDING WITHIN A PERIOD OF 18 MONTHS. HOWEVER, TH E BUILDER M/S SHANMUGA CONSTRUCTION SERVICES COULD NOT COMPLE TE THE CONSTRUCTION WITHIN 18 MONTHS AS PROJECTED IN T HE AGREEMENT DATED 8.12.2006. THEREFORE, ALL THE ASSE SSEES AND THREE OTHERS ENTERED INTO ANOTHER AGREEMENT TO EXTEND THE PERIOD OF JOINT VENTURE AGREEMENT FOR A PERIOD OF TWENTY FOUR MONTHS, ON 1.7.2008. IN THE STATEMENT FILED A LONG WITH RETURN OF INCOME, THE ASSESSEES CLAIMED THAT THE SA LE CONSIDERATION OF THE PROPERTY WAS ONLY TO THE EXTEN T OF ` 59,02,664/-. 3. THE LD. D.R. FURTHER SUBMITTED THAT AS PER THE J OINT DEVELOPMENT AGREEMENT, THE ASSESSEES ARE ENTITLED F OR 40% OF THE CONSTRUCTED AREA AND THE BUILDER IS ENTI TLED FOR 60% OF THE CONSTRUCTED AREA. IN LIEU OF THE 40% CO NSTRUCTED AREA, THE ASSESSEES HAVE TO TRANSFER PROPORTIONATE AREA TO THE EXTENT OF 60% OF THE LAND TO THE BUILDER TOWARD S COST OF CONSTRUCTION OF 40% OF THE CONSTRUCTED AREA. ACCOR DING TO THE LD. D.R., SINCE A REVISED AGREEMENT WAS ENTERED BETWEEN THE ASSESSEES AND THE BUILDER EXTENDING THE PERIOD OF JOINT VENTURE ON 1.7.2008, THE CAPITAL GA IN AROSE TO THE ASSESSEES ONLY DURING THE FINANCIAL YEAR 2008-0 9, WHICH IS RELEVANT TO THE ASSESSMENT YEAR 2009-10. ACCORD INGLY, THE ASSESSING OFFICER ASSESSED THE CAPITAL GAIN DUR ING THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEES ARE HAVING MULTIPLE FLATS AS THEIR SHARES FROM THE BUILDER, TH E ASSESSING 6 ITA NO.2931/MDS/2014 OFFICER DISALLOWED THE CLAIM UNDER SECTION 54F OF T HE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. PLACING RELIANCE ON THE JUDGMENT OF BOMBAY HIGH COURT IN BERTHA T. ALMEIDA V. ITO (2015) 53 TAXMANN .COM 522, THE LD. D.R. SUBMITTED THAT FOR THE PURPOSE OF CAPITAL GAIN IN RESPECT OF DEVELOPMENT AGREEMENT, THE DATE OF AGREEMENT ON WHICH POSSESSION WAS TAKEN BY THE BUIL DER HAS TO BE TAKEN AS THE DATE OF TRANSFER. SINCE THE AGREEMENT WAS EXTENDED ON 1.7.2008, ACCORDING TO TH E LD. D.R., THE POSSESSION WAS DEEMED TO BE GIVEN ONLY ON 1.7.2008. THEREFORE, THE CIT(APPEALS) IS NOT JUSTI FIED IN HOLDING THAT NO CAPITAL GAIN ARISES FOR THE YEAR UN DER CONSIDERATION. REFERRING TO THE ORDERS OF THE CIT( APPEALS), THE LD. D.R. SUBMITTED THAT THE CIT(APPEALS) FOUND THERE WAS NO TRANSFER FOR THE YEAR UNDER CONSIDERATION AN D THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO CONS IDER THE DATE OF COMPLETION OF THE CONSTRUCTION OF FLATS AND ITS HANDING OVER TO THE ASSESSEES AS THE DATE OF TRANSF ER FOR THE PURPOSE OF DETERMINING THE CAPITAL GAIN. ACCOR DING TO THE LD. D.R., SINCE THE ASSESSEES ENTERED INTO A RE VISED AGREEMENT DATED 1.7.2008 WITH THE BUILDER FOR EXTEN DING THE JOINT VENTURE AGREEMENT WHICH FALLS IN THE FINANCIA L YEAR 2008-09, RELEVANT TO THE ASSESSMENT YEAR 2009-10, C APITAL GAIN HAS TO BE ASSESSED ONLY DURING THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEES ARE HAVING MULT IPLE FLATS, THEY ARE NOT ENTITLED FOR EXEMPTION UNDER SE CTION 54F OF THE ACT. 5. ON THE CONTRARY, SHRI P. RAJASEKHARAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ALL THE FIVE ASSESSEES ALONG WITH THREE OTHERS ENTERED INTO A JO INT VENTURE AGREEMENT ON 8.12.2006 IN RESPECT OF THE LA ND LOCATED AT SURVEY NO.150/9 & 150/16 IN ADAMBAKKAM VILLAGE, TAMBARAM TALUK, KANCHEEPURAM DISTRICT. AL L THE EIGHT CO-OWNERS OF THE LAND ARE HAVING EQUAL SHARE IN THE LAND. AS PER THE DEVELOPMENT AGREEMENT, THE BUILDE R M/S SHANMUGA CONSTRUCTION SERVICES HAS TO CONSTRUCT THE BUILDING AT ITS COST AND 60% OF THE CONSTRUCTED ARE A WOULD BE RETAINED BY THE BUILDER, NAMELY, SHANMUGA CONSTR UCTION SERVICES, AND 40% OF THE CONSTRUCTED AREA WOULD BE GIVEN TO THE ASSESSEES IN LIEU OF PROPORTIONATE 60% OF TH E LAND AREA THAT WOULD BE GIVEN TO THE BUILDER, SHANMUGA CONSTRUCTION SERVICES. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER TOOK PLACE ON 8.12.200 6. THE SUBSEQUENT AGREEMENT IS ONLY TO EXTEND THE PERIOD O F CONSTRUCTION AS AGREED ON 8.12.2006. 7 ITA NO.2931/MDS/2014 6. REFERRING TO THE COPY OF THE DEVELOPMENT AGREEME NT DATED 8.12.2006, THE LD. REPRESENTATIVE SUBMITTED T HAT AS PER CLAUSE (6) OF THE AGREEMENT, THE VACANT POSSESS ION OF THE PROPERTY WAS HANDED OVER TO THE BUILDER. REFER RING TO THE COPY OF THE POWER OF ATTORNEY SAID TO BE EXECUT ED IN FAVOUR OF THE BUILDER, SHANMUGA CONSTRUCTION SERVIC ES, THE LD. REPRESENTATIVE SUBMITTED THAT THE BUILDER WAS A UTHORIZED TO EXECUTE SALE DEEDS IN FAVOUR OF PROSPECTIVE PURC HASERS IN RESPECT OF THE CONSTRUCTED AREA OF THE LAND WHIC H WAS GIVEN TO IT AND APPLY FOR LOCAL AUTHORITIES LIKE CO RPORATION, CHENNAI METROPOLITAN DEVELOPMENT AUTHORITY, ETC. FO R PLANNING PERMISSION. THIS POWER OF ATTORNEY WAS EX ECUTED ON 14.12.2006. REFERRING TO THE AGREEMENT EXECUTED ON 1.7.2008 FOR EXTENSION OF PERIOD OF JOINT VENTURE A GREEMENT, THE LD. REPRESENTATIVE SUBMITTED THAT THIS IS ONLY AN EXTENSION OF PERIOD OF AGREEMENT FOR 24 MONTHS AND THE TERMS AND CONDITIONS AGREED ON 8.12.2006 WERE NOT CHANGED AT ALL. THIS AGREEMENT ALSO REFERS TO THE AREA/PORTION OF THE FLAT ALLOTTED TO THE OWNERS. T HEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER I N FACT TOOK PLACE ON 8.12.2006 WHEN THE JOINT VENTURE AGREEMENT WAS EXECUTED BETWEEN THE ENTIRE OWNERS AND THE BUILDER, SHANMUGA CONSTRUCTION SERVICES, AND THE VACANT POSSESSION WAS HANDED OVER TO THE BUILDER. THEREFO RE, ACCORDING TO THE LD. REPRESENTATIVE, THE CIT(APPEAL S) RIGHTLY FOUND THAT THERE WAS NO TRANSFER OF LAND FOR ASSESS ING THE CAPITAL GAIN DURING THE YEAR UNDER CONSIDERATION, I .E. FOR ASSESSMENT YEAR 2009-10. 7. COMING TO THE CLAIM OF EXEMPTION UNDER SECTION 5 4 OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT T HE ASSESSEES TRANSFERRED 60% OF THE TOTAL AREA IN LIEU OF 40% OF THE CONSTRUCTED AREA. THEREFORE, THE COST OF CO NSTRUCTION OF 40% AREA WOULD BE THE SALE CONSIDERATION FOR TRA NSFERRING 60% OF THE AREA OF THE LAND. SINCE THE LAND ITSELF WAS GIVEN FOR JOINT DEVELOPMENT AND THE ASSESSEES WERE ENTITL ED TO GET BACK ONLY 40% OF THE CONSTRUCTED AREA ALONG WIT H PROPORTIONATE SHARE IN THE LAND, ACCORDING TO THE L D. REPRESENTATIVE, THE ASSESSEES HAVE INVESTED THE ENT IRE FUNDS FOR PURCHASING/CONSTRUCTING RESIDENTIAL HOUSE . PLACING RELIANCE ON THE UNREPORTED JUDGMENT OF THE MADRAS HIGH COURT IN CIT V. V.R. KARPAGAM IN TAX CASE (APP EAL) NO.301 OF 2014, THE LD. REPRESENTATIVE SUBMITTED TH AT SECTION 54F OF THE ACT WAS AMENDED, WHICH WILL COME INTO EFFECT ONLY FROM 1.4.2015, WHICH MAKES IT CLEAR THA T BENEFIT OF SECTION 54F OF THE ACT WILL BE APPLICABLE TO CON STRUCTION OF ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIE S THE SITUATION IN THE PRESENT CASE, I.E. POST AMENDMENT FROM 1.4.2015, THE BENEFIT OF SECTION 54F WILL BE APPLIC ABLE TO 8 ITA NO.2931/MDS/2014 ONE HOUSE IN INDIA. PRIOR TO THE SAID AMENDMENT, I T IS CLEAR THAT A RESIDENTIAL HOUSE WOULD INCLUDE MULTIPLE FLATS/RESIDENTIAL UNITS. SINCE THESE APPEALS BELON G TO ASSESSMENT YEAR BEFORE 1.4.2015, ACCORDING TO THE L D. REPRESENTATIVE, MULTIPLE FLATS/RESIDENTIAL UNITS WE RE ELIGIBLE FOR EXEMPTION UNDER SECTION 54F OF THE ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST ISSUE ARISES FOR CONSIDERATION IS THE YEAR IN WHICH THE CAPITAL GAIN ARISES FOR ASSESSMENT ON TRANSFER OF T HE LAND BY ALL THE ASSESSEES ALONG WITH THREE OTHERS. WE HAVE CAREFULLY GONE THROUGH THE AGREEMENT DATED 8.12.200 6. CLAUSE (6) OF THE AGREEMENT CLEARLY SAYS THAT THE F IRST PARTY, NAMELY, THE ASSESSEES AND THREE OTHERS SHALL HAND O VER THE POSSESSION OF THE PROPERTY TO THE BUILDER, NAMELY, SHANMUGA CONSTRUCTION SERVICES. THE PERIOD PROVIDE D IN THE AGREEMENT IS 18 MONTHS FOR COMPLETION OF THE CONSTRUCTION. THE AGREEMENT HAS PROVIDED FOR EXECU TION OF THE POWER OF ATTORNEY IN FAVOUR OF THE BUILDER TO E NABLE HIM TO DEAL WITH PROPERTY FOR GETTING APPROVAL OF CONCE RNED GOVERNMENT AUTHORITIES AND SALE OF THE SAME TO THE PROSPECTIVE PURCHASERS. SINCE THE CONSTRUCTION COU LD NOT BE COMPLETED WITHIN 18 MONTHS AS PROVIDED, THE PART IES ENTERED INTO ANOTHER AGREEMENT FOR EXTENSION OF THE TIME PROVIDING FOR 24 MONTHS FOR COMPLETION OF THE CONST RUCTION. THE AGREEMENT DATED 1.7.2008 CLEARLY SAYS THAT THE CONSTRUCTION HAS ALREADY COMMENCED AND IT IS IN PRO GRESS. THEREFORE, IT IS OBVIOUS THAT ALL THE ASSESSEES HAN DED OVER THE VACANT PHYSICAL POSSESSION OF THE PROPERTY ON 8.12.2006. THE AGREEMENT DATED 1.7.2008 IS ONLY FO R EXTENSION OF THE TIME FOR COMPLETING THE CONSTRUCTI ON. HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THE VACANT POSSESSION WAS GIVEN TO THE BUILDER ON 8.12. 2006 IN PURSUANCE TO THE JOINT VENTURE AGREEMENT ENTERED BE TWEEN THE PARTIES ON 8.12.2006. 9. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(47) OF THE ACT WHICH DEFINES TRANSFER. UNDER THE COMMON LAW, TRANSFER OF IMMOVABLE PROPERTY VALUING MORE THAN ` 100 WOULD BE MADE ONLY BY EXECUTING A REGISTERED SALE DEED. HOWEVER, UNDER INCOME-TAX ACT, SECTION 2(47) DEFINES TRANSFER IN RELATION TO CAPITAL ASSET. F OR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING SECTION 2(47) HEREUNDER:- 2(47) [TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDES, (I) THE SALE, EXCHANGE OR RELINQUISHMENT OF THE AS SET ; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR 9 ITA NO.2931/MDS/2014 (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN-TR ADE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION O R TREATMENT ;] [OR] [(IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND; OR] [(V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN O R RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS O R BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY O THER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFER RING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPER TY. EXPLANATION.FOR THE PURPOSES OF SUB-CLAUSES (V) AN D (VI), IMMOVABLE PROPERTY SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA;] EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT TRANSFER INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN, OR CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER , DIRECTLY OR INDIRECTLY, ABSOLUTELY OR CONDITIONALLY , VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMENT (WHETHER E NTERED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWISE, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HAS BE EN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON O R FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA;] 10. SECTION 2(47)(I) OF THE ACT TREATS THE SALE OF THE PROPERTY EXCHANGE OR RELINQUISHMENT OF THE ASSE T AS TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF T HE ACT. SECTION 2(47)(VI) SHOWS THAT ANY TRANSACTION BY WAY OF AN AGREEMENT OR ARRANGEMENT IN ANY MANNER WHICH HAS TH E EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF IMMOVABLE PROPERTY ALSO TREATS AS TRANSFER. IN THI S CASE, THE ASSESSEES IN EXCHANGE OF 40% OF THE CONSTRUCTED ARE A, TRANSFERRED 60% OF THE LAND TO THE BUILDER AND HAND ED OVER THE PHYSICAL POSSESSION. THEREFORE, IT IS AN EXCHA NGE OF PROPERTY BETWEEN THE PARTIES. IN OTHER WORDS, THE ASSESSEES EXCHANGED 60% OF THE LANDED AREA FOR 40% OF THE CONSTRUCTED AREA. THEREFORE, THERE IS A TRANSF ER WITHIN THE MEANING OF SECTION 2(47) (I) OF THE ACT ON THE DATE ON WHICH THE AGREEMENT DATED 8.12.2006 WAS EXECUTED. EVEN OTHERWISE, THE JOINT VENTURE AGREEMENT HAS THE EFFE CT OF TRANSFERRING 60% OF THE LANDED AREA TO THE BUILDER. THE 10 ITA NO.2931/MDS/2014 ASSESSEE CANNOT TAKE BACK 60% LANDED AREA ON WHICH THE BUILDER HAS COMMENCED CONSTRUCTION. AT THE BEST, T HE ASSESSEES WOULD GET ONLY 40% OF THE CONSTRUCTED ARE A AND 40% LANDED AREA PROPORTIONATE TO THE CONSTRUCTED AR EA. THEREFORE, THE TRANSACTION BETWEEN THE ASSESSEES AN D THE BUILDER IS BY WAY OF ARRANGEMENT OR AGREEMENT WHICH HAS THE EFFECT OF TRANSFERRING THE LANDED PROPERTY FOR ENJOYMENT OF THE BUILDER. IN OTHER WORDS, THE ASSESSEES TRAN SFERRED 60% OF THE LAND AREA TO THE BUILDER FOR ITS ENJOYME NT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THERE WAS A TRANSFER ON 8.12.2006 WITHIN THE MEANIN G OF SECTION 2(47)(I) AND 2(47)(VI) OF THE ACT. THEREFO RE, THE RELEVANT TRANSACTION TOOK PLACE IN THE FINANCIAL YE AR 2006-07 WHICH FALLS IN THE ASSESSMENT YEAR 2007-08. HENCE CAPITAL GAIN, IF ANY, IS ASSESSABLE ONLY IN THE ASSESSMENT YEAR 2007-08 AND CERTAINLY NOT IN THE YEAR 2009-10. 11. THE CIT(APPEALS) PROCEEDED TO OBSERVE THAT THE CAPITAL GAIN ARISES ONLY ON THE DATE OF COMPLETION OF THE CONSTRUCTION OF FLATS AND ITS HANDING OVER TO THE A SSESSEES. THIS OBSERVATION IS TOTALLY CONTRARY TO THE PROVISI ONS OF SECTION 2(47) OF THE ACT. IN FACT, THE ASSESSEES E NTERED INTO AN AGREEMENT AND HANDING OVER THE PHYSICAL POSSESSI ON OF THE PROPERTY TO BUILDER ALLOWING IT TO ENJOY 60% OF THE LAND IN LIEU OF 40% OF THE CONSTRUCTED AREA. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE TRANSFER TOOK PLACE ON 8.12.2006 AND THE ASSESSEES ARE LIABLE FOR PAYMENT OF CAPITAL GAIN TAX IN THE ASSESSMENT YEAR 2007-08. THEREFORE, NO CAPITAL GAIN ARISES IN THE YEAR IN WH ICH THE CONSTRUCTION WAS COMPLETED AND THE CONSTRUCTED AREA WAS HANDED OVER TO THE ASSESSEES. ACCORDINGLY, WE HOLD THAT NO CAPITAL GAIN ARISES FOR ASSESSMENT IN THE YEAR U NDER CONSIDERATION. 12. NOW COMING TO THE ISSUE OF EXEMPTION UNDER SECT ION 54F OF THE ACT, THE ASSESSEES ENTRUSTED THE CONSTRU CTION OF THE BUILDING TO THE BUILDER IN LIEU OF 60% OF THE L ANDED AREA TRANSFERRED TO THE BUILDER. THEREFORE, THE ASSESSE ES, FROM THE DATE ON WHICH THE TRANSFER WAS MADE BY ENTERING INTO AGREEMENT FOR JOINT DEVELOPMENT, ARE IN THE PROCESS OF CONSTRUCTING THE RESIDENTIAL HOUSE. THEREFORE, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEES ARE ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT. NOW TH E OBJECTION OF THE DEPARTMENT IS THAT THE ASSESSEES G OT MULTIPLE FLATS, ALMOST EIGHT FLATS EACH, IN LIEU OF THE LAND TRANSFERRED TO THE BUILDER. THE QUESTION ARISES FO R CONSIDERATION IS WHEN THE ASSESSEES RECEIVED EIGHT FLATS/RESIDENTIAL UNITS FROM THE BUILDER IN LIEU OF COST OF THE LAND TRANSFERRED TO THE BUILDER, WHETHER THE ASSESS EESARE 11 ITA NO.2931/MDS/2014 ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT ? WE HAVE GONE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN V.R. KARPAGAM (SUPRA). IN THIS CASE, THE ASSESSEE OBTAINED FIVE INDEPENDENT FLATS IN A MULTI-STORIED CONSTRUCTION AND CLAIMED EXEMPTION AS INDEPENDENT U NIT UNDER SECTION 54F OF THE ACT. THE MADRAS HIGH COUR T, AFTER REFERRING TO THE AMENDMENT MADE WITH EFFECT FROM 1. 4.2015, FOUND THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U NDER SECTION 54F OF THE ACT. IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE ASSESSEES ARE ELIGIBLE FOR EXEMPTI ON EVEN THOUGH MULTIPLE FLATS WERE ALLOTTED TO THEM IN LIEU OF COST OF 60% OF THE LAND ALLOTTED TO THE BUILDER. 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOL D THAT CAPITAL GAINS IN THIS CASE ARISES IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007-08 AND THE ASSESSEE IS ELIG IBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT THOUGH HE HA S RECEIVED MULTIPLE FLATS IN LIEU OF COST OF 60% OF THE LAND ALLOTTED TO THE BUILDER, SUBJECT TO FULFILLING THE OTHER CONDITIONS LAID DOWN UNDER SECTION 54F OF THE ACT WHICH SHALL BE EXAMINED BY ASSESSING OFFICER IN THE LIGHT OF THE A BOVE JUDGEMENT. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 23 RD SEPTEMBER, 2015 12 ITA NO.2931/MDS/2014 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .