Sri Alagappa Muthiah (HUF) Vs DCIT (ITAT Bangalore)
Conclusion: Liability to capital gains had not arisen in the assessment year 2017-18 as occupancy certificate was received on 01/02/2017 for commercial portion and 17/03/2017 for residential portion but in the assessment year 2018-19 on receipt of possession.
Held: Assessee-HUF co-owned 6 acres 23.2 guntas of land in Hebbal Village had entered into a Development Agreement, resulting in the development of his property into commercial and residential units, including the entire commercial unit and 6 apartments. Assessee acknowledged a capital gain of Rs.14,60,95,303 for assessment year (AY) 2018-19 and agreed to file for AY 2017-18 with a differential gain of Rs.27,35,99,751. However, assessee later withdrew this acknowledgment and argued that the capital gains liability should be considered for AY 2018-19 since the property was possessed on 08/05/2017. The property was valued at Rs. 89,15,48,164 by a registered valuer. Following a notice under Section 153C, assessee filed a return declaring capital gains of Rs. 27,14,43,062 based on a registered valuer’s report. SO determined that the capital gains should be attributed to AY 2017-18, using occupancy certificates from early 2017. AO recalculated the capital gains to Rs. 120,03,46,357 and adjusted the cost of acquisition from Rs. 750 to Rs. 140 per sq.ft. The main issue in the appeal was whether the capital gains should be taxed in AY 2017-18 or AY 2018-19. Assessee contended that capital gains should be recognized in AY 2018-19, referring to the possession letter and not based on the date of the occupancy certificate. It was held by Tribunal that the capital gains were taxed in AY 2017-18 based on the occupancy certificate dated 17.03.2017. Assessee argued that Section 45(5A), introduced on 01.04.2018, should be applied, which mandates that capital gains be taxed in the year when the completion certificate was issued. However, the bench found that Section 45(5A) could not be applied retrospectively for AY 2017-18. It accepted the possession letter dated 08.05.2017 and ruled that the capital gains should be taxed in AY 2018-19.
