April 2019

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

2.  Shilpa 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.

 

FACTS

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

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