1992 (2) TMI 141 - AT - Income Tax

Summary

Issues:
1. Determination of the cost of acquisition of two plots of land sold by the assessee.
2. Applicability of capital gains tax on the sale of the plots.

Detailed Analysis:
1. The primary issue in this appeal was the determination of the cost of acquisition of two plots of land sold by the assessee during the assessment year 1987-88. The assessee claimed that the cost of acquisition should be Rs. 175 per sq. mt., based on the price at which other plots in the vicinity were allotted by the Ghaziabad Development Authority (GDA). However, the Assessing Officer calculated the cost of acquisition at Rs. 56,504, considering the compensation awarded by the Land Acquisition Officer and the development charges paid by the assessee. The DC (Appeals) upheld this decision, leading to the current appeal before the tribunal.

2. The key contention raised by the assessee was that the case was analogous to gold bonds, where no capital gain arises upon the return of the deposited gold. However, the tribunal rejected this analogy, emphasizing that the land acquired by the GDA was agricultural land for development into a residential colony, entitling the assessee to compensation under the Land Acquisition Act. The tribunal highlighted that the cost of acquisition should include the fair market value of the land, solatium, and interest until the payment date. Since the exact compensation amount was not finalized, it was impossible to determine the cost of acquisition directly.

3. The tribunal explored an alternative approach, considering the GDA as a statutory institution with fixed rates for plot allotment. It reasoned that the allotment to the assessee would have been at the same price as any other customer, and the amount due to the assessee for land acquisition would be adjusted against the plot price. Therefore, the tribunal directed the Assessing Officer to determine the cost of acquisition based on the price any other plot allottee would pay to the GDA on the allotment date. This approach aimed to assess whether there was any capital gain on the sale of the plots for Rs. 1,04,086. Ultimately, the tribunal allowed the appeal in favor of the assessee based on this alternative method of determining the cost of acquisition.

4. The tribunal's decision highlighted the complexities involved in determining the cost of acquisition for the sold plots, considering the unique circumstances of land acquisition and plot allotment by the GDA. By rejecting the gold bonds analogy and adopting a pragmatic approach based on standard plot allotment rates, the tribunal provided a nuanced interpretation of the cost of acquisition for tax assessment purposes. The decision underscored the importance of considering specific factual and legal contexts in determining capital gains tax liabilities arising from property transactions.