2019 (2) TMI 162 - AT - Income Tax

Calculation of the short term capital gains / short term capital loss - Consolidated computation - invoking the provisions of the section 55A of the Act for the purpose of valuing the cost of acquisition of the property - Held that - The assessee having sold a single land and building it is not open to the Revenue to break up the transaction and to determine the short term capital gains in respect of the transactions separately. If that is to be done, AO having determined the short term capital gains in respect of land at ₹ 21,75,080/-, would also have to determine the short term capital gains /short term capital loss in respect of the building being ₹ 50 lakhs minus ₹ 26,00,180/- ₹ 23,99,820/- being the value of the building sold; Therefore ₹ 45,60,000 minus ₹ 23,99,820/- ₹ 21,60,180/- being the capital loss in respect of the building. The net result would short term capital gains in respect of land at ₹ 21,75,080/- and the short term capital loss in respect of the building at ₹ 21,60,180/-, thereby giving rise to short term capital gains of ₹ 14,900/-. However the original assessment order passed u/s.143(3) of the Act has already determined the short term capital gains of ₹ 3,20,000/-, which would have to be set off, thereby total short term capital loss of ₹ 3,05,100/- would result. This being so, the ld. Assessing Officer is directed to re-compute the short term capital gains / short term capital loss in respect of both the land and building in a consolidated manner and not independently in so far as the property sold is a land and building and both are short term capital assets. - Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
Appeal against CIT(A) order for assessment year 2009-10.

Analysis:
The appellant, an individual, purchased land and constructed a building, later selling both for a total consideration of ?50 lakhs. The original assessment determined short term capital gains of ?3,20,400. However, under CIT-1's direction, the Assessing Officer revalued the land alone at ?26,00,180 using guideline value, resulting in short term capital gains of ?21,75,080. This led to a discrepancy as the total sale price was now calculated at ?71,60,180, exceeding the actual sale price of ?50 lakhs. The Tribunal noted that the property sold was a single entity of land and building, and separate valuation was incorrect. The Assessing Officer was directed to consolidate the calculation, resulting in short term capital gains of ?14,900 after setting off the original gains, leading to a total loss of ?3,05,100. The appeal was partly allowed for statistical purposes.