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For example, if an assessee enters into a specified which would take into consideration the various
agreement falling with the ambit of section 45(5A) amenities provided by the developer and the ready
and hands over possession of the immovable reckoner rate prevalent in the locality. Further, the
property on 30-6-2017, the transfer can be said to be ready reckoner rate of constructed flats may at times
complete on the said date. In order to claim be higher than the FMV of the land. In this process,
deduction u/s. 54 or 54F, the new residential although the Government has deferred the
property must be constructed within a period of 3 chargeability of income tax, it is set to make a
years from the date of transfer i.e. 30-6-2020. If in windfall in tax revenues by levying taxes on the
this case, the completion certificate is received say in stamp duty value of constructed premises which
the F.Y. 2020-21, the capital gains will be chargeable would be several times higher in value than the FMV
to tax in A.Y. 2021-22 whereas the market value will of land sold by the assessee.
have to be made before 30-6-2020 to avail
No Mechanism for reference to Valuation Officer
exemption u/s. 54/54F, etc.
7. It is also pertinent to note that unlike the
Further, the deduction u/s. 54/54F is limited to only provisions of section 50C, there is no provision for
one residential flat and would not apply to the balance
the assessee to contest before the Assessing Officer
share of constructed premises to be received by the
that the stamp duty value exceeds the FMV of the
assessee. In some cases, the land owners chose to property and seek for a reference to the Valuation
receive adjoining flats in the constructed premises.
Officer. Therefore, if the market price of units in a
The assessee may take a view that these flats particular project is lower than the stamp duty
represent one residential unit, having a common value, the assessee would be burdened with a higher
kitchen, access area etc. and claim deduction for such
tax liability.
flats. However, this issue is very controversial,
Rights in land or building covered u/s. 45(5A)?
especially after the amendment vide Finance Act,
2014 and the allowability of such claim depends on 8. Further, an issue arises as to whether the transfer
of right in a land or building would also be governed
the facts and circumstances of each case.
by section 45(5A) of the Act. This issue is also
Value of consideration accruing on transfer in JDAs prevalent u/s. 50C of the Act wherein contrary views
6. This sub-section has determined the have been taken by Courts. The Hon'ble Bombay
consideration received or accrued to the assessee High Court in the case of CIT v. Greenfield Hotels &
on transfer of the asset on the basis of stamp duty Estates (P.) Ltd. [2016] 389 ITR 68/ [2017] 245
value of the share received by the assessee as on the Taxman 125/ 77 taxmann.com 308 has affirmed the
date of issue of completion certificate. Presently, view of the Hon'ble Mumbai Tribunal in the case of
various views were being adopted by the Courts to Atul G. Puranik v. ITO [2011] 11 taxmann.com
determine the value of consideration in case of JDAs 92/132 ITD 499 and held that leasehold right in a
such as adoption of Fair Market Value ('FMV') of land land or building do not fall within the ambit of
or cost of construction of assessee's share of section 50C of the Act.
constructed area. With the introduction of this Based on the recent judicial pronouncements in case
section, it is clear that the assessee would be of Mrs. Rekha Agarwal v. ITO [2017] 79 taxmann.com
subjected to tax on the stamp duty value of the
290 (Jaipur-Trib.) and Voltas Ltd. v. ITO [2016] 74
constructed premises which they would receive over taxmann.com 99/161 ITD 199 (Mum.-Trib.) the
and above cash component paid to them by the
assessee could take a view that the right in the land
developer. or building such as allotment rights, tenancy rights,
Thus, as per the existing provisions (prior to the development rights, etc., do not fall within the
Finance Act, 2017), the consideration accruing to the purview of section 45(5A) and would be governed
landowner on entering into JDAs was far lower than based on the existing provisions of the Act.
the stamp duty value of the constructed premises,

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