2011 (4) TMI 855 - AT - Income Tax

Computation of Capital gain - Held that - As Assessee has transferred the land and building to the developer through a document, which has been registered through State Registration Authorities therefore, there is transfer of a capital asset, the capital gain on which is chargeable to income tax - Therefore, appeal is dismissed accordingly. Valuation of development right - Provisions of sec. 50C - Held that - As already held there is transfer of land and building to the developer and therefore, provisions of sec. 50C are clearly applicable - Thus, stamp duty valuation is applied to development rights. Tax liability - Held that - As find that the assessee has not produced any documentary evidence to substantiate that in the case of spouse, who is a co-owner, no tax liability has been fastened - Therefore, find no merit in the submission of the assessee that he being other co-owner, cannot be burden to tax liability - Since the assessee has failed to substantiate with evidence that no tax liability had been attached in the case of the spouse of the assessee, therefore, this ground by the assessee is dismissed. Valuation - Actual cost of land - Held that - As the assessee has valued the cost of land as on 1.4.81 at Rs. 1,40,233/-, the same is on the basis of valuer s report in the year 1985. The assessee has not produced any documentary evidence before the AO to establish the actual cost of land that needs deduction from the consideration received - Thus, the value adopted by the AO at Rs. 1,12,186/-, hence justified. Valuation - Indexation of building - Held that - As the balance sheet of the assessee shows the value of the building at Rs. 7,43,534/- However, no justification/reason has been given by the Assessing Officer as to how and why he has not considered the indexation of the building, which is as per the balance sheet, while calculating the capital gain - The CIT(A) has also not dealt with this issue - Thus, it deem proper to restore this issue back to the file of the Assessing Officer to pass a speaking order on this issue in accordance with law - Thus, appeal is accordingly allowed for statistical purpose. Land and the bungalow - Held that - Regarding the working of capital gain filed by the assessee at Rs.39,32,160/-this ground needs to go back to the file of the Assessing Officer for fresh computation of capital gain - Accordingly, appeal is allowed for statistical purpose. Capital gain or not - Held that - Money paid by a builder to a housing society or private individual for redevelopment of the property received by me from the developer for redevelopment of my property - There is a transfer of existing land and building - It was demolished by the builder for fresh construction - The documents were registered by the State Registration Authorities - Therefore, the appeal of assessee, is dismissed.

Issues Involved:
1. Applicability of Section 50C to the transfer of development rights.
2. Consideration of cost and indexation of land and building.
3. Tax liability discrepancy between co-owners.
4. Computation of long-term capital gains.

Detailed Analysis:

1. Applicability of Section 50C to the Transfer of Development Rights:
The primary issue was whether Section 50C of the Income Tax Act applies to the transfer of development rights. The assessee argued that development rights are neither land nor building and thus should not fall under Section 50C. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] concluded that Section 50C is applicable. The CIT(A) stated, "The provision is clear and unambiguous. In this case admittedly, the value adopted by the stamp authority is higher than the valuation shown by the assessee. The Assessing Officer had no way but to adopt the value as per section 50C."

2. Consideration of Cost and Indexation of Land and Building:
The assessee provided a valuation of the land as of 1.4.1981 based on a valuer's report from 1985. The AO, however, did not accept this valuation, stating that the structure came into existence in 1985, and thus the valuer's report was not applicable for 1981. The AO adopted a cost of Rs. 1,12,186 for the land and indexed it to compute the capital gains. The assessee argued for a higher cost of Rs. 1,40,233 based on the valuer's report, but the Tribunal upheld the AO's valuation, stating, "The assessee has not given any cogent evidence or explanation for adoption of cost of land at Rs. 1,40,233/- as against Rs. 1,12,186/- adopted by the Assessing Officer."

3. Tax Liability Discrepancy Between Co-Owners:
The assessee contended that no tax liability was attached to the co-owner (spouse), and thus he should not be burdened with greater tax liability. The Tribunal found no merit in this argument due to the lack of documentary evidence. The Tribunal stated, "Since the assessee has failed to substantiate with evidence that no tax liability had been attached in the case of the spouse of the assessee, therefore, this ground by the assessee is dismissed."

4. Computation of Long-Term Capital Gains:
The AO computed the capital gains based on the deemed consideration of Rs. 3,82,50,000/- and indexed the cost of land and building. The assessee's revised computation showed a lower capital gain, which included the cost of the building as per the balance sheet. The Tribunal found that the AO did not consider the indexation of the building, which was shown in the balance sheet. The Tribunal directed the AO to pass a speaking order on this issue, stating, "We deem it proper to restore this issue back to the file of the Assessing Officer to pass a speaking order on this issue in accordance with law and after giving due opportunity of being heard to the assessee."

Conclusion:
The Tribunal upheld the application of Section 50C to the transfer of development rights, rejected the higher valuation of land proposed by the assessee, and dismissed the argument regarding the tax liability discrepancy between co-owners due to lack of evidence. The Tribunal, however, directed the AO to reconsider the indexation of the building cost in the computation of long-term capital gains. The appeal was partly allowed for statistical purposes.

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