I-T - One residential house would include multiple flats in same multistorey apartment before amendment to Sec 54F vide Finance Act, 2014: ITAT
By TIOL News Service
BANGALORE, NOVEMBER 30, 2018: THE ISSUE IS - Whether for claiming exemption u/s 54F of Act, one residential house would include multiple flats/residential units in the same multi-storey apartment building before the amendment to section 54F of the Act by Finance (No.2) Act, 2014 w.e.f. 01.04.2015 was introduced. YES IS THE VERDICT.
Facts of the case
THE assessee an Individual did not file return for relevant AY. Based on the information received from the Investigation Wing of Income Tax Department, Bangalore, AO observed that the assessee had executed a Joint Development Agreement ('JDA') with a builder/developer M/s. Chamundi Builders in respect of his property, for being developed into residential apartments by the builder. As per the terms of the JDA, the assessee received refundable deposit of Rs. 6 lakhs and in consideration of the assessee agreeing to transfer the undivided share of 60% in the land, the builder agreed to construct and deliver 40% of super-built up area in the form of 3 flats in the Apartment Complex/Building, car parking and other benefits in the constructed area. The AO was of the view that this transaction being in the nature of transfer of land, capital gains accrued in the assessee's hands in the period relevant to Assessment Year 2006-07 and initiated proceedings u/s 147 of the Act recording that he had reason to believe that the assessee's income had escaped tax. The AO computed Long Term Capital Gain (LTCG) and taxed the same. On appeal, the CIT(A) gave partial relief to assessee. The CIT(A), while upholding the AO's computation of LTCG held that the assessee was entitled for the benefit of exemption u/s 54F of the Act in respect of 1 residential unit as against the assessee's claim for being allowed exemption u/s 54F in respect of all three residential units received as per the terms of the JDA.
On appeal, the Tribunal held that,
++ as far as assessee's claim for exemption u/s 54F of the Act in respect of 3 residential units received by the assessee in lieu of entering into a JDA on 14.12.2005 with the developer M/s. Chamundi Builders, is concerned, it was noted that issue is covered in favour of the assessee, by the decision of the Karnataka High Court in the case of CIT Vs. Smt. K.G. Rukminiamma;
++ the same view was also taken by the Madras High Court in the case of CIT Vs. V.R. Karpagam. In this judicial pronouncement, the Madras High Court also held that the Amendment made to section 54F of the Act with regard to the word 'a' by Finance (No.2) Act, 2014 was operative w.e.f. only 01.04.2015, whereby exemption for more than one flat (residential house), is to be withdrawn. However, prior to the Amendment, a residential house would include multiple flats/residential units in the same multi-storey apartment building;
++ contentions of the DR that the Amendment to section 54F of the Act by Finance (No.2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and has to be read retrospectively since the intention of Legislature was that exemption was to be allowed only in respect of one unit/flat is not tenable, as it goes contrary to the decision of the Madras High Court in the case of CIT Vs. V.R. Karpagam. Thus the assessee in the case on hand is eligible to be allowed for exemption u/s 54F of the Act in respect of multiple flats, i.e., the 3 flats in the same apartment building received by him upon entering into the JDA on 14.12.2005 with M/s. Chamundi Builders. In the result, the assessee's appeal is allowed.
(See 2018-TIOL-2345-ITAT-MUM)
