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2021 (4) TMI 1005 - AT - Income TaxCapital Gains chargeable to tax - Land transferred in favour of M/s. Sai Gokul Builders in the scheme of JDA - non consider the cost of construction of 7 flats while computing the capital gain from the sale - HELD THAT - In this case, the A.O. denied the cost of construction incurred on 7 flats while computing the capital gain on the reason that assessee has not incurred this expenditure but it was incurred by developer. However, it has to be noted that the assessee has considered cost of these 7 flats as a consideration while computing the capital gain on entering into JDA. Once the assessee includes the cost of these 7 flats as sale consideration while determining capital gain on entering into JDA, the corresponding benefit shall be given on sale of these 7 flats. Now the issue is only with regard to the sale consideration adopted by assessee towards these 7 flats while offering the capital gain. The A.O. cannot overlook the computation of capital gain offered by assessee on entering into the JDA. Once the assessee adopted the cost of these 7 flats for the purpose of offering the capital gain, same to be considered as cost of construction on sale of these 7 flats - This has been supported by the order ofSMT. JEEVA VADIVELU, VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 (1) , BANGALORE. 2012 (9) TMI 961 - ITAT BANGALORE Being so, we direct the A.O. to consider the cost of construction of 7 flats while computing the capital gain from the sale of these 7 flats. This ground of assessee is allowed. Determining the value of land transferred to Sai Gokul Builders under JDA at ₹ 800/- p. sq.ft. instead of ₹ 500/- p.sq.ft. as guidance value notified by the Government of Karnataka - As carefully gone through the market guidance value published by the Government of Karnataka w.e.f. 19.4.2017 as per which, the impugned property bearing No.40B/3 40B Sai Gokula Builders situated at Hoodi s village, Bengaluru, East Taluk (erstwhile South Taluk), Mahadevapura, CMC Limits, Ward No.12, K.R. Puram Main Road, Hubli, Bengaluru and it is also noted that the property was converted for non-agricultural residential purposes vide sanction order ALN-SR-1175/1981-82 issued by the Tahsildar, South Taluk, situated at Hoodi s village, Bengaluru, East Taluk (erstwhile South Taluk), Mahadevapura, CMC Limits, Ward No.12, K.R. Puram Main Road, Hubli, Bengaluru. As such notified value was ₹ 550/- per sq.ft. which can be seen from entry No.19 As such in our opinion, the value to be adopted at ₹ 550/- per sq.ft. instead of ₹ 800/- p.sq.ft valued by the A.O. This ground of assessee is allowed.
Issues Involved:
1. Deduction of cost of construction of 7 flats sold. 2. Determination of capital gains on Joint Development Agreement (JDA) with M/s. Sai Gokul Builders. Issue-wise Detailed Analysis: 1. Deduction of Cost of Construction of 7 Flats Sold: The assessee filed an appeal against the CIT(A) order dated 30-06-2017, challenging the disallowance of the cost of construction of 7 flats sold. The assessee argued that the built-up area received was in lieu of the land transferred to the developer, and thus, the cost of construction should be deductible while computing capital gains. The AO had disallowed this cost, stating that the builder incurred the construction expenses, not the assessee. The CIT(A) upheld this view. The Tribunal noted that the flats were received as consideration for the transfer of land under the JDA, and the cost of construction should be considered while computing capital gains. The Tribunal cited previous decisions, including the case of Jeeva Vadivelu and K. Rajanna, where it was held that the cost of construction should be allowed. The Tribunal directed the AO to consider the cost of construction of ?86,10,000/- while computing the capital gains from the sale of the 7 flats. 2. Determination of Capital Gains on JDA with M/s. Sai Gokul Builders: The assessee contested the AO's determination of capital gains based on a guidance value of ?800/- per sq.ft., arguing that the correct value should be ?500/- per sq.ft. as per the Government of Karnataka's notification. The AO had adopted the higher value based on information from the Sub-Registrar, Mahadevapura, Bangalore, which was upheld by the CIT(A). The Tribunal reviewed the market guidance value published by the Government of Karnataka and found that the correct value for the property should be ?550/- per sq.ft. instead of ?800/- per sq.ft. adopted by the AO. Consequently, the Tribunal allowed the assessee's appeal on this ground as well. Conclusion: The Tribunal allowed the appeal of the assessee, directing the AO to: 1. Deduct the cost of construction of ?86,10,000/- while computing the capital gains on the sale of the 7 flats. 2. Adopt the value of ?550/- per sq.ft. for the land transferred under the JDA with M/s. Sai Gokul Builders. Order Pronounced: The order was pronounced in the open court on 16th April 2021.
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