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

ITA 811/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8869 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: P RAJASEKHARAN
• Keywords: Capital asset
• Section: 54F; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 811/MDS/2016 / ASSESSMENT YEAR : 2009-10 THE INCOME-TAX OFFICER, NON-CORPORATE WARD-16(2), CHENNAI 34. ( /APPELLANT) V. SHRI A.V.CHANDRAMOHAN, NO.43/48, PUDUPET STREET, ALANDUR, CHENNAI 600 016. PAN AAJPC4063E RESPONDENT) / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT / RESPONDENT BY : SHRI P. RAJASEKHARAN, CA ! / DATE OF HEARING : 07.06.2016 '# ! / DATE OF PRONOUNCEMENT : 15.07.2016 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 12 .01.2016 FOR THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : - - ITA 811/16 2 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.54F DESPITE MULTIPLE FLATS BEING ALLOTTED TO HI M IGNORING THE FACT THAT THE WORDING USED IN THE SECT ION IS A RESIDENTIAL HOUSE ENTITLING THE ASSESSEE FOR DEDUC TION FOR ONLY ONE HOUSE. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE DED UCTION U/S.54F TO BE GIVEN ON ALL THE FLATS EVENTHOUGH ONE OF THE CONDITIONS U/S.54F I.E. HOUSE SHOULD BE CONSTRUCTED WITHIN THE PERIOD OF 3 YEARS HAS NOT BEEN FULFILLED AS THE ASSESSEE HAS TAKEN POSSESSION OF THE CONSTRUCTED HOUSE ONLY AFTER 3 YEARS OF TRANSFER OF THE ORIGINA L ASSET. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE ALON G WITH SEVEN OTHER CO-OWNERS, OWNED A PIECE OF LAND LOCATE D AT ADAMBAKKAM VILLAGE, TAMBARAM, KANCHIPURAM DISTRICT. ALL THE CO-OWNERS HAD EQUAL RIGHTS IN THE LAND. ALL TH E CO-OWNERS ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S . SHANMUGAM CONSTRUCTIONS SERVICES ON 08/12/2006, REL EVANT TO THE A.Y. 2007-08, TO DEVELOP THEIR UNDIVIDED SHA RE OF LAND. AS PER PARA THREE OF THE AGREEMENT, THE BUILDER SHA LL CONSTRUCT RESIDENTIAL APARTMENTS ON SUCH UNDIVIDED SHARE OF LAND AND IN RETURN THE BUILDER WILL HAND OVER 40% O F THE BUILT UP AREA INCLUSIVE OF COMMON AREA FOR CONVEYING 60% OF THE UNDIVIDED SHARE OF LAND. THE ABOVE MENTIONED JOINT DEVELOPMENT AGREEMENT DATED 8/12/2006 WAS VALID FOR 18 - - ITA 811/16 3 MONTHS. SINCE THE CONSTRUCTION WAS NOT COMPLETED W ITHIN THE STIPULATED TIME, AN EXTENSION OF THE JOINT VENTURE AGREEMENT WAS ENTERED INTO ON 18/7/2008 RELEVANT TO THE A.Y. 2009-10. 3.1 THE BUILDER CONSTRUCTED THE APARTMENTS ON THE S AID LAND AND HANDED OVER 72 FLATS TO THE CO-OWNERS OF T HE LAND. FOR THIS PURPOSE, DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE ALONG WITH OTHER SEVEN CO-OWNERS REGISTERE D UNDIVIDED SHARE OF LAND PERTAINING TO 38 FLATS WHIC H WORKED OUT TO 5,38,87,764/ -. OUT OF THIS VALUE OF TRANSACTION, THE ASSESSEES SHARE COMES TO 65,49,538/ -. THE ASSESSEE WHILE FILING THE RETURN OF INCOME FOR THE A.Y. 2009 -10 TREATED THE SAID VALUE OF 65,49,538/- AS THE DEEMED SALE CONSIDERATION RECEIVED DURING THE FINANCIAL YEA 200 8-09. AS PER THE AGREEMENT, THE ASSESSEE ALONG WITH OTHER CO -OWNERS WERE SUPPOSED TO GET 40% OF THE TOTAL CONSTRUCTED A REA IN VIEW OF 60% OF THE UNDIVIDED SHARE OF LAND, HENCE, THE ASSESSEE TREATED THE SAID VALUE OF 65,49,538/- AS SALE CONSIDERATION FOR HIS 1/8 TH SHARE OF THE 60% OF THE UNDIVIDED SHARE OF LAND FOR THE FINANCIAL YEAR 2010-1 AND COM PUTED THE - - ITA 811/16 4 LONG TERM CAPITAL GAIN ACCORDINGLY. FURTHER, THE A SSESSEE CLAIMED THE ENTIRE CAPITAL GAIN AS EXEMPT U/S.54F O F THE ACT. 3.2 HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND HELD THAT THE UNDIVIDED SHARE OF LAND WAS TRANSFERRED TO THE BUILDER AS PER THE EXTENSION OF THE JOINT VENTURE AGREEMENT ENTERED INTO ON 1/7/2008 PERTAINI NG TO A.Y. 2009-10. FURTHER, THE AO OBSERVED FROM THE E XTENSION OF JOINT VENTURE AGREEMENT THAT THE ASSESSEE WAS A LLOTTED NINE FLATS AS CONSIDERATION FOR TRANSFERRING HIS SH ARE OF LAND TO THE DEVELOPER. HENCE, THE AO HELD THAT THE ASSESSE E WAS NOT ELIGIBLE FOR EXEMPTION U/S.54F(1)(A) OF THE ACT . AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (APPEALS). 3.3 BEFORE THE CIT(APPEALS), THE LD. AR RELIED ON T HE ORDER OF THE TRIBUNAL IN THE CASE OF OTHER CO-OWNERS FOR THE A.Y. 2009-10 IN ITA NOS.1396, 1397, 1493, 1494 AND 1495/MDS/2013, WHEREIN THE TRIBUNAL HAS DECIDED BOT H THE ISSUES IN FAVOUR OF THE ASSESSEE. 4. ON APPEAL, THE CIT(APPEALS) AFTER CONSIDERING TH E ABOVE ORDER OF THE TRIBUNAL, OBSERVED AS UNDER : REGARDING THE FIRST ISSUE, IT HAS BEEN HELD BY THE HONOURABLE TRIBUNAL THAT THE TRANSFER OF IMPUGNED C APITAL - - ITA 811/16 5 ASSET TOOK PLACE ON 8.12.2006, RELEVANT TO THE A.Y. 2007- 08, WHEN THE ORIGINAL JOINT DEVELOPMENT AGREEMENT W AS SIGNED BY THE ASSESSES WITH THE BUILDER AND NOT IN A.Y. 2009-10 WHEN THE EXTENSION OF THE JOINT DEVELOPMENT AGREEMENT WAS EXECUTED. THEREFORE, THE CAPITAL GAI N, IF ANY, WAS ASSESSABLE ONLY IN THE A.7. 2007-08 AND CERTAINLY NOT IN THE A.Y. 2009-10. SECONDLY, REGAR DING THE ISSUE OF THE CLAIM OF THE ASSESSEE U/S.54F, IT HAS BEEN HELD BY THE HONOURABLE TRIBUNAL THAT THE ASSES SEE WAS ELIGIBLE FOR EXEMPTION U/S.54F OF THE ACT IN VI EW OF THE JUDGMENT OF THE HONOURABLE MADRAS HIGH COURT IN THE CASE OF V.R.KARPAGAM, WHEREIN IT WAS HELD THAT EVEN THOUGH MULTIPLE FLATS WERE ALLOTTED TO THE ASSESSEE , THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S.54F OF THE ACT. SINCE, THE PRESENT ASSESSEE IS ONE OF THE CO-OWNERS AND THE FACTS OF ALL THE CASES ARE SIMILAR, FOLLOWING THE J UDGMENT OF THE JURISDICTIONAL HIGH COURT AND THE TRIBUNAL, HE DECI DED THE CASE IN FAVOUR OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION, THE ISSUE IS SQUARELY C OVERED BY THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEES OWN CAS E IN ITA NO. 2931/MDS/2014 DATED 23.9.2015 FOR THE ASSESSMENT YE AR 2007- 08, WHEREIN FOLLOWING ITS EARLIER ORDER DATED 23.9. 2015 IN THE CASE OF CO-OWNERS IN ITA NOS. 1396, 1397, 1493, 149 4 AND 1495/MDS/2013, IT WAS HELD AS UNDER : - - ITA 811/16 6 5. HEARD BOTH SIDES AND PERUSED ORDERS OF LOWER AUT HORITIES AND THE DECISIONS RELIED ON. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN OTHER CO-OWNERS CASE IN ITA NOS. 1396, 1397, 1493 TO 1495/MDS/2013 DATED 15.05.2015 ALREADY DECIDED T HE ISSUE I.E. INCIDENCE OF CAPITAL GAINS THE YEAR IN WHICH I T HAS TO BE TAXED AND ALLOWABILITY OF SECTION 54 OF THE ACT HOL DING THAT CAPITAL GAIN HAS TO BE ASSESSED IN THE ASSESSMENT Y EAR 2007- 08 AND THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54F THOUGH THE ASSESSEE RECEIVED MULTIPLE FLATS IN LIEU OF COST OF 60% OF THE LAND ALLOTTED TO THE BUILDER OBSERVIN G AS UNDER:- 2. SHRI P. RADHAKRISHNAN, THE LD. DEPARTMENTAL REPR ESENTATIVE, SUBMITTED THAT ALL THE FIVE ASSESSEES ALONG WITH TH REE OTHERS ENTERED INTO AN AGREEMENT FOR JOINT DEVELOPMENT OF LAND ON 8.12.2006 WITH ONE SHANMUGA CONSTRUCTION SERVICES. ACCORDING TO THE LD. D.R., THE JOINT VENTURE AGREEMENT WAS FO R CONSTRUCTION OF A MULTI-STORIED BUILDING WITHIN A PERIOD OF 18 M ONTHS. HOWEVER, THE BUILDER M/S SHANMUGA CONSTRUCTION SERV ICES COULD NOT COMPLETE THE CONSTRUCTION WITHIN 18 MONTHS AS P ROJECTED IN THE AGREEMENT DATED 8.12.2006. THEREFORE, ALL THE ASSESSEES AND THREE OTHERS ENTERED INTO ANOTHER AGREEMENT TO EXTEND THE PERIOD OF JOINT VENTURE AGREEMENT FOR A PERIOD OF T WENTY FOUR MONTHS, ON 1.7.2008. IN THE STATEMENT FILED ALONG WITH RETURN OF INCOME, THE ASSESSEES CLAIMED THAT THE SALE CONSIDE RATION OF THE PROPERTY WAS ONLY TO THE EXTENT 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 ENTITLED FO R 60% OF THE CONSTRUCTED AREA. IN LIEU OF THE 40% CONSTRUCTED A REA, THE ASSESSEES HAVE TO TRANSFER PROPORTIONATE AREA TO TH E EXTENT OF 60% OF THE LAND TO THE BUILDER TOWARDS COST OF CONS TRUCTION OF 40% OF THE CONSTRUCTED AREA. ACCORDING 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 GAIN AROSE TO THE ASSESSEES ONLY DURING THE FINANCIAL YEAR 2008-09, WHICH IS RELEVANT TO THE ASSESSMENT YEAR 2 009-10. ACCORDINGLY, THE ASSESSING OFFICER ASSESSED THE CAP ITAL GAIN DURING THE YEAR UNDER CONSIDERATION. SINCE THE ASS ESSEES ARE HAVING MULTIPLE FLATS AS THEIR SHARES FROM THE BUIL DER, THE ASSESSING OFFICER DISALLOWED THE CLAIM UNDER SECTIO N 54F OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). - - ITA 811/16 7 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 WHI CH POSSESSION WAS TAKEN BY THE BUILDER HAS TO BE TAKEN AS THE DATE OF TRANSFER. SINCE THE AGREEMENT WAS EXTENDED ON 1 .7.2008, ACCORDING TO THE LD. D.R., THE POSSESSION WAS DEEME D TO BE GIVEN ONLY ON 1.7.2008. THEREFORE, THE CIT(APPEALS ) IS NOT JUSTIFIED IN HOLDING THAT NO CAPITAL GAIN ARISES FO R THE YEAR UNDER CONSIDERATION. REFERRING TO THE ORDERS OF THE CIT( APPEALS), THE LD. D.R. SUBMITTED THAT THE CIT(APPEALS) FOUND THER E WAS NO TRANSFER FOR THE YEAR UNDER CONSIDERATION AND THE C IT(APPEALS) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE DATE OF COMPLETION OF THE CONSTRUCTION OF FLATS AND ITS HANDING OVER T O THE ASSESSEES AS THE DATE OF TRANSFER FOR THE PURPOSE OF DETERMIN ING THE CAPITAL GAIN. ACCORDING TO THE LD. D.R., SINCE THE ASSESSE ES ENTERED INTO A REVISED AGREEMENT DATED 1.7.2008 WITH THE BU ILDER FOR EXTENDING THE JOINT VENTURE AGREEMENT WHICH FALLS I N THE FINANCIAL YEAR 2008-09, RELEVANT TO THE ASSESSMENT YEAR 2009- 10, CAPITAL 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 SECTION 5 4F OF THE ACT. 5. ON THE CONTRARY, SHRI P. RAJASEKHARAN, THE LD. R EPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ALL THE FIVE ASSES SEES ALONG WITH THREE OTHERS ENTERED INTO A JOINT VENTURE AGREEMENT ON 8.12.2006 IN RESPECT OF THE LAND LOCATED AT SURVEY NO.150/9 & 150/16 IN ADAMBAKKAM VILLAGE, TAMBARAM TALUK, KANCHEEPURAM DI STRICT. ALL THE EIGHT CO-OWNERS OF THE LAND ARE HAVING EQUA L 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 AREA WOULD BE R ETAINED BY THE BUILDER, NAMELY, SHANMUGA CONSTRUCTION SERVICES , AND 40% OF THE CONSTRUCTED AREA WOULD BE GIVEN TO THE ASSES SEES IN LIEU OF PROPORTIONATE 60% OF THE LAND AREA THAT WOULD BE GIVEN TO THE BUILDER, SHANMUGA CONSTRUCTION SERVICES. THEREFORE , ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER TOOK PLACE ON 8.12.2006. THE SUBSEQUENT AGREEMENT IS ONLY TO EXTEND THE PERI OD OF CONSTRUCTION AS AGREED ON 8.12.2006. 6. REFERRING TO THE COPY OF THE DEVELOPMENT AGREEME NT DATED 8.12.2006, THE LD. REPRESENTATIVE SUBMITTED THAT AS PER CLAUSE (6) OF THE AGREEMENT, THE VACANT POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE BUILDER. REFERRING TO THE COPY OF THE POWER OF ATTORNEY SAID TO BE EXECUTED IN FAVOUR OF THE BUILD ER, SHANMUGA CONSTRUCTION SERVICES, THE LD. REPRESENTATIVE SUBMI TTED THAT THE - - ITA 811/16 8 BUILDER WAS AUTHORIZED TO EXECUTE SALE DEEDS IN FAV OUR OF PROSPECTIVE PURCHASERS IN RESPECT OF THE CONSTRUCTE D AREA OF THE LAND WHICH WAS GIVEN TO IT AND APPLY FOR LOCAL AUTH ORITIES LIKE CORPORATION, CHENNAI METROPOLITAN DEVELOPMENT AUTHO RITY, ETC. FOR PLANNING PERMISSION. THIS POWER OF ATTORNEY WA S EXECUTED 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 E XTENSION 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 ALLOTTE D TO THE OWNERS. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER IN FACT TOOK PLACE ON 8.12.2006 WHEN THE JOINT VENTURE AGRE EMENT WAS EXECUTED BETWEEN THE ENTIRE OWNERS AND THE BUILDER, SHANMUGA CONSTRUCTION SERVICES, AND THE VACANT POSSESSION WA S HANDED OVER TO THE BUILDER. THEREFORE, ACCORDING TO THE L D. REPRESENTATIVE, THE CIT(APPEALS) RIGHTLY FOUND THAT THERE WAS NO TRANSFER OF LAND FOR ASSESSING THE CAPITAL GAIN DUR ING 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 THE ASSESSEES TRANSFERRED 60% OF THE TOTAL AREA IN LIEU OF 40% OF THE CONSTRU CTED AREA. THEREFORE, THE COST OF CONSTRUCTION OF 40% AREA WOU LD BE THE SALE CONSIDERATION FOR TRANSFERRING 60% OF THE AREA OF T HE LAND. SINCE THE LAND ITSELF WAS GIVEN FOR JOINT DEVELOPMENT AND THE ASSESSEES WERE ENTITLED TO GET BACK ONLY 40% OF THE CONSTRUCT ED AREA ALONG WITH PROPORTIONATE SHARE IN THE LAND, ACCORDING TO THE LD. 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 (APPEAL) NO.301 OF 2014, THE L D. REPRESENTATIVE SUBMITTED THAT SECTION 54F OF THE AC T WAS AMENDED, WHICH WILL COME INTO EFFECT ONLY FROM 1.4. 2015, WHICH MAKES IT CLEAR THAT BENEFIT OF SECTION 54F OF THE A CT WILL BE APPLICABLE TO CONSTRUCTION OF ONE RESIDENTIAL HOUSE IN INDIA AND THAT CLARIFIES THE SITUATION IN THE PRESENT CASE, I .E. POST AMENDMENT FROM 1.4.2015, THE BENEFIT OF SECTION 54F WILL BE APPLICABLE TO ONE HOUSE IN INDIA. PRIOR TO THE SAI D AMENDMENT, IT IS CLEAR THAT A RESIDENTIAL HOUSE WOULD INCLUDE MUL TIPLE FLATS/RESIDENTIAL UNITS. SINCE THESE APPEALS BELON G TO ASSESSMENT YEAR BEFORE 1.4.2015, ACCORDING TO THE LD. REPRESEN TATIVE, MULTIPLE FLATS/RESIDENTIAL UNITS WERE ELIGIBLE FOR EXEMPTION UNDER SECTION 54F OF THE ACT. - - ITA 811/16 9 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 THE LAND BY ALL THE ASSES SEES ALONG WITH THREE OTHERS. WE HAVE CAREFULLY GONE THROUGH THE AGREEMENT DATED 8.12.2006. CLAUSE (6) OF THE AGREE MENT CLEARLY SAYS THAT THE FIRST PARTY, NAMELY, THE ASSESSEES AN D THREE OTHERS SHALL HAND OVER THE POSSESSION OF THE PROPERTY TO T HE BUILDER, NAMELY, SHANMUGA CONSTRUCTION SERVICES. THE PERIOD PROVIDED IN THE AGREEMENT IS 18 MONTHS FOR COMPLETION OF THE CONSTRUCTION. THE AGREEMENT HAS PROVIDED FOR EXECUTION OF THE POW ER OF ATTORNEY IN FAVOUR OF THE BUILDER TO ENABLE HIM TO DEAL WITH PROPERTY FOR GETTING APPROVAL OF CONCERNED GOVERNME NT AUTHORITIES AND SALE OF THE SAME TO THE PROSPECTIVE PURCHASERS. SINCE THE CONSTRUCTION COULD NOT BE COMPLETED WITHI N 18 MONTHS AS PROVIDED, THE PARTIES ENTERED INTO ANOTHER AGREE MENT FOR EXTENSION OF THE TIME PROVIDING FOR 24 MONTHS FOR C OMPLETION OF THE CONSTRUCTION. THE AGREEMENT DATED 1.7.2008 CLE ARLY SAYS THAT THE CONSTRUCTION HAS ALREADY COMMENCED AND IT IS IN PROGRESS. THEREFORE, IT IS OBVIOUS THAT ALL THE AS SESSEES HANDED 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 CONSTRUCTION. HENCE , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE VACANT POSSES SION WAS GIVEN TO THE BUILDER ON 8.12.2006 IN PURSUANCE TO T HE JOINT VENTURE AGREEMENT ENTERED BETWEEN 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 T HE COMMON LAW, TRANSFER OF IMMOVABLE PROPERTY VALUING MORE THAN ` 100 WOULD BE MADE ONLY BY EXECUTING A REGISTERED SALE DEED. HOW EVER, UNDER INCOME-TAX ACT, SECTION 2(47) DEFINES TRANSFER IN RELATION TO CAPITAL ASSET. FOR 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 (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-TRADE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR 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 OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED T O IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 18 82) ; OR - - ITA 811/16 10 (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, CO MPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHI CH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. 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 ALW AYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTERE ST THEREIN, OR CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER W HATSOEVER, DIRECTLY OR INDIRECTLY, ABSOLUTELY OR CONDITIONALLY , VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMENT (WHETHER ENTE RED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWISE, NOTWITHSTANDING THAT S UCH TRANSFER OF RIGHTS HAS BEEN CHARACTERISED AS BEING EFFECTED OR DEPENDE NT UPON OR 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 ASSET AS TRA NSFER WITHIN THE MEANING OF SECTION 2(47) OF THE ACT. SECTION 2 (47)(VI) SHOWS THAT ANY TRANSACTION BY WAY OF AN AGREEMENT OR ARRA NGEMENT IN ANY MANNER WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT OF IMMOVABLE PROPERTY ALSO TREATS AS TRAN SFER. IN THIS CASE, THE ASSESSEES IN EXCHANGE OF 40% OF THE CONST RUCTED AREA, TRANSFERRED 60% OF THE LAND TO THE BUILDER AND HAND ED OVER THE PHYSICAL POSSESSION. THEREFORE, IT IS AN EXCHANGE OF PROPERTY BETWEEN THE PARTIES. IN OTHER WORDS, THE ASSESSEES EXCHANGED 60% OF THE LANDED AREA FOR 40% OF THE CONSTRUCTED A REA. THEREFORE, THERE IS A TRANSFER WITHIN THE MEANING O F SECTION 2(47) (I) OF THE ACT ON THE DATE ON WHICH THE AGREEMENT D ATED 8.12.2006 WAS EXECUTED. EVEN OTHERWISE, THE JOINT VENTURE AGREEMENT HAS THE EFFECT OF TRANSFERRING 60% OF THE LANDED AREA TO THE BUILDER. THE ASSESSEE CANNOT TAKE BACK 60% LANDED AREA ON WHICH THE BUILDER HAS COMMENCED CONSTRUCTION. A T THE BEST, THE ASSESSEES WOULD GET ONLY 40% OF THE CONSTRUCTED AREA 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 ENJO YMENT OF THE BUILDER. IN OTHER WORDS, THE ASSESSEES TRANSFERRED 60% OF THE LAND AREA TO THE BUILDER FOR ITS ENJOYMENT. THEREF ORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WA S A TRANSFER ON 8.12.2006 WITHIN THE MEANING OF SECTION 2(47)(I) AN D 2(47)(VI) OF - - ITA 811/16 11 THE ACT. THEREFORE, THE RELEVANT TRANSACTION TOOK PLACE IN THE FINANCIAL YEAR 2006-07 WHICH FALLS IN THE ASSESSMEN T YEAR 2007- 08. HENCE CAPITAL GAIN, IF ANY, IS ASSESSABLE ONLY IN THE ASSESSMENT YEAR 2007-08 AND CERTAINLY NOT IN THE YE AR 2009-10. 11. THE CIT(APPEALS) PROCEEDED TO OBSERVE THAT THE CAPITAL GAIN ARISES ONLY ON THE DATE OF COMPLETION OF THE C ONSTRUCTION OF FLATS AND ITS HANDING OVER TO THE ASSESSEES. THIS OBSERVATION IS TOTALLY CONTRARY TO THE PROVISIONS OF SECTION 2(47) OF THE ACT. IN FACT, THE ASSESSEES ENTERED INTO AN AGREEMENT AND H ANDING OVER THE PHYSICAL POSSESSION OF THE PROPERTY TO BUILDER ALLOWING IT TO ENJOY 60% OF THE LAND IN LIEU OF 40% OF THE CONSTRU CTED 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. T HEREFORE, NO CAPITAL GAIN ARISES IN THE YEAR IN WHICH THE CONSTR UCTION WAS COMPLETED AND THE CONSTRUCTED AREA WAS HANDED OVER TO THE ASSESSEES. ACCORDINGLY, WE HOLD THAT NO CAPITAL GA IN ARISES FOR ASSESSMENT IN THE YEAR UNDER 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 LANDE D AREA TRANSFERRED TO THE BUILDER. THEREFORE, THE ASSESSE ES, FROM THE DATE ON WHICH THE TRANSFER WAS MADE BY ENTERING INT O AGREEMENT FOR JOINT DEVELOPMENT, ARE IN THE PROCESS OF CONSTR UCTING THE RESIDENTIAL HOUSE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEES ARE ENTITLED FOR EXEMPTI ON UNDER SECTION 54F OF THE ACT. NOW THE OBJECTION OF THE D EPARTMENT IS THAT THE ASSESSEES GOT MULTIPLE FLATS, ALMOST EIGHT FLATS EACH, IN LIEU OF THE LAND TRANSFERRED TO THE BUILDER. THE Q UESTION ARISES FOR 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 ASSESSEESAR E ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT? WE HAVE GO NE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN V.R. KARPAGAM (SUPRA). IN THIS CASE, THE ASSESSEE OBTAINED FIVE INDEPENDENT F LATS IN A MULTI- STORIED CONSTRUCTION AND CLAIMED EXEMPTION AS INDEP ENDENT UNIT 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 MAD RAS HIGH COURT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION T HAT THE ASSESSEES ARE ELIGIBLE FOR EXEMPTION EVEN THOUGH MU LTIPLE FLATS WERE ALLOTTED TO THEM IN LIEU OF COST OF 60% OF THE LAND ALLOTTED TO THE BUILDER. - - ITA 811/16 12 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 I S ELIGIBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT THOUGH HE HAS 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 W HICH SHALL BE EXAMINED BY ASSESSING OFFICER IN THE LIGHT OF THE ABOVE JUDGEMENT. 5. WITH THE ABOVE LINES, WE REMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR CONSIDERATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 15 TH OF JULY, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 15 TH JULY, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.