As far as the deduction u/s. 54F of the Act on the question whether if under a JDA multiple flats are given to the owner whether deduction u/s.54F of the Act can be given, the decision of the Hon’ble High Court of Karnataka and the other decision cited before us supports the plea of the assessee that deduction u/s. 54F of the Act cannot be denied on the ground that multiple flats are obtained by the assessee. The ld. DR in this regard had placed reliance on the decision of the Hon’ble High Court of Karnataka in the case of CIT v. Late Khubchand M Makhija, ITA No.496/2007 dated 18.12.2013.
We find that the facts of the Assessee’s case are similar to the case of Smt.K.G.Rukminiamma (supra) decided by the Hon’ble Karnataka High Court. In the case of K.G.Rukminiamma, the facts were, on a site measuring 30’ x 110′ the assessee had a residential premises. Under a joint development agreement she gave that property to a builder for putting up flats. Under the agreement 8 flats are to be put up in that property and 4 flats representing 48% is the share of the assessee and the remaining 52% representing another 4 flats is the share of the builder. So the consideration for selling 52% of the site was 4 flats representing 48% of built up area and the 4 flats are situated in a residential building. The Court held that the 4 flats constitute ‘a residential house’ for the purpose of sec 54. The 4 residential flats cannot be construed as 4 residential houses for the purpose of sec 54. It has to be construed as “a residential house” and the assessee is entitled to the benefit accordingly. In that view of the matter, the Court held that the Tribunal as well as the appellate authority were justified in holding that there is no liability to pay Capital Gains tax as the case squarely falls under sec. 54 of the Income Tax Act, 1961.
Appellate authority cannot deny benefit of deduction under Section 54F /54 which assessee is entitled to in law for no filing of return of income
Another aspect which needs to be considered is that the conclusion of CIT(Appeals) that since the assessee did not file return of income making claim for deduction u/s. 54 of 54F of the Act, the same cannot be allowed. On this aspect, we are of the view that the CIT(Appeals) as an appellate authority cannot deny the benefit of deduction which the assessee is entitled to in law. In this regard, the ld. counsel for the assessee has brought to our notice that the decision of the ITAT Mumbai Bench in the case of Dr. Ashwin Balchand Mehta v. JCIT, ITA No.5329 &6923/Mum/2012, order dated 06.11.2015, wherein the Tribunal after considering the decision of the Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., 349 ITR 336 (Bom), held that even if a claim is not made before the AO, it can be made before the appellate authorities. We are of the view that a lawful claim of deduction cannot be denied by the revenue authorities purely on technicalities. Tax is to be levied and collected in accordance with the law. If the assessee is entitled to deduction while computing the long term capital gain, that cannot be denied on the ground that such a claim was not before the AO. In Manohar Reddy Basani Vs. ITO ITA. No. 1307/Hyd/2017 order dated 30.5.2018, the ITAT Hyderabad Bench took the view that deduction u/s.54F of the Act cannot be denied for the reason that a claim to that effect was not made in a return of income.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal by the assessee against the order dated 15.02.2018 of the CIT(Appeals)-3, Bengaluru relating to assessment year 2006-07.
2. The assessee is an individual. She owned a property at 269, 2nd Main, Banashankari III Stage, Chennammanakere Achukattu, Bangalore, [hereinafter referred to as “the old property”] comprising of land measuring 3500 sq.ft. together with construction measuring 1 sq. (100 sq.ft.) with AC Sheet roof, mud wall, mud flooring and jungle wood used for doors & windows without any civic amenities. The assessee got this property through registered Gift/settlement Deed dated 27.04.2002. The description of the property in the aforesaid Settlement Deed is as follows:-
“SCHEDULE
All that piece and parcel of immovable property bearing No.66, Katha No.42, House List No.38 measuring East to West : 30′-0″ (Thirty Feet) and North to South : 50′-0″ (Fifty Feet) and Property bearing No. 67 Katha No.10/3, measuring East to West : 30′-0″ (Thirty Feet) and North to South : 50’-0″ (Fifty Feet) situated at Ittamadu Village, Uttarahalli Hobli, Bangalore South Taluk, now coming under the purview of Bangalore Mahanagara Palike Ward No.55, in all measuring East to West : 60′-0″ ( Sixty Feet) and North to South : 50′-0″ ( Fifty Feet) and bounded on:-
EAST BY : Road.
WEST BY : Property bearing No.65,
NORTH BY : Road,
SOUTH BY : Property bearing Nos.61 and 62.
BUILDING DESCRIPTION : Residential Building constructed on the Schedule property with plinth area of One Square having A.C.Sheet Roof, Mud wall, Mud flooring and Jungle Wood used for Doors and Windows without any civic amenities.”
3. The assessee entered into a Joint Development Agreement (JDA) in respect of the aforesaid property dated 14.12.2005 with M/s. Vasthushree Developers, a partnership firm (the Developer). As per the JDA, the assessee was to receive 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 Developer was entitled to 60% of the super built-up area + car parking. It appears that the assessee did not file return of income for the AY 2006-07. The JDA was entered into on 14.12.2005.
4. According to the revenue, by entering into the aforesaid JDA, the assessee had effected transfer of old property and the capital gain on such transfer was liable to be taxed in AY 2006-07. The proceedings u/s. 147 of the Act were initiated by the AO on the basis of copy of JDA which is a registered document, copy of which was in the possession of the AO. The notice u/s. 148 of the Act dated 27.03.2013 was sent to the assessee at Banashankari III Stage address, but the same was returned by the postal authorities with the postal remarks “no such person”. Another notice u/s. 148 of the Act was served by affixture and at the same address. Vide notice dated 142(1) of the Act which is stated to be served on the assessee, the AO called upon the assessee to produce the details of long term capital gain on transfer of the old property under the JDA. According to the order of assessment, the assessee did not appear in the proceedings despite opportunities. In the circumstances, the AO proceeded to complete the assessment u/s. 144 of the Act to the best of his judgment. The AO computed the LTCG on transfer of old property as follows:-
Rs.
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