Income Tax Appellate Tribunal - Chennai
Ito, Chennai vs R.J.V.Kaiwar, Chennai on 31 May, 2017
आयकर अपील
य अ धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ड.एस. सु दर $संह, लेखा सद य केसम)
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1673/Mds/2016
नधा+रण वष+ / Assessment Year : 2011-12
The Income Tax Officer, Shri R.J.V. Kaiwar,
Non Corporate Ward 15(2), v. No.5, 2nd Crescent Park Street,
Chennai - 600 034. Gandhi Nagar, Adayar,
Chennai - 600 020.
PAN : ALDPK 9112 H
(अपीलाथ//Appellant) (01यथ//Respondent)
अपीलाथ/ क2 ओर से/Appellant by : Shri Supriyo Pal, JCIT
01यथ/ क2 ओर से/Respondent by : Shri Y. Sridhar, CA
सन
ु वाई क2 तार
ख/Date of Hearing : 06.03.2017
घोषणा क2 तार
ख/Date of Pronouncement : 31.05.2017
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) - 15, Chennai, dated 24.09.2015 and pertains to assessment year 2011-12.
2. Shri Supriyo Pal, the Ld. Departmental Representative, submitted that the assessee entered into a joint development 2 I.T.A. No.1673/Mds/16 agreement on 23.08.2010 and claimed exemption under Section 54 of the Income-tax Act, 1961 (in short 'the Act'). Referring to the joint development agreement, copy of which is available at page 141 of the paper-book, the Ld. D.R. submitted that the assessee handed over the physical possession of the property to the developer for joint development. As per this agreement, the assessee is entitled for 70% of the constructed area and remaining 30% will go to the share of the developer. If the assessee gets anything more than 70%, the assessee shall pay for the excess constructed area at the rate of `9500/- per sq.ft. In the agreement, it is specifically stated as 'C' Schedule that it belongs to the assessee and other co- owners. Similarly, in the 'D' Schedule, 30% of the undivided share from and out of 'B' Schedule of the property would go to the developer. The assessee is entitled for 70% of the constructed area proportionately.
3. The Ld. Departmental Representative further submitted that on this transaction, the assessee earned `8,46,12,019/- towards capital gain. The assessee claimed that the entire amount was exempted under Section 54 of the Act. The Assessing Officer worked out the sale consideration as per Section 50C of the Act at 3 I.T.A. No.1673/Mds/16 `9,52,77,020/-. Referring to the assessment order, more particularly para 5, the Ld. D.R. submitted that the assessee handed over the construction possession of the property at the time of executing joint development agreement. Referring to Section 2(47)(v) of the Act, the Ld. D.R. submitted that in view of the arrangement made by the assessee with a joint developer, there was transfer of property for the year under consideration. The assessee has also filed revised return for the assessment year 2013-14 on 04.03.2014 by taking into consideration the notional value of sale consideration in the revised block as per supplementary agreement dated 05.11.2012. Since the project was not completed within a period of three years after entering into joint development agreement on 23.08.2010, the Assessing Officer brought the entire capital gain of `8,39,08,948/- for taxation. The Assessing Officer rejected the claim of the assessee under Section 54 of the Act. The Assessing Officer, in fact, has taken the guideline value at `16,000/- per ground as on 01.04.1981 and thereafter computed the long term capital gains at `8,39,08,948/-. According to the Ld. counsel, when the assessee entered into an agreement and handed over the physical possession of property to the developer for developing, there was transfer within the meaning 4 I.T.A. No.1673/Mds/16 of Section 2(47)(v) of the Act. Since the construction could not be completed within a period of three years, according to the Ld. D.R., the assessee is not eligible for exemption under Section 54F of the Act, therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee.
4. On the contrary, Shri Y. Sridhar, the Ld. representative for the assessee, submitted that the assessee entered into a joint development agreement on 26.08.2010, a copy of which is available at page 141 of the paper-book. The Ld. representative submitted that the owner is entitled for 70% of the undivided share in the land and also 70% of super built up area in the form of residential apartment. The balance 30% of land and super built up area will go to the developer. The developer has to construct the building on his own after getting necessary approval from the Chennai Metropolitan Development Authority. Even though the developer initially intended to put up 57302.895 sq.ft. on the basis of Floor Space Index of 1.1:95, the builder could not get the approval of CMDA due to the regulations in Coastal Regulation Zone. Therefore, supplementary agreements were entered into to construct area as per the Floor Space Index permissible in the coastal area. 5 I.T.A. No.1673/Mds/16
5. The Ld. representative for the assessee further submitted that the assessee is entitled for 70% of super built up area as per approved plan and balance 30% given to the builder. The assessee is also entitled to proportionate share in the land to the extent of 70%. The Ld. representative further submitted that physical possession was not handed over to the developer on 28.06.2010. The Ld. representative further submitted that the building plan was approved by Chennai Metropolitan Development Authority only on 31.12.2012 after approval of coastal zone management authorities. Only after approval from Chennai Metropolitan Development Authority, the assessee handed over the physical possession of the property for the purpose of construction. Therefore, according to the Ld. representative, the contention of the Ld. D.R. that constructive possession was given to the developer on 26.08.2010 on the date of agreement is not correct. The assessee gave licence to the developer only for the purpose of getting approval from the competent authorities and the coastal zone regulation authority to develop. But, the developer was not able to get the approval and it was ultimately approved on 31.03.2012. This fact is not in dispute. Therefore, according to the Ld. representative, the assessee by way 6 I.T.A. No.1673/Mds/16 of revised return claimed the exemption under Section 54 of the Act by offering the capital gain, hence, the CIT(Appeals) has rightly allowed the claim of the assessee.
6. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, an agreement was entered into for joint development of property on 26.08.2010. As per the agreement, licence was given to the developer for measuring the land for preparing the plan, etc. before starting the actual construction. It is not in dispute that due to coastal zone regulation, the joint developer was not able to get the approval for the intended area of construction. The Floor Space Index was considerably reduced in the coast zone regulation and after getting necessary approval from coastal zone regulation authority, Chennai Metropolitan Development Authority ultimately granted approval only on 31.03.2012. The physical possession of the property thereafter handed over to the developer for the purpose of construction. Therefore, a mere licence to enter into the property for preparing plan and to carry on necessary formalities for the purpose of constructing the building cannot be construed as handing over of physical possession of the property. 7 I.T.A. No.1673/Mds/16
7. If the joint developer could not get the plan approved from Chennai Metropolitan Development Authority, the assessee would continue to be in the physical possession of the property. In other words, no part of property was handed over to the joint developer as per agreement which would enable him to continue in possession. As per the agreement, the assessee would continue the physical possession of property till the developer get approval from Chennai Metropolitan Development Authority. After the approval, the physical possession of the property was handed over, which ultimately falls in assessment year 2013-14. Therefore, the assessee filed a revised return to claim exemption under Section 54 of the Act. This Tribunal is of the considered opinion that when the assessee handed over the entire land on the basis of arrangement that the developer could retain 30% of land in proportionate to constructed area, there was transfer of property in the assessment year 2013-14.
8. The cost of 30% of undivided share of land would be the cost of 70% of constructed area at the rate of `9500/- per sq.ft. Since the assessee has not received any money from the developer, the entire fund has to be treated as investment in the construction by 8 I.T.A. No.1673/Mds/16 the developer. This Tribunal is of the considered opinion that it has to be construed that the assessee invested cost of 30% of undivided share of land for the construction. In other words, the cost of 30% of undivided share of land would be deemed to be invested and deposited with developer on transfer of 30% of undivided share of land to the developer, for the assessment year 2013-14. Since the cost of 30% share of undivided land was deemed to be invested with the developer for construction, this Tribunal is of the considered opinion that the assessee is eligible for exemption under Section 54 of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
7. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 31st May, 2017 at Chennai.
sd/- sd/-
ु दर $संह)
( ड.एस. स (एन.आर.एस. गणेशन)
(D.S. Sunder Singh) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
चे नई/Chennai,
st
8दनांक/Dated, the 31 May, 2017.
Kri.
9 I.T.A. No.1673/Mds/16
आदे श क2 0 त$ल9प अ:े9षत/Copy to:
1. अपीलाथ//Appellant
2. 01यथ//Respondent
3. आयकर आय;
ु त (अपील)/CIT(A)-15, Chennai-34
4. आयकर आय;
ु त/CIT-6, Chennai
5. 9वभागीय 0 त न ध/DR
6. गाड+ फाईल/GF.