VELAGPUDI KRISHNA PRADAD,VIJAYAWADA vs. THE ITO, VIJAYAWADA

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 69/VIZ/2017 (Asst. Year : 2011-12) Velagapudi Krishna Prasad, vs. ITO, Ward-2(2), D.No. 32-15-110/4, Flat No.404, Vijayawada. 3rd Floor, Kutumba Enclave, Moghalarajapuram, Vijayawada. PAN No. ACZPV 6726 B (Appellant) (Respondent)

Assessee by : Shri G.V.N. Hari – Advocate. Department By : Shri D.J.P. Anand – Sr.DR Date of hearing : 24/01/2018. Date of pronouncement : 09/02/2018. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Vijayawada, dated 22/09/2016 for the Assessment Year 2011-12. 2. Facts of the case, in brief, are that the assessee is a proprietor of Namita Transports, filed his return of income by admitting total income of Rs. 2,27,930/-. The assessee had entered into a development agreement with M/s. Ramineni Constructions and got two flats on development, however, he had

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not admitted any capital gains on the said transaction. The Assessing Officer reopened the assessment and worked out long term capital gain. The case of the assessee before the Assessing Officer is that he has received two flats and is eligible for claiming deduction under section 54F of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). The Assessing Officer rejected the claim of the assessee and only one flat is allowed under section 54F of the Act. 3. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. 4. On being aggrieved, assessee carried the matter in appeal before the tribunal. 5. Ld. counsel for the assessee has submitted that the issue involved in this appeal is squarely covered by the decision of the coordinate bench of the tribunal in the case of ITO v. Sri Ravuri Sai Chaitanya in ITA NO. 498/Vizag/2013 dated 28/03/2017, wherein by following the judgment of the Hon'ble High Court of Madras in the case of CIT vs. Gumanmal Jain in TCA No. 33/2017 [(2017) 98 CCH 93 (Chennai - HC)] has held that the assessee is entitled for benefit under section 54F for more than one flat, the same may be followed.

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agreement? The issue is no longer a res integra. The Hon’ble High Court of A.P., in the case of CIT Vs. Syed Ali Adil (supra), has considered the issue and after analyzing the provisions of section 54F of the Act, observed that the expression ‘a residential house’ in section 54F of the Act has to be understood in a sense that building should be of residential nature and ‘a’ should not be understood to indicate a single number and where an assessee had purchased two residential flats, is entitled to exemption u/s 54F of the Act, in respect of capital gains on sale of its property on purchase of both flats. The High Court further observed that deduction u/s 54F of the Act, is allowable with respect to the residential house consisting of several independent units. A similar view has been expressed by the Hon’ble High Court of Madras, in the case of CIT Vs. Gumanmal Jain (supra), wherein the Hon’ble High Court observed that all the flats are a product of one development agreement of the same piece of land being said land, hence even if flats are in different blocks and different towers, as long as they are in same address/location, it does not disentitle the assessee from getting the benefit of section 54F of the Act. In yet another case, the Hon’ble High Court of Madras in the case of CIT Vs. V.R. Karpagam (2015) 373 ITR 127, held that prior to amendment u/s 54F by Finance Act, 2004 w.e.f. 1.4.2015, with regard to word ‘a’, a residential house include multiple flats/residential units, where under the development agreement assessee was entitled to receive certain built-up area, which got translated into five flats, exemption u/s 54F in respect of five flats in a multi-storey construction would be available. 13. Thus, the legal proposition before the amendment of section 54F of the Act, by the Finance Act, 2014 w.e.f. 1.4.2015, in the case of development agreement, is very clear that if the land owner receives number of flats, even though they are located in different blocks and different towers, once they are in same address/location and all the flats are a product of one development agreement, then the assessee is eligible for exemption u/s 54F of the Act, in respect of all the flats. Therefore, we are of the view that the assessee is eligible for exemption u/s 54F of the Act in respect of all the flats received in pursuance of joint development agreement. The revenue has failed to bring on record any contrary decision against the law laid down by the Hon’ble A.P. High Court, in the case of CIT Vs. Syed Ali Adil (supra). Considering the facts and circumstances of the case and also respectfully following the decision of Hon’ble A.P. High Court, in the case of CIT Vs. Syed Ali Adil (supra), we are of the view that the assessee is eligible for exemption u/s 54F of the Act, towards all the flats received in pursuance to development agreement.

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Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated : 09th February, 2018. vr/-

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Copy to: 1. The Assessee - Velagapudi Krishna Prasad, D.No. 32-15-110/4, Flat No.404, 3rd Floor, Kutumba Enclave, Moghalarajapuram, Vijayawada. 2. The Revenue - ITO, Ward-2(2), Vijayawada. 3. The Pr.CIT, Vijayawada. 4. The CIT(A), Vijayawada. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.