2018 (9) TMI 788 - AT - Income Tax

Addition of capital gain - year in which taxable? - Held that - Referring to Coordinate Bench decision in the case of other co-owners the appeal of the assessee is allowed and it is held that the capital gain is taxable in the year 2003 when the actual vacant position of the land was given to the Developer.

Summary

Issues:
1. Assessment of alleged capital gains for A.Y 2010-11.
2. Determination of value of land surrendered for development.

Analysis:

Issue 1: Assessment of alleged capital gains for A.Y 2010-11
The case involved an appeal by the assessee against the order of the CIT (A)-6, Hyderabad, for the A.Y 2010-11. The assessee challenged the dismissal of the appeal, arguing that the order was perverse, illegal, and unsustainable. The primary contention was regarding the inclusion of alleged capital gains in the assessment for the relevant year. The Assessing Officer (AO) had brought the capital gains to tax based on the signing of a development agreement. The assessee, however, argued that the capital gains should have been taxed in A.Y 2003-04, as per a decision by the Tribunal in a related case involving co-owners. The Tribunal, after considering the arguments and relevant legal precedents, held that the capital gain was indeed chargeable in A.Y 2003-04 when the actual vacant possession of the land was handed over to the developer. Therefore, the appeal was allowed on this issue.

Issue 2: Determination of value of land surrendered for development
Another aspect of the case related to the determination of the value of land surrendered for development. The Commissioner (Appeals) had upheld the Assessing Officer's adoption of the cost of land at ?5.98 crores, considering it as the composite value of the land and superstructure. The assessee contended that only the value of the superstructure should have been considered for determining the value of the land surrendered. The Tribunal, however, did not delve deeply into this issue as the primary contention regarding the assessment of capital gains for A.Y 2010-11 was resolved in favor of the assessee. Consequently, the Tribunal allowed the appeal, focusing on the capital gains assessment issue and holding that the capital gain was taxable in A.Y 2003 when the actual vacant possession of the land was given to the developer.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing that the capital gain was chargeable in A.Y 2003-04 and not in A.Y 2010-11 as determined by the tax authorities. The decision provided clarity on the timing of capital gains taxation in cases involving development agreements and possession transfer to developers.