PR COMMISSIONER OF INCOME TAX INCOME TAX-2 vs C A BADRINATH (HUF)

- 1 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 15 DAY OF OCTOBER, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA
INCOME TAX APPEAL NO. 129 OF 2021
BETWEEN:
1.
PR. COMMISSIONER OF INCOME TAX
INCOME TAX-2
BMTC COMPLEX,
KORAMANGALA,
BANGALORE.
2.
THE ASSISTANT COMMISSIONER
OF INCOME TAX
CIRCLE-2 (2)(1)
BENGALURU.
…APPELLANTS
(BY SRI. E. I. SANMATHI, ADVOCATE)
Digitally signed
by AASEEFA
PARVEEN
Location: HIGH
COURT OF
KARNATAKA
AND:
C. A. BADRINATH (HUF),
NO.57 AND 57/4, IST MAIN,
MALLESHWARAM,
BANGALORE-560003.
PAN-AADHC3044B.
…RESPONDENT
(BY SRI. A. SHANKAR, SR.COUNSEL FOR
SRI. ANAMALAI S., ADVOCATE)
THIS ITA / INCOME TAX APPEAL UNDER SEC.260-A OF
INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED
29/01/2020 PASSED IN ITA NO. 3362/BANG/2018, FOR THE
ASSESSMENT YEAR 2015-2016 PRAYING TO

- 2 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH
OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE
HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE
APPELLATE ORDER DATED 29.01.2020 (ANNEXURE-A) PASSED
BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH,
BENGALURU IN APPEAL PROCEEDINGS NO. ITA NO.
3362/BANG/2018 FOR ASSESSMENT YEAR 2015-2016, AS
SOUGHT FOR IN THIS APPEAL.
THIS APPEAL, COMING ON FOR FINAL HEARING, THIS
DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA
ORAL JUDGMENT
(PER: HON'BLE MR. JUSTICE S.G.PANDIT)
The above appeal filed by the Revenue under Section
260A of the Income Tax Act, 1961, is directed against the
order dated 29.01.2020 in ITA No.3362/BANG/2018 for
the assessment year 2015-16 passed by the Income Tax
Appellate Tribunal 'C' Bench, Bengaluru.
2. The above appeal was admitted on 12.08.2021
to examine the following two substantial questions of law:
1. "Whether on the facts and in the circumstances of
the case, the Tribunal is right in law holding the
assessee is entitled for section 54F benefit by

- 3 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
holding that the right to the built up area was
acquired on the date of entering Joint Development
Agreement which is more than 36 months and as
such it is transfer of capital asset without observing
that by entering into JDA, assessee was conferred a
right in super built up area and it did not get a right
which the assessee could transact in but only
recognized share of assessee in project, it was only
vide the sharing agreement dated 12/12/2012, that
the assessee was allotted 23 Flats, vilaments and
row houses which gives title to assessee to transact
with other parties"?
2. "Whether on the facts and in the circumstances of
the case and in law, the Tribunal and CIT's orders
can be said as perverse in holding that assessee
entitled for benefit under section 54F of the Act
ignoring that assessee acquired a new asset on
10/1/2014 whereas assessee original asset was
sold after 16/1/2015, therefore assessee was not
entitled for benefit under section 54F of the Act on
9.6 crores"?
3. Heard learned counsel Sri.E.I.Sanmathi for the
appellants-Revenue and learned Senior Counsel
Sri.A.Shankar for learned counsel Sri.Anamalai.S for
respondent- Assessee.

- 4 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
4. It is seen that the respondent-Assessee is a
HUF. The respondent-Assessee entered into Agreement of
Sale in respect of 23 flats on various dates i.e., January-
2014 to October-2014 and possession of those flats was
handed over between April-2014 to November-2014. The
Sale Deeds were executed subsequently between July-
2014 to July-2015. It is stated that the respondent-
Assessee offered the income for assessment for the
Assessment year 2015-16, claiming benefit under Section
54 of the Act. However, the Assessment Officer (AO)
disallowed the claim of the respondent-Assessee under
Section 54 of the Act by order dated 29.12.2017
(Annexure-C). The respondent-Assessee filed appeal
before the CIT Appeals and the CIT Appeals by order dated
28.09.2018 (Annexure-B) allowed the appeal and directed
the AO to assess the capital gains and examine the
applicability of exemption claimed under Section 54 of the
Act for the assessment year 2014-2015 and assessment
year 2015-16. The appellants-Revenue approached the

- 5 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
ITAT against the appellate order of the CIT (Appeals). The
ITAT placing reliance on the decision of the Hon'ble Apex
Court in SANJEEV LAL VS. COMMISSIONER OF INCOME
TAX, CHANDIGARH reported in [2014] 46
Taxmann.Com 300 (SC) rejected the Revenues' appeal
holding that the date of Sale Agreement has to be
considered as date of sale. Questioning the said order of
the ITAT, the Revenue is before this Court in this appeal.
5. Learned counsel Sri.Sanmathi.E.I mainly
contends that the Tribunal could not have blindly followed
the decision in Sanjeev Lal and confirmed the order of the
CIT (Appeals). Learned counsel Sri.Sanmathi.E.I made an
effort to distinguish the said decision by contending that
the Sanjeev Lal's case was decided in a peculiar facts of
the said case and moreover, he submits that it involved
litigation and therefore, the Sale Deed was executed
subsequently. Learned counsel Sri.E.I.Sanmati would
further submit that the benefit under Section 54 would be

- 6 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
available with the precondition, strictly complying with the
conditions therein, placing reliance on the decision of the
Hon'ble Apex Court in COMMISSIONER OF CUSTOMS
(IMPORT), MUMBAI V. M/S.DILIP KUMAR AND COMPANY
AND ORS .
6. Learned Senior Counsel Sri.A.Shankar would
submit that in the instant case, the CIT (Appeals) as well
as the ITAT has rightly granted the benefit of Section 54
exemption referring to the Agreement of Sale entered into
between the respondent and the purchasers and also
referring to the fact that possession has been delivered
immediately on entering into the Sale Agreement. Learned
Senior Counsel refers to the definition of 'Sale' under Sub-
section 47 of Section 2 of the Act and submits that the
transfer in relation to a capital asset includes any
transaction involving the allowing of a possession of any
immovable property to be taken. Learned counsel would
further submit that the decision of Division Bench of
KISHORBHAI HARJIBHAI PATEL V.
Gujarat High Court in

- 7 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
INCOME TAX OFFICER, WARD 1(2)(4)* in [2019] 107
TAXMANN.COM 295 (GUJARAT) as well as decision of Co-
ordinate Bench of this Court in SHRI LAHAR SINGH
SIROYA vs. THE ASSISTANT COMMISSIONER OF
INCOME-TAX (ITA No.169/2010 dated 15.12.2015)
following the decision in Sanjeev Lal, have held in identical
fact situation that the Assessee would be entitled for
benefit under Section 54 of the Act. Further, learned
Senior Counsel would submit that the AO accepted the
taxability of the capital gain for the assessment year
2015-16 and when the taxability for the assessment year
2015-16 is accepted, they could not deny the benefit
under Section 54F of the Act. Thus, he would pray for
dismissal of the appeal.
7. Having heard the learned counsel for the parties
and on perusal of the entire material on record including
the decisions cited by the learned counsels for the parties,
we are of the considered opinion that the Substantial
Questions of Law raised by the appellants-Revenue is to

- 8 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
be answered against the appellants-Revenue and in favour
of the respondent-Assessee.
8. The transaction entered into between the
respondent-Assessee and purchasers as noted by the CIT
Appeals at paragraph 5.1 of the order is not in dispute.
The agreements are entered into by the respondent and
purchasers as stated above between January-2014 and
November-2014. Possession of those flats are delivered to
the purchasers between April-2014 to November-2014
whereas the Sale Deeds are executed between July-2014
and July-2015. It is also not in dispute that the assessee
purchased new property on 10.1.2014. The income offered
by the respondent-Assessee for taxability for the
assessment year 2015-16 is accepted by the Revenue.
When the appellants-Revenue has accepted the capital
gains offered for the Assessment Year 2015-2016, the
appellants-Revenue could not have denied the benefit
under Section 54 of the Act to the respondent-Assessee.

- 9 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
9. Be that as it may, this Court in Shri Lahar Singh
Siroya supra has made it clear that providing for short-
term and long-term capital gains is a beneficial piece of
legislation, whereby certain benefits in taxation is given to
the Assessee on fulfilment of certain conditions. Further, it
observed that every such legislation is to be construed
liberally in favour of the Assessee, as it is for the benefit of
the Assessee. This Court in the said case while allowing
the benefit of Section 54 of the Act places reliance on the
decision of the Hon'ble Apex Court in Sanjeev Lal, though
the decision of the Hon'ble Apex Court indicates that the
decision was arrived at the peculiar facts of the said case.
The facts of the present case are also identical to the facts
involved in Sanjeev Lal .
10. Thus, we do not find any error or perversity in
the order passed by the ITAT in confirming the order
passed by the CIT (Appeals). Moreover, the Division Bench
of Gujarat High Court in Kishorbhai Harjibhai Patel Supra

- 10 -
HC-KAR
NC: 2026:KHC:58199-DB
ITA No. 129 of 2021
CNR: KAHC010047532021
in an identical fact situation following the decision of the
Hon'ble Apex Court in Sanjeev Lal supra as well as the
decision of Co-ordinate Bench of this Court in Shri Lahar
Singh Siroya supra held that CIT (Appeals) therein was not
right in denying the deduction under Section 54 of the Act.
Thus, for the reasons recorded above, we are of the
considered opinion that there is no merit in the appeal and
accordingly, the Substantial Questions of Law are
answered against the appellants-Revenue and in favour of
the respondent-Assessee.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(DR.CHILLAKUR SUMALATHA)
JUDGE
DS
CT:TSM
List No.: 1 Sl No.: 6