COMMISSIONER OF INCOME TAX Vs. PADMAVATHY

JUDGEMENT

(1.) The Revenue has filed this appeal challenging the order dated 17-04-2006 made in ITA No.1473/Bang/2003 passed by the Income Tax Appellate Tribunal, Bangalore Bench-B dismissing the appeal and confirming the order dated 11-09-2003 passed by the Commissioner of Income Tax (Appeals), Bangalore ('CIT (Appeals)' for short) in ITA No. 14/W6(3) CIT(A) 111/2002-03 for the assessment year 1999-2000. The respondent-assessee filed return of income on 28-06-1999 for the assessment year 1999-2000 declaring the income of Rs. 4,65,200/, Subsequently, the assessee filed revised return, on 11-11-1.999 declaring the income of Rs. 13,83,616/-. The income declared consists of income from property, capital gain and income from other sources. The Assessing Officer selected the returns filed by the assessee for scrutiny. The assessee has claimed deduction under Section 54EA of the income Tax Act (hereinafter referred to as 'the Act') in respect of sum of Rs. 41,13,000/- invested in specified securities out of total consideration received from. the sale, of flats owned by the assessee. It is the case of the assessee that she has entered into a joint development agreement with M/s. Soundharya Constructions on 6-7-1994 in respect of property bearing No. 94 - 97 situated at II Main Road, Link Road, Seshadripuram, Bangalore. As per the said agreement, the assessee has to transfer the said land in favour of the Developer and the Developer in turn has to construct 16 multistoried apartment, out of which, the assessee is entitled to receive 5 flats with car parking space in the basement by way of consideratior for transfer of the said property. As per the joint development agreement, the Developer has to demolish the old structure and develop the property by constructing multistoried apartment. The Developer has to bear the entire cost of the construction of the multistoried apartment. As per the agreement, after construction of the apartment, six flats equivalent to Rs. 45,00,000/- were to be given to the assessee. Out of six flats received as sale consideration, three flats were sold for the total sale consideration of Rs. 41,13,000/- retaining the other three flats. Out of three flats, one is being used by the assessee for her self-occupation, another has been let out on a monthly rent of Rs. 10,000/- and the third flat was mortgaged for a lump-sum consideration. In the returns filed by her, she claimed deduction under Section 54EA of the Act. The Assessing Authority issued notice to the assessee. After hearing the representatives of the assessee, computed the assessment on 19-03-2002 and the Assessing Officer held that the assessee has not fulfilled the conditions laid down under Section 54EA of the Act, hence she is not entitled for deduction under Section 54EA of the Act.

(2.) The assessee being aggrieved by the assessment order dated 19-3-2002, preferred an appeal before the CIT (Appeals). The C1T (Appeals) after considering the matte: in detail partly allowed the appeal denying the exemption under Section 54 and allowed the appeal insofar as exemption under Section 54EA is concerned. Even though the assessee has not received the sale consideration in cash pursuant to the agreement, she has received six flats as consideration. The sale consideration of three flats was invested in the long term capital gain. Hence, she is eligible for exemption under Section 54EA of the Act. The Revenue being aggrieved by the order passed by the CIT (Appeals) approached the Income Tax Appellate Tribunal in ITA No. 1473/Bang/2003. The Appellate Tribunal relying upon the judgment of Bombay High Court reported in 81 ITD 545 (BOMBAY HOUSING CORPORATION LTD. v/s ACIT) dismissed the appeal and confirmed the order passed by the CIT (Appeals). Being aggrieved by the said order, the Pevenue has preferred this appeal.

(3.) The appeal was admitted for consideration of the following substantial questions of law.