2022 (8) TMI 197 - AT - Income Tax

Computation of the capital gain on the basis of the JDA - whether the date of development agreement or the date of delivery of the flats are to be considered for the purpose of computation of capital gain? - bifurcation of the composite value of the land and building - HELD THAT - We find the assessee in the instant case has entered into a Joint Development Agreement cum-GPA for development of 791 sq.yards - As per the agreement, she got 8 Flats of 1100 sq.ft. each. The total market value of the project as per the document (SRO) is Rs.2,70,50,000/- (land value Rs.79,10,000/- and market value of constructed area is Rs. 1,91,40,000/-. Since the assessee had not disclosed the land transfer transaction in her return of income, the Assessing Officer after considering the share of the assessee in the project at 40% determined the consideration and transfer of the property at Rs. 1,08,20,000/-. After deducting the indexed cost of acquisition of Rs. 11,717/- he determined the LTCG at Rs. 1,08,08,283/-. We find in appeal, the learned CIT (A) following the decision of the Coordinate Bench of the Tribunal in the case of K. Vijaya Lakshmi 2018 (3) TMI 138 - ITAT HYDERABAD held that the provisions of section 45(5A) cannot be applied retrospectively. Similarly, following the decision of the Hon'ble A.P High Court in the case of Potla Nageswar Rao 2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT where it has been held that the transfer is complete on the execution of the JDA, he held that the assessee is liable to capital gain tax in the impugned A.Y i.e. A.Y 2016-17 when the Jt.Development Agreement was entered into between the assessee and M/s. Dhanush Builders developers for development of the property. We do not find any infirmity in the order of the learned CIT (A) on this issue. Since the learned CIT (A) in his detailed order has decided the issue regarding the year of taxation of the capital gain and also the manner in which the capital gain should be computed which is based on the decision of the jurisdictional High Court and the Coordinate Bench of the Tribunal. Therefore, we do not find any infirmity in the order of the learned CIT (A) in dismissing the grounds raised before him. Accordingly, the grounds raised by the assessee are dismissed.

Summary

Issues Involved:
1. Year of assessability of capital gains.
2. Computation of capital gains.
3. Admission of additional ground regarding deduction under section 54F.

Detailed Analysis:

1. Year of Assessability of Capital Gains:
The primary issue was whether the capital gains should be assessed in the year the development agreement was entered into or when the possession of the flats was handed over. The assessee argued that the capital gain should be recognized in the year possession of the flats was handed over. However, the CIT (A) upheld the Assessing Officer's (AO) decision, citing the Andhra Pradesh High Court's ruling in Potla Nageswara Rao which stated that the transfer is complete upon the execution of the Joint Development Agreement (JDA). The Tribunal agreed with the CIT (A), affirming that the capital gains were correctly assessed in the year the JDA was executed, i.e., A.Y. 2016-17.

2. Computation of Capital Gains:
The AO computed the capital gains based on the market value of the property as per the JDA, considering the assessee's 40% share in the project, which amounted to Rs. 1,08,20,000/-. The indexed cost of acquisition was calculated at Rs. 11,717/-, leading to a Long Term Capital Gain (LTCG) of Rs. 1,08,08,283/-. The assessee contended that the AO should have bifurcated the composite value of the land and building and only considered the value of the superstructure for the computation. The Tribunal, however, upheld the CIT (A)'s decision, which was based on the jurisdictional High Court's ruling and the Tribunal's previous decisions, rejecting the assessee's argument for bifurcation and confirming the AO's method of computation.

3. Admission of Additional Ground Regarding Deduction Under Section 54F:
The assessee raised an additional ground seeking deduction under section 54F, which was claimed in the return of income. The Tribunal examined whether this additional ground was a legal ground that did not require fresh investigation of facts. The AO's report indicated that the assessee had not claimed the deduction during the assessment proceedings. The Tribunal found that the additional ground required verification of facts and was not purely a legal issue. Consequently, the Tribunal dismissed the additional ground raised by the assessee.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the CIT (A)'s order regarding the assessability of capital gains in the year the JDA was executed and the computation method used by the AO. The additional ground for deduction under section 54F was also dismissed as it required factual verification. The decision was pronounced in the open court on 29th July, 2022.