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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO
Per Vijay Pal Rao, Judicial Member
This appeal by the assessee is directed against the order dated 24.11.2016 of CIT(A) for the assessment year 2007-08. The assessee has raised the following grounds.
Page 4 of 7 2. At the time of hearing the ld. AR of the assessee has pointed out that if the ground nos. 5 and 6 of the assessee’s appeal on the issue of exemption u/s. 54F is decided in favour of the assessee then the other grounds becomes academic in nature. Hence the ground nos. 5 and 6 are taken up for hearing and adjudication.
The assessee is an individual and entered into Joint Development Agreement (JDA) on 18.05.2006 with M/s. BVR constructions on sharing of 55% to the developer and 45% to the land owners. While completing the assessment u/s. 143(3), the AO has restricted the claim of deduction u/s. 54F only to one flat instead of four flats claimed by the assessee. The assessee challenged the action of the AO before the CIT(A) but could not succeed. Before the Tribunal, the ld. AR of the assessee has submitted that all these four flats were received by the assessee as per the JDA and therefore when the sale consideration for transfer of the land to the developer has been received in the form of these four flats then the assessee is eligible for deduction u/s. 54F for the entire sale consideration. In support of his contention, he has relied upon the decision of the Hon’ble jurisdictional High Court in case of CIT Vs K.G. Rukminiamma (331 ITR 211) as well as the decision of the Hon’ble Madras High Court in case of CIT Vs Gumanmal Jain (2017) (98 CCH 0093).
On the other hand the ld. DR has relied upon the orders of the authorities below and submitted that the language of section 54F is unambiguous regarding a residential house and therefore more than one residential house cannot be allowed for the purpose of deduction u/s. 54F. He has further submitted that the AO and CIT(A) has clearly made out the fact that except one flat the assessee has already let out the other three flats and offered the rental income under the head income from house property. Therefore each flat is a separate residential unit. Thus the AO has justified to restrict the claim u/s. 54F only to the extent of one flat.
Having considered the rival submissions as well as relevant material on record it is noted that the assessee received four flats as a sale consideration against the transfer of 55% of share in the land in favour of the developer. Thus these flats are received as the consideration for transfer of the land. An identical issue has been considered by the Hon’ble jurisdictional High Court in case of CIT Vs K.G. Rukminiamma (supra) in para 12 as under.
“12. In the instant case, the facts are not in dispute. On a site measuring 30' × 110', the assessee had a residential premises. Under a joint development agreement, she gave that property to a builder for putting up flats. Under the agreement eight flats are to be put up in that property and four flats representing 48 per cent is the share of the assessee and the remaining 52 per cent representing another four flats is the share of the builder. So, the consideration for selling 52 per cent of the site is four flats representing 48 per cent. All the four flats are situate in a Page 6 of 7 residential building. These four residential flats constitute “a residential house” for the purpose of section 54. Profit on sale of property is used for residence. The four residential flats cannot be construed as four residential houses for the purpose of section 54. It has to be construed only as “a residential house” and the assessee is entitled to the benefit accordingly.”
Thus the Hon’ble High Court in the identical facts has held that all the four flats situated in the same residential building constitute the residential house for the purpose of section 54. Similarly, the Hon’ble Madras High Court in the case of CIT Vs Gumanmal Jain (supra) has held in para 7 as under.
In view of the above facts and circumstances of the case and following the decision of Hon’ble jurisdictional High Court as well as Hon’ble Madras High Court cited above the claim u/s. 54F is allowed for in respect of the four flats.
Since the assessee’s claim u/s. 54F is allowed therefore the other grounds raised by the assessee becomes academic in nature and are not pressed by the assessee.
In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 31st day of March, 2017