Tax Benefit available to Multiple Flats received under Joint Development Agreement even if Assessee already own a Residential House: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Bangalore bench has held that the Tax benefit under section 54F of the Income Tax Act is available to assessee in respect of multiple flats received under joint development agreement even if assessee already own a residential house.

The assessee entered into a Joint Development Agreement (JDA) with one M/s Vasthushree Developers as per which she received 40% of the share of the land of the property and 40% of the super built-up area and proportionate car parking in the premises to be constructed over the old property.

The Assessing Officer held that the amount so received is taxable as capital gains from the hands of the assessee. He also rejected the assessee’s claim for deduction under section 54F of the Act by finding that there was no residential property in the property transferred.

Confirming the above order, the CIT (Appeals) held that the assessee owned another house at Banashankari 3rd Stage and therefore assessee was not entitled to deduction u/s. 54F of the Act. Under section 54F of the Act, long-term capital gain will be exempt if the assessee utilizes the long-term capital gain in constructing a residential house. Under proviso to section 54F of the Act, the assessee should not own more than one residential house, other than the new asset on the date of transfer of the original asset.

Relying upon a catena of judicial decisions, the bench held that the CIT(Appeals) ought to have allowed deduction claimed by the assessee either under section 54 or 54F of the Act.

Allowing the contentions of the assessee, the bench held that “Even assuming that there was no building over the property that was subject matter of JDA, still the assessee would be entitled to deduction u/s. 54F of the Act. We are of the view that there is no basis for the conclusion of CIT(A) that the assessee owned more than two residential houses. The conclusions of the CIT(A) in this regard are without any basis. As already observed, the property referred to by the CIT(A) is nothing but ‘BSK 3rd Stage’ which was subject matter of the JDA, as stated by the ld. counsel for the assessee before us.”