CIT Vs Smt. V.R.Karpagam (Madras High Court)
In the Tax Case (Appeal) of CIT vs. Smt. V.R. Karpagam, adjudicated by the Madras High Court, the primary contention revolved around the eligibility of the assessee for exemption under Section 54F of the Income Tax Act for capital gains arising from the transfer of a long-term capital asset. The crux of the dispute lay in whether the assessee, who was to receive five flats as part of a development agreement, could claim exemption for all five flats under Section 54F.
The respondent/assessee had engaged in an agreement with M/s. Mount Housing and Infrastructure Ltd., wherein she would receive 43.75% of the built-up area after the development of her land. This translated into five flats. The assessee claimed exemption under Section 54F for the capital gains arising from the transfer, asserting that there were no capital gains left for assessment.
The Assessing Officer initially allowed exemption for only one flat, but the Commissioner of Income Tax (Appeals) extended it to one flat with the largest area. Dissatisfied with this decision, the assessee appealed further to the Income Tax Appellate Tribunal.
The Tribunal, after reviewing previous decisions and considering the provisions of Section 54F, held that the word “a” appearing in the section should be understood in plural, based on a precedent from the Karnataka High Court. The Tribunal concluded that the assessee was eligible for exemption on all five flats received. The Revenue challenged this decision, arguing that each residential unit should be considered separately.
