2019 (10) TMI 15 - AT - Income Tax

Rectification order u/s 154 - rejection of claim u/s 54 - adoption of sale value of consideration of the land arising on account of entering into joint development agreement - Dispute is with regard to the value to be adopted in respect of 2 flats and 2 covered car parking allotted to the assessee in the proposed building. It is the contention of the assessee that the value of 2.67 crore mentioned in the joint development agreement was the expected market value of the flat including the value of proportionate land attached to the flats - HELD THAT - The assessee has furnished the valuation report obtained from a registered value, while the ld DR submits that the cost of construction incurred by the builder can be adopted for determining the sale consideration of land/building for development. We also find merit in the contentions of the assessee that the cost of construction of two flats along with two covered car parking could not be ₹ 267 crores. In our view, the manner of ascertaining the cost of construction should be left to the wisdom of the assessing officer. Accordingly, we are of the view that this issue needs to be examined at the end of the AO. Accordingly we set aside the order passed by the ld CIT(A) on this issue and restore the same to the AO for determining the value of cost of construction. A.R submitted that the value of two flats and two covered car parking as determined by the AO should be allowed as deduction u/s 54 of the Act, since the same would represent the value of new flats constructed by the assessee for the purposes of sec.54 of the Act. We direct the AO to examine this claim of the assessee also. With regard to the rejection of claim of ₹ 60 lakhs claimed by the assessee, we notice from the return of income filed by the assessee the same has been claimed u/s 54 of the Act only. Accordingly, we restore this issue also the file of AO with the direction to examine this issue afresh by examining the return of income filed by the assessee - Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues:
Appeal against order confirming rectification u/s 154 of the Act for asst. year 2013-14.

Analysis:
The appeal challenges the rectification order passed by the AO u/s 154 of the Act, which revised the long term capital gain computation. The original assessment accepted the gain as per the assessee's computation. However, the AO later revised the sale consideration based on the Joint Development Agreement, increasing it to ?500 lakhs. The AO also rejected a deduction claim of ?60 lakhs u/s 54F. The assessee contended that the JDA value was inflated, and the actual cost of construction was lower. The AO's reliance on JDA was disputed by the assessee, who provided a valuation report showing a lower construction cost. The dispute centered on the valuation of two flats and car parking.

The Tribunal found an apparent mistake in the sale value computation due to discrepancies in the JDA. The valuation of the flats and parking needed further examination. The AO was directed to reevaluate the cost of construction based on the evidence presented by the assessee. The Tribunal also instructed the AO to reconsider the deduction claim of ?60 lakhs under section 54 of the Act, as it was not claimed under section 54F as assumed by the AO. The matter was remanded to the AO for a fresh assessment based on the evidence and submissions provided by the assessee. The appeal was allowed for statistical purposes, and the decision was pronounced in open court on 27th September 2019.