THE issue before the Bench is - Whether assessee is eligible for deduction u/s 54EC, even if investment made in the relavant AY was not within six months from handing over of the possession to the developer by virtue of joint development agreement. And the answer is NO.
Facts of the case
The assessee is an HUF consisting of Mr. S.R. Madhavan, as kartha of the joint family. The assessee had entered into a joint development agreement (JDA) with M/s Sumanth & Co. Chennai
for jointly developing the said property by demolishing the existing building and structure. As per the joint development agreement, the consideration for the owners was entitlement of 7763 ft of the super built up area. The estimated cost of the construction was Rs.70.00 lakhs. As per this agreement, the property was redeveloped and each stakeholder in the joint development agreement got their shares. It had declared a total income of Rs.2317 and long term capital gain (LTCG) of Rs.38,33,570/- on sale of house property in the alleged JDA. Subsequently, in assessment year 2006-07, the assessee had declared a total income of Rs.1626/-. It had further claimed exemption u/s 54 and 54EC of Rs.28,41,770 and Rs.27.00 lakhs respectively. However, during assessment, the AO took only Rs.70.00 lakhs as sales consideration received instead of Rs.97,37,800, as taken by the assessee and computed the taxable LTCG at Rs. 6,35,030. Whereas, for the AY 2006-07, the AO concluded a STCG of Rs.9,10,249.
On appeal, the Tribunal held that,
++ the working made by the first appellate authority is scientific and based on logic. The rate adopted is the rate accrued between the builder and the assessee for surrender of the constructed area. Therefore, the assessee cannot dispute that he has not received the amount as worked out by the CIT(A). The only dispute in assessment year 2006-07 is that the CIT (A) has erred in computing the STCG of Rs.9,10,249/-. In our opinion, in view of the above discussion, there is no error in the order of the CIT(A) in computing the STCG. Therefore, we do not find any merit in Ground of the assessee’s appeal for assessment year 2006-07;
++ as far as assessment year 2005-06 is concerned, the grievance of the assessee is that the Assessing Officer has erred in working out the LTCG of Rs.6,35,030/-. It is submitted that the transactions for sale of land as well as the sale of super built up area is to be considered as one transaction. The assessee had made investment eligible for deduction u/s 54EC. This investment was made, though in a period related to assessment year 2006-07 and not within six months from the handing over of the possession to the developer by virtue of joint development agreement. But if it is considered a single transaction, then the assessee had made investment on 27.7.2005 in REC Board and it is entitled for the deduction. We have duly considered the rival contentions and perused the record carefully. As observed earlier, the transactions for sale of land was completed in the accounting year relevant to assessment year 2005-06. The assessee has handed over the possession to the builder on 15.06.2004. The assessee itself has disclosed the LTCG in assessment year 2005-06. The investment in REC Board was not made in six months. It was made only on 27.7.2005 i.e. beyond the period of six months. Therefore, the CIT(A) has rightly observed that the assessee is not eligible for deduction u/s 54EC.
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