prpri Revenue cannot take a different stand in case of Co-Owners Revenue cannot take a different stand in case of Co-Owners

Case Law Details

Case Name : Smt. Bachupally Laxmi (alias Routhu Laxmi) Vs ITO (ITAT Hyderabad)
Appeal Number : ITA No. 571/Hyd/2020
Date of Judgement/Order : 27/05/2021
Related Assessment Year : 2013-14

Smt. Bachupally Laxmi (alias Routhu Laxmi) Vs ITO (ITAT Hyderabad)

For the purpose of computation of LTCG arising out of the development agreement cum GPA, the Assessing Officer has accepted that the assessee has acquired the flats as on 9.11.2009 and therefore, in the year 2012 when the assessee has sold the flat, the holding period has to be held as more than 3 years and the provisions of sub-section 3 of section 54F are not applicable. Similarly, the gain arising out of the sale of flat also has to be held as LTCG and not STCG as held by the Assessing Officer. She further submitted that in the case of co-owners i.e. Smt. Devi Reddy Renuka and Smt. Nallapattu Saraswati, the respective CIT (A)s have held the issue in favour of the assessees and the Revenue has not filed any appeals to the Tribunal. Therefore, according to her, the rule of uniformity and consistency has to be adopted and the same decision is to be taken in the case of the present assessees as well.

ITAT observed that the assessees have given their landed property for development and their share of flats have been identified and allotted by way of the said agreement itself. Therefore, the respective CIT (A)’s in the case of Smt. Devi Reddy Renuka and Smt. Nallapattu Saraswati have held that the assessees therein are deemed to have acquired the property on the date of development agreement itself and thus, the period of holding has to be held to be more than 3 years. In the case of co-owners, the Revenue cannot take a different stand. If the Revenue has accepted the decision of the CIT (A)’s, in the cases of Renuka and Saraswati, I am of the opinion that the same decision has to be taken in the case of the assessees before this Tribunal also. Therefore, by adopting the principles of consistency and uniformity, I hold that the exemption u/s 54F cannot be withdrawn in the relevant A.Ys and the capital gain arising out of sale of flat has to be treated as LTCG as done in the case of co-owners. Thus, the appeals of both the assessees are allowed.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

ITA Nos.571 & 572/Hyd/2020 are the appeals filed by Smt. Bachupally Laxmi (Alias Routhu Laxmi) for the A.Ys 2013-14 and 2014-15, while ITA No.573/Hyd/2020 is the appeal filed by Sri Koushik Routhu for the A.Y 2014-15. All these appeals are filed by the assessees against the separate but similar orders of the CIT (A)-3, Hyderabad, dated 6.1.2020. Therefore, both the assessees are related to each other and the facts and circumstances and the grounds raised are similar. Therefore, all the three appeals were heard together and are disposed of by this common and consolidated order.

2. Brief facts of the case are that the assessee Smt. Bachupally Laxmi and the assessee Shri Kaushik Routhu are mother and son and are owners of land to the extent of 363 sq. yards and 121 sq. yards respectively in Suryapet. Both the assessees along with two others i.e. Smt.Devi Reddy Renuka and Smt. Nallapattu Saraswathi who also hold 242 sq. yards lands each in the adjoining plots, entered into a development agreement dated 9.11.2009 with a builder for construction of a residential apartment. Now the ratio of share between the landowners and the developer/builder is 35:65. In respect thereof, Smt. Lakshmi was to receive 3 flats + 75% share in the fourth flat and Kaushik Routhu was to receive one flat + 25% in the fourth flat. Smt. Renuka Devi and Smt. Nallapattu Saraswati were to receive two flats each and 50% each in the third flat. The specific flats allotted to each of the landowner is also part of the development agreement. The assessees did not file their returns of income for the relevant A.Ys. When the Assessing Officer came to know about the development agreement, notices u/s 148 were issued to each of the assessees. The assessees filed their returns of income declaring the Long-Term Capital Gain arising out of the development agreement and claimed the same as exempt u/s 54F of the Act on account of the flats allotted to them by the builder. The Assessing Officer allowed the exemption in the A.Y 2010-11. Subsequently, the builder completed the construction and handed over the flats to the assessees in May, 2012. The assessee Smt. Lakshmi sold one flat in the financial year 2013 relevant to the A.Y 2013-14 and another flat in the financial year relevant to the A.Y 2014-15. Similarly, the assessee Shri Kaushik along with his mother sold a flat in the financial year relevant to the A.Y 20 14- 15. The Assessing Officer noticed that the assessees have received the constructed flat in May, 2012 and within a year thereafter, the assessees have sold the flats and therefore, the provisions of sub­section 3 of section 54F are attracted. He held that the exemption granted u/s 54F of the Act to the assessees in the A.Y 2010-11 has to be withdrawn in the A.Ys 20 13-14 in the case of Smt. Lakshmi and in the case of Shri Koushik in the A.Y 2014-15. He accordingly brought the LTCG to tax.

3. Further, with regard to the capital gain arising out of the sale of flat, he held that the gain arising thereon is Short-Term Capital Gain (STCG) since the assessee has not held the asset for more than 3 years. Thus, he withdrew the exemption granted u/s 54F in the A.Y 2010-11 and also brought the STCG on sale of flat to tax. In the case of Smt. Lakshmi for the A.Y 2014-15, the Assessing Officer withdrew the exemption granted u/s 54F on a protective basis in the ay 2014-15 and substantially in the A.Y 2013-14. Aggrieved, both the assessees preferred appeals before the CIT (A) and the CIT (A) confirmed the assessment order and the assessees are in second appeal before the Tribunal. Since the ground of appeal in all the three appeals are similar, the grounds of appeal in ITA No.571/Hyd/2020 are reproduced hereunder:

“1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.

2. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition made by the Assessing officer of Rs.28,98,425/- by applying the provisions of Sec.54F(3) of the I. T. Act.

3. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the flat was sold after a period of three years from the date of the Development Agreement and that therefore, exemption u/s 54 earlier allowed should not have been withdrawn.

4. The learned Commissioner of Income-Tax (Appeals) erred in assessing the capital gain of Rs. 1,90,000/- in respect of flat No.303 as Short-Term Capital Gain without considering the fact that the property was held for more than three years and the capital gain arising is LTCG.

5. As an alternative, the Assessing Officer ought to have treated the gain on sale of land as LTCG.

6. The learned Commissioner of Income-Tax (Appeals) erred in confirming levy of interest u/s 234A, 234B and 234C of the I. T. Act.

7. Any other ground that may be urged at the time of hearing”.

3. The learned Counsel for the assessee while reiterating the submissions made before the authorities below submitted that for the purpose of computation of LTCG arising out of the development agreement cum GPA, the Assessing Officer has accepted that the assessee has acquired the flats as on 9.11.2009 and therefore, in the year 2012 when the assessee has sold the flat, the holding period has to be held as more than 3 years and the provisions of sub-section 3 of section 54F are not applicable. Similarly, the gain arising out of the sale of flat also has to be held as LTCG and not STCG as held by the Assessing Officer. She further submitted that in the case of co-owners i.e. Smt. Devi Reddy Renuka and Smt. Nallapattu Saraswati, the respective CIT (A)s have held the issue in favour of the assessees and the Revenue has not filed any appeals to the Tribunal. Therefore, according to her, the rule of uniformity and consistency has to be adopted and the same decision is to be taken in the case of the present assessees as well.

4. The learned DR, on the other hand, supported the orders of the authorities below.

5. Having regard to the rival contentions and the material on record and having gone through the Development Agreement cum GPA, I find that the assessees have given their landed property for development and their share of flats have been identified and allotted by way of the said agreement itself. Therefore, the respective CIT (A)’s in the case of Smt. Devi Reddy Renuka and Smt. Nallapattu Saraswati have held that the assessees therein are deemed to have acquired the property on the date of development agreement itself and thus, the period of holding has to be held to be more than 3 years. In the case of co-owners, the Revenue cannot take a different stand. If the Revenue has accepted the decision of the CIT (A)’s, in the cases of Renuka and Saraswati, I am of the opinion that the same decision has to be taken in the case of the assessees before this Tribunal also. Therefore, by adopting the principles of consistency and uniformity, I hold that the exemption u/s 54F cannot be withdrawn in the relevant A.Ys and the capital gain arising out of sale of flat has to be treated as LTCG as done in the case of co-owners. Thus, the appeals of both the assessees are allowed.

6. In the result, assessee’s appeals are allowed.

Order pronounced in the Open Court on 27th May, 2021.

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