M/S. ANUPAM RANJAN (HUF),BENGALURU vs. INCOME TAX OFFICER, WARD-7(2)(1), BANGALORE

Rs.18,16,540/- The learned CIT(A) ought to have appreciated that the apartments were only improvement on undivided share in the land and consequently the entire capital gain arising on the transactions are liable to be assessed only under the head "long term capital gain". 3. Rs.18,16,540/- The learned ':CIT(A) ought to have allowed the benefit of Section 54 of the Act in respect of the new asset acquired by the Appellant while computing the long term capital gain for which adequate details had been provided for. 4. Rs.18,16,540/- The learned CIT(A) erred in holding that the appellant had not furnished any document to prove that the appellant had transferred to the builder the land and building without appreciating that the appellant had furnished the joint development agreement and also the agreement for transfer of the property dated 1.6.2011 which only resulted in capital gain being brought to tax for the relevant year and in the circumstances the alleged failure as claimed by the CIT(A) was incorrect and the benefit of deduction under section 54/54F ought to have been given to the appellant. 5. On the facts and in the circumstances of the case, the Rs.18,16,540/- learned CIT(A) ought to have accepted the capital gain as offered by the Appellant and ought to have deleted the impugned additions. 6. Without prejudice, the impugned additions Rs.18,16,540/- confirmed by the learned CIT(A) are arbitrary, excessive, unreasonable and the impugned additions are required to be deleted in toto.

For these and such other grounds that may be urged at the -- time of hearing, the Appellant prays that the appeal may be allowed.

Facts of the case are that the assessee is a HUF, being a co- owner of property bearing Survey No.861, Khata No.72, Tauzi No.205, Thana Phulwari, Patna District entered into JDA on 11.1.2007 for construction of residential flats with M/s. Ashiana Marketing & Construction Pvt. Ltd., No.414, Ashiana Towers, 4th Floor, Exhibition Road, PO GPO, Gandhi Maidan P.S., Patna, Bihar- 800 001, wherein assessee got 40% of total built-up area. The assessee received 13 flats, out of which assessee sold 12 flats in the assessment year 2012-13 and one flat was sold in 2013-14. Thus, the assessee received total consideration of Rs.1,42,64,500/- from the sale of 12 flats being 50% of share. The undivided share of land sold along with these 12 flats is 6620.89 sq.ft. The assessee declared the long term capital gain from these transactions. However, the AO bifurcated the capital gain as long term capital gain as well as short term capital gain and computed the long term and short term gain as below:-

The Ld. A.R. reiterated that the assessee’s income has to be computed from the JDA as only under head “Long term Capital gain” and there is no short-term capital gain as the gain arised consequent to the assessee entered into JDA with M/s. Ashiana Marketing & Constructions Pvt. Ltd. on 11.1.2007. It was the contention of the assessee’s counsel that on commencing from the date of transfer of the land to the developer and ending on the date when the assessee sold its share of flats constitute a single transaction. This argument is too fallacious to be accepted. The land is one capital asset transferred by the assessee and the flats allotted to it in consideration for the transfer of land constitute a different capital asset for the assessee. How can transfer of two capital assets transferred on different dates constitute a single transaction for the purpose of capital gains under the Act? It is not a conversion of an asset from one form to the other. Such a conversion is deemed to be a transfer only when a capital asset is converted into stock-in-trade by a person. In the instant case, it is not in dispute that the land held by the assessee was its capital asset. It cannot also be disputed that the flats acquired by it were also its capital assets. The acquisition of the new asset may have been by any mode, but simply because the new asset came to it by way of consideration for transfer of earlier asset, the transfer of new asset does not cease to be a transfer as per s. 2(47) of the Act constituting altogether a

Same view was taken by the Hyderabad Bench in the case of Dr. Maya Shenoy Vs. ACIT (124 TTJ 692) (Hyd)(Trib).

Further contention of the assessee’s counsel is that the assessee is entitled for exemption u/s 54 as well as 54F of the Act. This argument of assessee’s counsel is totally incorrect. The exemption u/s 54 of the Act is to be granted when the following conditions are satisfied as held by Bangalore Bench of Tribunal in the case of Smt. Sujaya Seshadri Bhagawan Vs. ITO Ward-(2)(3) in ITA No.822/Bang/2019 dated 29.7.2021 as follows:-

The schedule of property transferred as mentioned in the present case as seen from the copy of JDA dated 11.1.2007 filed before us, the assessee transferred following properties:- Schedule A (Description of the Property) All the piece and parcel of lands of “Vishnu Enclave” comprising of Blocks `A’ & `B’ being portion of Survey Plot No.861, Khata No.72, Tauzi No.205, thana No.137, P.S. GANDHI Maidan. Holding No.684, Circle No.9, Ward No.2/10, situated at Maua Mohaarampur (Salimpur Ahra), district of Patna, measuring about 10.6725 Katha more of less being equivalent to 14514 Sq.ft and bounded as follows:-

Contrary to this, assessee has submitted before us that assessee has transferred the land and residential building, which is contrary to the records filed before us. There was no building in the scheduled property. Hence, these arguments of the assessee are totally misconceived and deserve to be dismissed. Alternatively, the argument of the assessee’s counsel is that assessee is entitled for exemption u/s 54F of the Act. The assessee claimed deduction u/s 54F of the Act at Rs.98,93,034/-. The A.O. granted proportionate deduction at Rs.88,21,925/- i.e. proportionate to the investment and sale consideration received by the assessee. The Ld. CIT(A) observed that assessee has not produced any document to prove that the assessee has transferred to the builder consisting of land and building. Further, he observed that in absence of any such document in support of its claim, no fault can be attributable to the AO for not allowing deduction u/s 54F of the Act. As discussed in earlier para, the assessee claimed deduction u/s 54F of the Act. However, assessee’s claim of deduction u/s 54F of the Act is justified if it has fulfilled the following conditions laid down in that provisions, specifically u/s 54F(3) of the Act as under. In other words, where an individual or HUF transfers any long-term capital asset, not being a residential house, and invests the net sale proceeds to acquire a residential house, the exemption under section 54F is available provided following conditions are satisfied:

With this observation, we remit the issue in dispute to the file of AO for fresh consideration.

The appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 3rd Nov, 2022