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2016 (4) TMI 1326 - AT - Income TaxCapital gain computation - Joint Development Agreement - AO adopting the cost of construction as sale consideration - CIT (Appeals) has directed AO to compute the capital gains by considering the sale consideration as the fair market value based on the government record - Held that - Identical issue has been considered and decided by the co-ordinate bench of this Tribunal in the case of Shankar Vittal Motor Co. Ltd. 2016 (4) TMI 1129 - ITAT BANGALORE wherein held because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction. - Decided against revenue
Issues:
1. Validity of the return filed by the assessee. 2. Computation of capital gains based on Joint Development Agreement (JDA) terms. 3. Consideration for capital gains calculation - guidance value of property or cost of construction. 4. Applicability of the judgment in the case of ACIT Vs. Shankar Vittal Motor Co. Ltd. 5. Compliance with the decision of the co-ordinate bench and the jurisdictional High Court. Detailed Analysis: Issue 1: The validity of the return filed by the assessee was challenged by the Revenue, contending that the non-est return filed by the assessee was considered valid by the CIT (Appeals) based on the premise that the return was filed at the assessment stage. The Revenue argued that this was contrary to the facts of the case. Issue 2: The main issue revolved around the computation of capital gains based on the terms of the Joint Development Agreement (JDA) entered into by the assessee with a developer. The JDA entitled the assessee to a percentage of the total saleable super built-up area in the residential building to be constructed by the developer. The Revenue disputed the method used by the Assessing Officer to compute capital gains, which resulted in a significant tax liability for the assessee. Issue 3: The disagreement between the Revenue and the assessee centered on the consideration to be used for calculating capital gains. The Revenue argued that the cost of construction should be considered as the sale consideration, while the CIT (Appeals) directed the Assessing Officer to compute capital gains using the fair market value based on government records. This raised the question of whether the guidance value of the property or the cost of construction should be the basis for determining the capital gains. Issue 4: The judgment in the case of ACIT Vs. Shankar Vittal Motor Co. Ltd. was cited by the assessee to support their position. The co-ordinate bench of the Tribunal had considered a similar issue and ruled in favor of the assessee, emphasizing the importance of the guidance value of the land in computing capital gains. The decision of the co-ordinate bench was based on the judgment of the jurisdictional High Court, highlighting the relevance of precedent in such cases. Issue 5: The final decision of the Tribunal was influenced by the judgment of the co-ordinate bench and the jurisdictional High Court, which supported the position taken by the assessee regarding the computation of capital gains. By following the precedent set by the higher authorities, the Tribunal dismissed the appeal of the Revenue, indicating compliance with established legal principles and interpretations. In conclusion, the judgment addressed various issues related to the computation of capital gains based on a Joint Development Agreement, highlighting the importance of legal precedents and the interpretation of relevant laws in reaching a decision.
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