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2021 (2) TMI 625 - AT - Income TaxCapital gain - JDA entered - Transfer u/s 2(47) - receipt in the form of super built-up area of commercial space - year of assessment - HELD THAT - Nothing is brought on record by the assessee to show that there was a development activity in the impugned project during the assessment year 2005-2006 and any cost of construction was incurred by the builder. It is to be inferred that no amount of investment by the developer in the construction activity during the assessment year 2005-2006. Hence, we are of the opinion that transferee was not willing to perform his part of obligations as stipulated in the JDA, in the assessment year 2005-2006 within the meaning as expressed in section 53A of the Transfer of Property Act. As such, the contractual obligation of the developer was not met with in the assessment year 2005- 2006. Being so, the conditions laid down in section 2(47)(v) of the I.T. Act cannot be invoked so as to bring the capital gains into tax in the assessment year 2005-2006 and thus the very foundation of the assessee s case is devoid of merits and not tenable. We are not in agreement with the argument of the learned AR that the transfer took place in the assessment year 2005-2006 and has been rightly brought to tax by the AO in the year 2012-2013, since the assessment in the year 2012-2013 the assessee received duly developed and constructed area into his possession out of his share of constructed area. Thus, the additional ground raised by the assessee is dismissed. Disallowance of non-consideration of commission paid to Bentley Investment while computing cost of acquisition of the property - AO disallowed the commission amount from cost of acquisition on the grounds as the Payment of commission did not add value to the property, the transfer was in the nature of adventure of trade, cost was not incurred within the time limit as prescribed U/s 48(1) and 55(1)(b) of the Act, such expenditure was not indicated in the return of income,such transaction should have reflected as receivable in the books of M/s Bentley and transaction did not suffer TDS and payment was not supported by any agreement - HELD THAT - Reasons given by the AO for not considering the payment of commission as cost of acquisition is not justified. The party who has received the commission payment confirmed that they have received the commission and payment has been made by cheque. The AO cannot doubt the genuineness of these payments. These payments are inextricably linked to the acquisition of the impugned property and it should be considered as cost of acquisition while determining the capital gain on entering into JDA. Accordingly, we direct the AO to consider the payment of ₹ 1 crore as part of cost of acquisition and thereafter compute the capital gain. This ground of appeal by the assessee is allowed. Determination of sale consideration by adopting guidance value of commercial space in respect of cost of construction of this commercial space to the builder - HELD THAT - AO not rejected the claim of assessee that the cost of construction claimed by the assessee at ₹ 1,500 per sq.ft. being the cost of construction incurred by the developer. The Assessing Officer only claimed that provisions of section 50C of the Act is applicable at ₹ 2,200 per sq.ft. being the guideline value. Since the Assessing Officer not disputed the cost of construction at ₹ 1,500 per sq.ft. incurred by the developer on constructing the assessee s share of constructed area, we are of the opinion that the Assessing Officer has to consider the cost of construction at ₹ 1,500 per sq.ft. being the cost of construction incurred by the developer towards the constructed area of assessee s share and to determine the capital gains in the assessment year 2012-2013. This view is fortified by the judgment in the case of ITO v. N.S.Nagaraj 2014 (12) TMI 888 - ITAT BANGALORE and Khivraj Motors 2015 (8) TMI 468 - KARNATAKA HIGH COURT wherein held that when the cost of construction is been agreed upon by the parties and such cost of construction being the full value of consideration is not refuted by the Assessing Officer without assigning any valid reasons, then the cost of construction to the developer ought to be accepted as full value of consideration. Applicability of section 50C of the Act for sale of residential flats - HELD THAT - As decided in MR. PRAKASH CHAND BETHALA 2021 (2) TMI 215 - ITAT BANGALORE has taken place vide Sale Agreement dated 8.3.1993 and full value of consideration for the purpose of computing long term capital gain in the hands of the assessee has to be adopted on the basis of guidance value of this property as on the date of Sale Agreement only, not on the date of Sale Deed dated 9.3.2007. Accordingly we allow the grounds taken by the assessee as there was no applicability of section 50C in the year 2007-08 - Thus we direct the A.O. to consider the guideline value of the impugned residential flats as in the financial years 2006-2007 and 2007- 2008 as the sale agreement are entered in the earlier assessment years and not in the assessment year 2012-2013. Taking the consistent view, we allow the ground of appeal of the assessee. Action of the AO with regard to treatment of interest on fixed deposits which was prematurely closed and interest paid was reversed on premature closure of fixed deposits - HELD THAT - After hearing both the parties, we are of the opinion that the Assessing Officer has to bring on tax the correct income earned from fixed deposits while going through the bank statements / certificate issued by Vijaya Bank, Hassan Branch in respect of fixed deposit prematurely closed by the assessee. The assessee shall produce bank statements / interest certificate in support of the income earned from the fixed deposit from Vijay Bank. With these observations, we remit the issue to the file of the A.O. for fresh consideration.
Issues Involved:
1. Commission payment as part of the cost of acquisition. 2. Sale consideration for commercial space. 3. Applicability of provisions of Section 50C for the sale of apartments. 4. Income from other sources. Detailed Analysis: 1. Commission Payment as Part of Cost of Acquisition: The assessee claimed a commission payment of ?1 crore to M/s Bentley Investment as part of the cost of acquisition of the property. The Assessing Officer (AO) disallowed this claim for several reasons, including the timing of the payment and the lack of a formal agreement. The Tribunal found that the payment was genuine, made by cheque, and inextricably linked to the acquisition of the property. Therefore, the Tribunal directed the AO to consider the commission payment as part of the cost of acquisition. 2. Sale Consideration for Commercial Space: The assessee received commercial space as part of a Joint Development Agreement (JDA) and calculated the capital gains based on the builder's cost of construction at ?1,500 per sq.ft. The AO, however, adopted the guideline value of ?2,200 per sq.ft. The Tribunal held that Section 50C, which deals with the adoption of guideline values for stamp duty purposes, does not apply in this context. The Tribunal ruled that the cost of construction should be considered as the full value of consideration and directed the AO to adopt ?1,500 per sq.ft. as the cost of construction for computing capital gains. 3. Applicability of Provisions of Section 50C for Sale of Apartments: The assessee had entered into agreements to sell certain residential flats in the financial years 2006-2007 and 2007-2008, but the actual sale deeds were executed in the financial year 2011-2012. The AO applied the guideline value as on the date of the sale deed, leading to an addition of ?48,82,428. The Tribunal held that the guideline value as on the date of the agreement to sell should be considered, following the proviso to Section 50C(1), which allows for the adoption of the value on the date of the agreement if the consideration is received through electronic means. The Tribunal directed the AO to adopt the guideline value as on the date of the agreement. 4. Income from Other Sources: The AO added ?12,56,890 as interest income from prematurely closed fixed deposits, whereas the assessee had declared ?4,50,840. The Tribunal directed the AO to verify the bank statements and interest certificates to determine the correct interest income and remit the issue for fresh consideration. Conclusion: The appeal was partly allowed, with the Tribunal providing specific directions on the computation of capital gains and the treatment of interest income. The Tribunal emphasized the importance of considering the actual cost of construction and the guideline value at the time of the agreement to sell, rather than at the time of the sale deed, for a fair assessment of capital gains.
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