Section 54F – Claim u/s. 54 is admissible in respect of flats allotted by the builder to the assessee under the terms of the Development Agreement as the same constitute consideration retained by the Developer and utilised for construction of flats on behalf of the assessee.
Jagdish D. Shah | Jagdish T. Punjabi Chartered Accountants
Ajay Varde vs. Pr. CIT (Mumbai) Members: Joginder Singh, VP and Ramit Kochar, AM ITA No.: 2627/Mum./2018 A.Y.: 2013-14. Dated: 14th November, 2018 Counsel for assessee / revenue: M.
Subramanian / L. K. S. Dehiya
Section 54F – Claim u/s. 54 is admissible in respect of flats allotted by the
builder to the assessee under the terms of the Development Agreement as the
same constitute consideration retained by the Developer and utilised for
construction of flats on behalf of the assessee.
The assesse, an individual, in his return of
income declared Capital Gains at Rs. 15,982 after claiming deduction u/s. 54F
and 54EC of the Act. The Assessing Officer (AO) completed the assessment
accepting the returned income. Subsequently, the Pr. CIT issued notice u/s. 263
of the Act and held that the order passed by the AO u/s. 143(3) of the Act was
erroneous as the same was prejudicial to the interest of the revenue. The Pr.
CIT observed that during the year under consideration, the assessee along with her
relatives entered into development agreement for the development of property
owned by the assessee with her relatives. As per the terms of agreement with
the developer, consideration for the said transfer of development rights was a
sum of Rs. 40 lakhs and four residential flats and six car parking spaces. The
assessee computed the gains by adopting Rs. 1,32,62,500 to be full value of
consideration. This sum of Rs.1,32,62,500 comprised of Rs. 40,00,000 being the
monetary consideration and Rs. 92,62,500 being the value of residential flats
which the assessee was entitled to receive from the developer. From the full
value of consideration the assessee reduced indexed cost of acquisition and the
value of two new residential houses which were to be received by the assessee
u/s. 54F of the Act.
The Pr. CIT, however, held that the assessee
could not be allowed to claim exemption u/s. 54F of the Act in respect of the
said two residential flats as the said flats were yet to be constructed by the
developer and were future properties and hence the assessee was not entitled to
claim exemption u/s. 54F of the