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Capital gains in case of development contract

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An assessee had given his plot (purchased before 1981 Rs 5000/-) to a builder under irrevocable power of attorney under development agreement in 2007. The builder completed the building in 2014 and the assessee got 3 flats (total value Rs 6000000/-mentioned in agreement).

Now he wants to sell the flats. He has not shown any transactions in his returns because he did not receive any amount. The whole transaction was in kind.

As per my understanding there are 2 transactions

1) when the plot was given for development and he got 3 flats

2)When he sells the new flats

My question is that can we show the 1st transaction in 2014 (we can claim deduction U/s 54F)?

A tax consultant has advised him that The whole transaction will just 1 transaction (From Development agreement to sale of new flats)

Replies (1)

CA HAYEDAR SHAIKH

Practice

627 Points Posted on 19 March 2015

Yes, agreed that there are two different transaction.

we can show 1st transaction in 2014.

Go through the following for the better understanding.

In this case, the Revenue contended that the benefit of section 54 could be availed only in respect of one residential flat and in respect of the remaining three residential flats, the assessee would not be entitled to deduction under section 54.
The Karnataka High Court, applying the decision in D. Anand Basappa (supra) to the present case, held that all the four flats were situated in the same residential building and, hence, would constitute "a residential house" for the purpose of section 54. Therefore, the assessee would be entitled to deduction under section 54 in respect of all four flats.