DHIRAJKUMAR SOHANLAL THUKRAL ,MUMBAI vs. ACIT CIRCLE 17(1), MUMBAI

The assessee is an individual engaged in the business of transport under the name and style as M/s. Dhiraj Roadlines. The appellant filed the original

The record discloses that the appellant had entered into a Development Agreement dated 14.11.2011 under which the appellant had received a consideration of Rs.1,10,00,000/- and was entitled to receive 50% of the built- up area comprising of five units out of which three were residential flats and two commercial shops. The assessee initially claimed that the construction cost of the five units was also part of the consideration alongwith the cash consideration of Rs.1,10,00,000/- and calculated the total sale consideration at Rs.5,72,84,000/-. After making an allowance for the indexed cost of improvement and the indexed cost of acquisition, the capital gains were calculated at Rs.4,87,83,497/-. The assessee claimed deduction under Section 54F of the Act of Rs.2,54,52,211/- and the balance amount of Rs.2,33,31,286/- as LTCG was offered as income for the purposes of taxation.

The Assessing Officer called for certain details which were furnished by the appellant vide letter dated 22.12.2015 alongwith copy of the Development Agreement.

It appears that during the assessment proceedings, the assessee by his letter dated 21.03.2016 gave further particulars. Before the Assessing Officer, the appellant restricted the claim of deduction under Section 54F of the Act to only one residential flat which was valued at Rs.70,42,384/-.

The Assessing Officer also directed initiation of penalty proceedings alongwith interest, etc.

The CIT(A) has concurred with the finding as recorded by the Assessing Officer, including on the disallowance of set off and carry forward of unabsorbed depreciation of Rs.8,67,420/-. Insofar as disallowance of unabsorbed depreciation is concerned, CIT(A) has observed that appellant had failed to provide adequate evidence to substantiate the claim for set off and in the absence of said evidence, the set off cannot be granted under Section 32 of the said Act.

It is submitted by the learned counsel for the appellant that under the Development Agreement, apart from cash consideration of Rs.1,10,00,000/-, the appellant also got 50% of the constructed property comprising of five units out of which three were residential and two commercial units. It was submitted that the appellant had furnished a Valuation Certificate by an Architect for the construction cost of the said five units. It is thus submitted that according to the appellant the total consideration would be the cash consideration alongwith the construction cost of the five units. It is submitted that the Assessing Officer was in error in disallowing the said claim.

It is further submitted that although before the Assessing Officer the appellant had restricted the claim of deduction under Section 54F of the said Act to only one residential unit, the law permits the appellant to claim such deduction in respect of the three residential units/flats which are incidentally part of the same building. The learned counsel pointed out that sub-section (1) of Section 54F of the Act was amended w.e.f. 01.04.2015 by which the provision was restricted to “construction of one residential house” instead of “a residential house”. It is pointed out that the amendment cannot apply to the present case, which arises out of assessment year 2013-14. Reliance in this regard is placed on the decision of Madras High Court in Commissioner of Income Tax, Coimbatore vs Smt. V.R. Karpagam, 373 ITR 127 (Madras). It is submitted that this being a pure question of law, can be raised at any stage of the proceedings. It is, therefore, submitted that the appellant is entitled to

The learned DR submitted that the appellant under the terms of the Development Agreement got 50% of the built-up area, which ought to be considered alongwith 50% of the undivided share in the land underneath. It is submitted that the Assessing Officer was justified in recomputing the claim under Section 54F of the Act restricting it to only one residential unit, which was also the claim of the appellant before the Assessing Officer. It is submitted that the appellant cannot now claim the said deduction in relation to three residential units which was not a claim made before the Assessing Officer.

We have considered the submissions made. The terms on which the development rights were given to the builder, which is on a ‘principal-to- principal’ basis, is a matter of record in the form of Development Agreement. It is a matter of record that the appellant, apart from the cash consideration of Rs.1,10,00,000/-, is entitled to receive 50% of the built-up area as sanctioned by the Municipal authorities, which comprises of three residential units and two shops. In such circumstances, there are twin issues which would arise, viz. about the consideration which the appellant got (which includes the cash consideration and the part of constructed area) and the second issue about whether the appellant would be entitled to claim deduction under Section 54F of the Act in respect of three residential units. It is not disputed and, in fact, it is a matter of record that all the three residential units are part of the same building. Sub-section (1) of Section 54F of the Act was amended w.e.f. 01.04.2015 wherein the portion “constructed a residential house” has now been substituted by “constructed one residential house in India”. The

Insofar as the second issue about disallowance of unabsorbed depreciation is concerned, the learned counsel for appellant on instructions submits that the appellant is not pressing the said ground. It is, therefore, not necessary to adjudicate the same and the same is dismissed as not pressed.

In the result, the appeal is partly allowed. The matter is remitted back to the file of the Assessing Officer in the light of the observations made in para 13 and 14 above. The appellant shall co-operate with the Assessing Officer for expeditious disposal of the issue.