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2014 (9) TMI 494 - AT - Income TaxComputation of STCG in reassessment proceedings transactions for sale of land as well as the sale of super built up area - Denial of exemption u/s 54EC since investment made beyond 6 months Held that - As far as the sale of a property to M/s. Sumanth & Co. under the agreement dated 8.4.2004 is concerned, it was completed in the accounting year relevant to AY 2004-05, because the assessee has surrendered all its rights and entitlements in the undivided share of land to the extent of 43% in favour of the builder - CIT (A) has observed that as per clause iv(b) of the agreement, it was agreed between the parties that on surrender of any built up area, the owner would receive a sum of ₹ 2500/per sq. ft. - value of undivided interest in the land is also embedded - the land value in assessee s share would come to ₹ 60,31,394 - This value was meant for built up area of 5037 sft. He worked out the land value of per sq. ft. and then multiplied with surrendered area of 2278 sq. ft. - CIT (A) observed that the full value of consideration after debiting the value of land, the sale consideration accrued to the assessee is ₹ 29,67,283 - He debited the cost of acquisition of the land from this amount @ ₹ 903/- sft which was valued as cost of construction and in this way worked to ₹ 9,10,249/- is the STCG - The working made by the learned first appellate authority is scientific and based on logic - The rate adopted is the rate accrued between the builder and the assessee for surrender of the constructed area - the assessee cannot dispute that he has not received the amount as worked out by the CIT (A) - there is no error in the order of the CIT (A) in computing the STCG Decided against assessee. The transactions for sale of land was completed in the accounting year relevant to assessment year 2005-06. The assessee has handed over the possession to the builder on 15.06.2004. The assessee itself has disclosed the LTCG in assessment year 2005-06. The investment in REC Board was not made in six months. It was made only on 27.7.2005 i.e. beyond the period of six months. Therefore, the learned CIT (A) has rightly observed that the assessee is not eligible for deduction u/s 54EC. - Decided against the assessee.
Issues Involved:
1. General grounds of appeal. 2. Reopening of assessment by issuance of notice u/s 148. 3. Computation of short-term capital gain (STCG) and denial of exemption u/s 54EC. 4. Computation of long-term capital gain (LTCG) and eligibility for exemption u/s 54EC. 5. Charging of interest. Detailed Analysis: 1. General Grounds of Appeal: The first ground in both assessment years (A.Ys) was a general ground of appeal which did not necessitate specific findings. Consequently, these grounds were rejected. 2. Reopening of Assessment by Issuance of Notice u/s 148: The assessee challenged the reopening of the assessment by issuance of a notice u/s 148 of the Income Tax Act. However, the learned Counsel for the assessee did not press this ground in both years, leading to its rejection. 3. Computation of Short-Term Capital Gain (STCG) and Denial of Exemption u/s 54EC: The assessee disputed the computation of STCG and the denial of exemption u/s 54EC. The facts were common in both years, so the Tribunal considered them together. The assessee, an HUF, entered into a joint development agreement (JDA) with M/s Sumanth & Co. for redeveloping a property. The Assessing Officer (A.O) computed the LTCG based on a sale consideration of Rs. 70 lakhs instead of Rs. 97,37,800 as claimed by the assessee. The A.O computed the LTCG as Rs. 34,76,800 and allowed an exemption u/s 54, leading to a taxable LTCG of Rs. 6,35,030. The assessee's grievance was that the A.O did not grant the benefit of section 54EC for the LTCG of Rs. 6,35,030. In the subsequent assessment year (2006-07), the assessee received Rs. 27,79,570 for relinquishing part of their share in the built-up area. The CIT (A) computed the STCG at Rs. 9,10,249 instead of Rs. 27,79,570 as worked out by the A.O. The CIT (A)'s detailed analysis included the consideration for the constructed area surrendered and the undivided interest in the land. The Tribunal found the CIT (A)'s computation to be logical and scientific, thus upholding the STCG computation of Rs. 9,10,249. 4. Computation of Long-Term Capital Gain (LTCG) and Eligibility for Exemption u/s 54EC: For A.Y 2005-06, the assessee argued that the transactions for the sale of land and the sale of the super built-up area should be considered as one transaction and claimed exemption u/s 54EC. However, the investment in REC Bonds was made beyond the six-month period from the date of handing over possession to the developer. The Tribunal agreed with the CIT (A) that the assessee was not eligible for the deduction u/s 54EC as the investment was not made within the stipulated period. 5. Charging of Interest: The issue of charging interest was deemed consequential in nature. Conclusion: Both appeals filed by the assessee were dismissed, and the Tribunal upheld the orders of the CIT (A) regarding the computation of STCG and the denial of exemption u/s 54EC for LTCG. The Tribunal found no merit in the grounds raised by the assessee.
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