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2015 (8) TMI 468 - HC - Income TaxCalculation of capital gain - addition made by the Assessing Officer on the basis of the 18% of the project cost - Commissioner after having noticed that the dispute was with regard to calculation of value of gross consideration received by the assessee held that advertisement cost, extra amounts paid to land lord and the assessee are not part of actual cost of construction, hence deleted the addition also confirmed by ITAT - Held that - For the purposes of valuation of the lease of undivided 50% share in the land in favour of the third party (developer) has been arrived at Rupees Four Crore by calculating 50,000 sq.ft. as the super built up area i.e. 50% of the constructed super built area by adopting the rate of construction at ₹ 800/- per sq.ft. and accordingly, the total sum payable has been arrived at Rupees Four Crore and the consideration of ₹ 1,40,00,000/- paid to the land lord has also been included in the said valuation. In fact it requires to be noticed at this juncture itself that developer has provided certain extra amenities in respect of 18% of super built area to be delivered to the assessee for which the assessee has paid a sum of ₹ 90,55,695/- which also came to be allowed by the Assessing Officer. The cost of construction having been agreed upon between parties at ₹ 800/- per sq. ft. and same being the full value of consideration which was agreed to between the parties and which was not rejected by the Assessing Officer by assigning reasons, same ought to have been accepted. We are of the considered view that amount of ₹ 1,40,00,000/- paid to the land lord to be accepted as part of actual construction and as such we are of the view that the finding arrived at by the Appellate Commissioner at Paragraph 6 by holding payment of ₹ 1.40 crores made to owner and amount paid to assessee to vacate the premises had nothing to do with the construction and it is also held that same is in consonance with the Tripartiate Agreement entered into between the parties and in that view of the matter it is to be held that the Appellate Authorities were correct in holding that the addition of ₹ 56 lakh made by the Assessing Officer on the basis of project cost indicated by the developer is liable to be deleted. The Assessing Officer has not gone into the issue of valuation adopted by the assessee, about and with regard to its correctness, the CIT (appeals) has proceeded to delete the additions made by the Assessing Officer on the facts obtained which we find that there is no infirmity. Said reasoning is just and proper. - Decided in favour of the assessee
Issues Involved:
1. Whether the Tribunal was correct in deciding the matter on merits when the assessment order was set aside by the Commissioner under Section 263 of the Income Tax Act. 2. Whether the Appellate Authorities were correct in holding that the addition of Rs. 53,26,567/- made by the Assessing Officer based on 18% of the project cost of Rs. 19.43 crores is liable to be deleted without considering the additional expenditure incurred by the assessee for extra amenities. Issue-wise Detailed Analysis: Issue 1: Tribunal's Decision on Merits Despite Assessment Order Set Aside - The Tribunal's decision to proceed on merits despite the assessment order being set aside by the Commissioner under Section 263 of the Income Tax Act was challenged. - The court noted that this issue was already addressed in ITA No.775/2009, where it was resolved in favor of the assessee. - Therefore, the court reiterated its previous stance, affirming that the Tribunal was correct in deciding the matter on merits. Issue 2: Deletion of Addition Made by Assessing Officer - The core issue revolved around the calculation of gross consideration received by the assessee. - The assessee declared the cost of construction at Rs. 800 per sq. ft. for 22,112 sq. ft., totaling Rs. 1,76,88,000/- for long-term capital gains, including a non-refundable deposit of Rs. 20,00,000/-. - The Assessing Officer, however, used the builder's project cost of Rs. 19,79,237.54 and apportioned 18% of this cost to the assessee, resulting in a proportionate project cost of Rs. 3,49,70,263/- and made additions accordingly. - The Appellate Commissioner found that the Assessing Officer did not reject the assessee's calculation but substituted it with a different valuation based on the builder's books, which included advertisement charges and amounts paid to the landlord and assessee for vacating the premises. - The court noted that the valuation agreed upon in the Tripartite Agreement dated 23.8.2001 was Rs. 800 per sq. ft. and the cost of construction was not rejected by the Assessing Officer. - The court held that the amounts paid to the landlord and the assessee for vacating the premises should not be included in the construction cost, and the agreed valuation of Rs. 800 per sq. ft. should be accepted. - The court affirmed the Appellate Commissioner's decision that the additions made by the Assessing Officer were to be deleted, finding no infirmity in the reasoning. Conclusion: - The court dismissed the appeal, affirming the order passed by the Income Tax Appellate Tribunal, Bangalore Bench, in ITA No.1110/Bang/2008 dated 31.3.2009. - Both substantial questions of law were answered in favor of the assessee and against the revenue.
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