2023 (6) TMI 127 - AT - Income Tax

Computation of capital gain on transfer of Plot - Adoption of certain amount as Cost of Acquisition - HELD THAT - On an overview, it can be seen that there are basically two transfer transactions of the assessee, first, the transfer by compulsory acquisition of land by the Government of Maharashtra and the, second, of the transfer of plots to M/s. Shriram Builders Developers, which were allotted to the assessee in lieu of the compulsory acquisition. In a nutshell, the assessee was allotted the two plots as quid pro quo for the compulsory acquisition of his land after paying back Rs. Y. In that view of the matter, the fair market value of these two plots minus Rs. Y will constitute full value of consideration in the first transaction of transfer of agricultural land by compulsorily acquisition. AO, has observed that the first transaction of transfer by compulsory acquisition will not attract capital gain because it was a transfer of agricultural land - the date of allotment of the plots was 26-08-2011. Had the compulsory acquisition been of some non-agricultural land, the capital gain chargeable to tax would have resulted by taking the fair market value of the two plots minus Rs. Y as full value of consideration. Second transaction of the transfer of Plot Nos.20 20A taking place during the year, which happened on 12-09-2011, namely, around 15 days from the date of allotment of plots - Neither the original receipt of compensation in seclusion can be construed as the fair market value of the property in the first transaction of transfer nor its subsequent refund to CIDCO with certain addition in isolation as the cost of acquisition in the second transfer transaction. Cost of acquisition of the two plots in the second transaction of transfer is their fair market value on the date of their allotment to the assessee, which constituted the basis for the full value of consideration in the first transfer transaction. Thus capital gain in the second transaction needs to be computed by taking the assessee s share in Rs.10.75 crore as full value of consideration to be reduced by his proportionate share in the value of plot Nos. 20 20A, Sector-22, at Ulwe, Tal. Panvel, Dist. Raigad on 26-08-2011 allotted by CIDCO. Since the necessary figure of the fair market value of the two plots on 26.8.2011, being, the cost of acquisition in the second transaction is not available, we set-aside the impugned order and remit the matter to the file of the AO for determining it afresh. Appeal is allowed for statistical purposes.

Summary

Issues involved:
The judgment addresses the issue of adoption of a certain amount as Cost of Acquisition in the computation of capital gain on the transfer of specific plots.

Comprehensive details:
The judgment pertains to an appeal against an order passed by the CIT(A) regarding the assessment year 2012-13. The primary contention raised in the appeal is the adoption of a particular amount as the Cost of Acquisition in the calculation of capital gain from the transfer of Plot Nos.20 & 20A, Sector-22, at Ulwe, Tal. Panvel, Dist. Raigad.

The facts of the case reveal that the assessee, along with others, entered into an agreement for the transfer of the mentioned plots to M/s. Shriram Builders & Developers. These plots were initially allotted to the assessee in lieu of compulsory land acquisition by the Government in 1986. Subsequently, the plots were sold to the developers in 2011. The dispute arose when the assessing officer considered a certain amount paid by the assessee to CIDCO under the 12.5% scheme as the Cost of Acquisition, resulting in a significant capital gain. This decision was upheld by the CIT(A), leading to the appeal before the Tribunal.

Upon examination of the case, it was observed that the original compensation received by the assessee for the land acquisition was less than Rs.2.00 lakh. The Maharashtra Government's 12.5% scheme allowed for the allotment of urban land in such cases. The plots in question were allotted to the assessee in 2011, and a specific amount was paid to CIDCO. The Tribunal determined that the fair market value of the plots minus the amount paid to CIDCO should be considered as the full value of consideration in the first transfer transaction.

Regarding the second transaction of selling the plots to the developers, the Tribunal concluded that the fair market value of the plots on the date of their allotment to the assessee should constitute the Cost of Acquisition in this transaction. As such, the matter was remitted back to the assessing officer for a fresh determination of the capital gain based on these observations.

In conclusion, the appeal was allowed for statistical purposes, and the case was remitted to the assessing officer for further assessment in line with the Tribunal's findings.