9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (3) TMI 964 - AT - Income TaxLong Term Capital Gains arising from the JDA - determine correct value of consideration received as a result of transfer of property - HELD THAT - In this case, AO has adopted fair market value of the building at ₹ 6544 per sq.ft by considering compensation paid by the assessee to the builder @ ₹ 11,544 per sq.ft, including UDS, cost of land @ 5000 per sq.ft and determined value of building at 6544 per sq.ft. In our considered view, the method adopted by the AO is incorrect, because amount paid by the assessee to the builder, includes profit element of the builder and therefore, same cannot be considered for the purpose of determining full value of consideration in the hands of the assessee. At the same time, though, the assessee claims to have taken cost of construction of building @ ₹ 3500 per sq.ft, but no evidence has been filed to justify rate, including any confirmation from builder. In case, rate adopted by the assessee is supported by an evidence, then same may be considered for computing full value of consideration. Since, facts are not clear, we are of the considered view that the issue needs to go back to the file of the Assessing Officer to determine correct value of consideration received as a result of transfer of property. Deduction towards amount paid to builder as compensation for sharing less constructed area - HELD THAT- Amount paid by the assessee to the builder to compensate lesser super built up area amounts to expenses of transfer which needs to be allowed as deduction, when the Assessing Officer has not disputed fact that the assessee has paid compensation to the builder. Further, although the assessee has not made claim in the return of income, but claim was made in the revised statement of total income filed before completion of assessment. Therefore, in our considered view, the Assessing Officer should have entertained claim of the assessee. Hence, we direct the Assessing Officer to allow claim of the assessee towards compensation paid to builder as expenses of transfer. Deduction towards encumbrance cost / cost of improvement, although the assessee claims to have discharged encumbrance on the property by paying loan availed from banks - HELD THAT - It is well settled principle of law by the decision of the Hon'ble Supreme Court in the case of V.S.M.R. Jagadishchandran (Decd.) 1997 (7) TMI 6 - SUPREME COURT if previous owner creates encumbrance on the property and subsequent owner discharge encumbrance, then amount spent for discharging encumbrance amounts to cost of acquisition / improvement of the property. In this case, the assessee claims that there was encumbrance on the property and the same has been discharged by him, whereas, the authorities below recorded categorical finding that encumbrance was created by the present owner, but not previous owner. The facts are contradictory. Therefore, we are of the considered view that this issue also needs to go back to the file of the Assessing Officer to ascertain correct facts and also decide the issue in light of decision of the Hon'ble Supreme Court in the case of V.S.M.R. Jagadishchandran (Decd.) Vs. CIT (supra). The issue needs to go back to the file of the Assessing Officer to recompute long term capital gain derived from transfer of property, in pursuant to joint development agreement, in light of our discussions given hereinabove. Hence, we set aside this issue to the file of the Assessing Officer and direct the A.O. to reconsider the issue in accordance with law. Appeal filed by the assessee is treated as allowed for statistical purposes.
Issues Involved:
1. Re-computation of Long Term Capital Gains (LTCG) from the Joint Development Agreement (JDA). 2. Disallowance of the claim of improvements and appropriate indexation. 3. Disallowance of the claim of encumbrance cleared on making payments. 4. Determination of sale consideration for computing LTCG. 5. Deduction towards encumbrance cost/cost of improvement. Detailed Analysis: 1. Re-computation of Long Term Capital Gains (LTCG) from the Joint Development Agreement (JDA): The assessee, along with his brothers, entered into a JDA with a builder for the development of property, agreeing to share 60% of the constructed area in exchange for 40% undivided share of land. The developer paid ?1.20 crores and five flats of 1500 sq.ft each. The terms were later modified, resulting in the builder receiving 38.37% instead of 40%, and the assessee compensated the builder ?22,04,873/-. The assessee computed LTCG using a construction cost of ?3500 per sq.ft, while the Assessing Officer (AO) used ?6544 per sq.ft. The CIT(A) upheld the AO’s computation, rejecting the assessee's claim. 2. Disallowance of the claim of improvements and appropriate indexation: The assessee claimed improvements and appropriate indexation in the LTCG computation. The AO disallowed these claims, and the CIT(A) upheld this disallowance. The assessee argued that the compensation paid to the builder for lesser constructed area should be considered as an improvement cost, but the AO and CIT(A) did not accept this. 3. Disallowance of the claim of encumbrance cleared on making payments: The assessee claimed deductions for amounts paid to clear encumbrances on the property, totaling ?6,97,577/-, ?17,16,000/-, and ?42,00,000/-. The AO disallowed these claims, stating that the encumbrances were not created by the previous owner but by the present owner (assessee and his family). The CIT(A) upheld this disallowance, stating that only encumbrances created by the previous owner and discharged by the subsequent owner are deductible. 4. Determination of sale consideration for computing LTCG: The AO determined the sale consideration based on the compensation paid to the builder, adopting a rate of ?6544 per sq.ft. The assessee argued that this rate included the builder's profit and was not appropriate for determining the full value of consideration. The CIT(A) upheld the AO’s determination. The Tribunal found that the method adopted by the AO was incorrect as it included the builder's profit and directed the AO to reconsider the value of consideration based on evidence. 5. Deduction towards encumbrance cost/cost of improvement: The assessee claimed deductions for clearing encumbrances created by loans taken by his parents. The AO and CIT(A) disallowed these claims, stating that the encumbrances were created by the present owners. The Tribunal noted the contradictory facts and directed the AO to re-examine the issue in light of the Supreme Court decision in V.S.M.R. Jagadishchandran (Decd.) Vs. CIT, which allows deductions for encumbrances created by previous owners. Conclusion: The Tribunal found that the issues regarding the re-computation of LTCG, deduction of compensation paid to the builder, and deduction of encumbrance costs needed further examination. It directed the AO to re-compute the LTCG and reconsider the deductions in accordance with the law. The appeal was allowed for statistical purposes.
|
