Y C Gopinath , Bangalore V. Income Tax Officer Ward-6(3), Bangalore

ITA 3223/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6264 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: S N SHYANBHOG
• Keywords: Capital Gains
• Section: 143(3); 54F; 54

Judgement Text

ITA NO.3223/BANG/2018 SHRI Y.C. GOPINATH, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.3223/BANG/2018 ASSESSMENT YEAR: 2009-10 Y.C. GOPINATH NO.9, 3 RD CROSS, NEHRU NAGAR SHESHADRIPURAM BANGALORE-560020 PAN NO : AIFPC5962Q VS. ITO WARD-6(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI S.N. SHYANBHOG, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 23.09.2020 DATE OF PRONOUNCEMENT : 24.09.2020 O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRE CTED AGAINST CIT(A) ORDER DATED 31.10.2018. THE RELEVANT ASSESS MENT YEAR IS 2009-10. 2. THE LD. A.R. HAD PRESSED ONLY GROUND NOS.3 TO 5. THE GROUNDS 3 TO 5 READS AS FOLLOWS: 3. THE CIT(A)-2 HAS DENIED THE EXEMPTION U/S 54F FO R THE CAPITAL GAIN ARISING ON TRANSFER OF 60% OF LAND FOR BUILDER S AGAINST COST OF CONSTRUCTION OF FLATS FOR 40% SHARE OF YOUR APPELLA NT. THE CIT(A)-2 HAS HELD THAT APPELLANT IS NOT ENTITLED TO EXEMPTION U/ S 54F OF THE IT ACT ON THE MULTIPLE NUMBER OF FLATS RECEIVED BY HIM. ITA NO.3223/BANG/2018 SHRI Y.C. GOPINATH, BANGALORE PAGE 2 OF 5 4. THE CIT(A)-2 HAS HELD THAT THE DECISION OF THE H ONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. K.G. RUKM INIYAMMA (2011) 331 ITR 211 IS NOT APPLICABLE TO THE FACTS OF THE A PPELLANTS CASE, AS IN THE SAID CASE, A RESIDENTIAL HOUSE WAS DEMOLISHED A ND FLATS WERE CONSTRUCTED THROUGH JOINT DEVELOPMENT AGREEMENT. I N THE CASE OF YOUR APPELLANT, THE VACANT LAND WAS GIVEN FOR JOINT DEVE LOPMENT FOR CONSTRUCTION OF FLATS AND HENCE THE SAID DECISION I S NOT APPLICABLE IN YOUR APPELLANTS CASE AS PER CIT(A)-2, WHICH IS NOT CORRECT. THE SAID DECISION IS APPLICABLE IN THE CASE OF YOUR APPELLAN T TOO, AND YOUR APPELLANT IS ENTITLED FOR EXEMPTION U/S 54F OF THE ACT ON ALL THE FLATS RECEIVED BY HIM FOR TRANSFER OF 60% LAND TO BUILDER S INSTEAD OF ONE FLAT AS HELD BY CIT(A)-2. 5. THE HONBLE INCOME TAX APPELLATE TRIBUNAL, BANGA LORE, IN THE CASE OF SRI B.J. BADRINATH VS. ITO WARD 4(3)(1) ITA NO.2938/BANG/2018 DATED 16.11.2018, HAS HELD THAT T HE DECISION IN THE CASE OF CIT VS. K.G. RUKMINIYAMMA APPLIES FOR EXEMP TION U/S 54 AND ALSO 54F OF THE I.T. ACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ASSESSEE ALONG WITH HIS THREE BROTHERS HAD INHERIT ED A PROPERTY FROM THEIR FATHER. THE ASSESSEE AND CO-OWN ERS OF THE PROPERTY HAD ENTERED INTO A JOINT DEVELOPMENT AGREE MENT ON 14.2.2009. IN THE RE-ASSESSMENT ORDER COMPLETED U/ S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT,1961 ['THE ACT' FO R SHORT] (ORDER DATED 28.3.2013), THE A.O. CALCULATED TOTAL LONG TE RM CAPITAL GAINS OF RS.3,96,08,490/-. THE ASSESSEES SHARE BE ING 1/4 TH , CAPITAL GAINS WAS ASSESSED IN ASSESSEES HAND AT RS .99,02,125/- . 4. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FILE D APPEALS TO THE FIRST APPELLATE AUTHORITY. THE ASSESSEE SUB MITTED BEFORE THE FIRST APPELLATE AUTHORITY THAT CAPITAL GAINS IS NOT ASSESSABLE IN THE YEAR OF ENTERING INTO JOINT DEVELOPMENT AGRE EMENT BUT ONLY WHEN THE FLATS ARE RECEIVED BY THE ASSESSEE AS PER THE JOINT DEVELOPMENT AGREEMENT. ALTERNATIVELY, IT WAS SUBMI TTED THAT ASSESSEE WAS ENTITLED TO BENEFIT OF SECTION 54F OF THE ACT IN RESPECT OF THE 3 FLATS, WHICH ASSESSEE WILL RECEIVE AS PER THE JOINT ITA NO.3223/BANG/2018 SHRI Y.C. GOPINATH, BANGALORE PAGE 3 OF 5 DEVELOPMENT AGREEMENT. THE CIT(A) HELD THAT ASSESS EE IS LIABLE FOR LONG TERM CAPITAL GAINS IN THE YEAR OF ENTERING INTO JOINT DEVELOPMENT AGREEMENT. AS REGARDS THE CLAIM OF DED UCTION U/S 54F OF THE ACT, THE CONTENTION RAISED BY THE ASSESS EE WAS REJECTED. THE RELEVANT FINDING OF THE CIT(A) WITH REGARD TO REJECTION OF CLAIM OF DEDUCTION U/S 54F OF THE ACT READS AS FOLLOWS: 5.5 AS REGARDS THE GROUND TAKEN BY THE APPELLANT TH AT DEDUCTION U/S 54F TO BE ALLOWED RELYING ON JURISDIC TIONAL HIGH COURT DECISION IS CONCERNED, I HAVE COMPARED THE FA CTS OF THE CASE WITH THAT OF RUKAMANIAMMA. IN THE CASE OF RUKAMANI YAMMA AN EXISTING HOUSE WAS DEMOLISHED AND CONSTRUCTED NUMBE R OF FLATS BY THE DEVELOPER AND 50% OF THEM WERE RECEIVED BY HER IN LIEU OF THE BUILDING GIVEN TO THE DEVELOPER FOR DEVELOPMENT. W HEREAS IN THE APPELLANTS CASE IT WAS A LAND OWNED BY 4 PEOPLE EN TERED INTO DEVELOPMENT AGREEMENT TOGETHER WITH THE DEVELOPER A ND IN LIEU OF TRANSFER OF SUCH LAND EACH LAND OWNER RECEIVED CERT AIN NUMBER OF FLATS. THUS, THE FACTS OF THE CASE RELIED ON BY TH E APPELLANT ARE NOT SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANTS CASE THEREFORE, THIS GROUND IS DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE HAS F ILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. A.R. RELIED ON THE GROUNDS RAISED. THE LD. D.R. STRONGLY SUPPORTED THE ORDERS PASSED BY THE INCOME TAX AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE KARNATAKA HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. K.G. RUKMANI REPORTED IN 331 ITR 211 HAD DECIDED IN AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IN THE CASE CONSIDERED BY H ONBLE JURISDICTIONAL HIGH COURT HAD A PROPERTY IN BANGALO RE AND SHE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT. AS PER THE JOINT DEVELOPMENT AGREEMENT, ASSESSEE WAS TO RECEIVE FOUR FLATS FROM THE BUILDER. IN TH RETURN OF INCOME, ASSESSEE DECL ARED NIL CAPITAL GAINS ON THE STRENGTH OF DEDUCTION CLAIMED U/S 54 O F THE ACT. THE A.O. HELD THAT ASSESSEE HAD EARNED CAPITAL GAINS WH ICH IS ITA NO.3223/BANG/2018 SHRI Y.C. GOPINATH, BANGALORE PAGE 4 OF 5 TAXABLE. ON APPEAL, THE CIT(A) HELD THAT ASSESSEE WAS ENTITLED TO THE BENEFIT OF SECTION 54 OF THE ACT. THE ORDER OF THE CIT(A) WAS UPHELD BY THE TRIBUNAL. ON FURTHER APPEAL BY THE R EVENUE BEFORE THE HONBLE HIGH COURT, IT WAS CONTENDED THAT ASSES SEE WAS ENTITLED TO ONLY EXEMPTION/DEDUCTION U/S 54 OF THE ACT IN RESPECT OF ONE FLAT AND IN RESPECT OF THE REMAINING 3 FLATS , ASSESSEE WAS NOT ENTITLED TO THE BENEFIT. THE HONBLE HIGH COUR T REJECTED THE CONTENTIONS RAISED BY THE REVENUE. THE HONBLE HIG H COURT HELD ALL THE FLATS WERE SITUATED IN A RESIDENTIAL BUILDI NG AND THE FOUR RESIDENTIAL FLATS CONSTITUTE A RESIDENTIAL HOUSE. ACCORDINGLY, THE VIEW TAKEN BY THE TRIBUNAL WAS CONFIRMED BY THE HON BLE HIGH COURT. 7. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SRI B.J. BADRINATH VS. ITO IN ITA NO.2938/BANG/2018 (ORDER D ATED 16.11.2018) HAD HELD THAT RATIO OF THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. K. G. RUKMINIYAMMA (SUPRA) APPLIES TO ALSO 54F OF THE ACT SINCE BOTH SECTION I.E. 54 & 54F OF THE ACT ARE PARI MATERIA. MOREOVER, IN THE CASE OF OTHER CO-OWNERS, IT HAS BEEN SUBMITTED BY THE LD. A.R. THAT CLAIM OF DEDUCTION U/S 54F OF THE ACT WAS ALLO WED BY THE A.O. THIS ASSERTION MADE BY THE LD. A.R. WAS NOT C ONTROVERTED BY THE LD. D.R. 8. THE AMENDMENT TO SECTION 54 & 54F, RESTRICTING T HE CLAIM OF DEDUCTION TO ONE RESIDENTIAL UNIT WAS INTRODUCED BY FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 (I.E. FROM AY 2015 -16). SINCE WE ARE CONCERNED WITH ASSESSMENT YEAR 2009-10, THE AME NDMENT BROUGHT OUT BY FINANCE (NO.2) ACT, 2014 DOES NOT HA VE APPLICATION FOR THE INSTANT CASE. IT IS ORDERED AC CORDINGLY. ITA NO.3223/BANG/2018 SHRI Y.C. GOPINATH, BANGALORE PAGE 5 OF 5 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPT, 2020 SD/- (A.K. GARODIA) ACCOUNTANT MEMBER SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER BANGALORE, DATED 24 TH SEPT, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.