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2021 (8) TMI 925 - AT - Income TaxComputation of Long Term Capital Gain - AO held that the buyback agreement was an independent transaction and worked out short term capital gains in respect of super structure to be constructed and to be transferred, thus, the long term capital gains was computed excessively - Revenue argued CIT(Appeals) adopted the value of land as on 1.4.1981 at ₹ 250/sq.ft. as against ₹ 100/sq.ft. by the AO - HELD THAT - CIT(Appeals) after considering the submissions of the assessee that on reverse indexation method, the value of land as on 1.4.1981 is @ ₹ 781.25 / sq.ft., considered the same at ₹ 250 / sq.ft, which is most reasonable and the same is to be adopted. See LATE SMT KRISHNA BAJAJ VERSUS ASST COMMISSIONER OF INCOME TAX 2013 (12) TMI 544 - KARNATAKA HIGH COURT Determining the value for the surrender of land to the developer by the assessee and the co-owner for development of a housing project - JDA entered - AR submitted that the JDA has to be read along with supplementary agreement to JDA which suggests that the assessee has transferred 75.72% proportionate share of undivided interest in land as against the original transfer of 51.85% of undivided share in land and assessee will retain only 24.28% of proportionate share of undivided interest in land - HELD THAT - When we read JDA dated 13.10.2014 along with supplementary agreement it shows that assessee transferred only 24.28% of undivided interest in land to the developer for a consideration of ₹ 13.30 crores and 11475 sq.ft. of constructed area. Further, the 6 flats agreed to be surrendered by the landlord by the revised JDA agreement comprises of two components i.e., land and building. The value of proportionate area of undivided interest in the landed property of 8957.37 sq.ft at ₹ 24,611.64 per sq.ft. and the value of building of constructed area of 11934 sq.ft. charged at ₹ 2,500 per sq.ft. works out to ₹ 2,98,35,000. The land value will be ₹ 10,91,65,000 worked out at ₹ 24,611.44 per sq.ft. The registered valuer has given the value of land in his report at ₹ 20,000 to ₹ 22,000 per sq.ft. which is kept on record at page 127 of PB. Therefore, the valuation adopted for 11934 sq.ft. constructed area cannot be compared with the value of constructed area of 11475 sq.ft. retained by the Owner. Being so, this was rightly followed by the CIT(Appeals) as mentioned in his order. We do not find any infirmity in the valuation of the CIT(Appeals) towards transfer of 75.72% undivided interest in land to the developer. CIT(Appeals) calculated the short term capital gain on sale of built-up area at Nil - The assessee herein transferred 75.72% of undivided share in land to the developer. The JDA and supplementary agreement cannot be read isolatedly and it gives distorted picture on transfer of landed property to the developer. When we read JDA dated 13.10.2014 along with supplementary agreement to JDA dated 19.8.2015, it suggests that the whole arrangement is to transfer 75.72% of undivided share in land to the developer and this is a single transaction so that there is no computation of short term capital gain in this case as computed by the AO. The CIT(Appeals) has given relief on a different count and computed the short term capital gain at Nil. The same is confirmed. Exemption u/s 54 - HELD THAT - As in this case the deduction was claimed by assessee u/s. 54 of the Act and there was no prohibition in this assessment year with regard to owning more than one residential house so as to deny exemption u/s. 54 The assessee in this case purchased new residential house situated at No.228 (originally part of No.285 and sub-numbered as 285/1, renumbered as 66 and later as No.228) 4th Main Road, Malleshwaram, Bangalore 560 055, PID No.7-3-66 for a consideration of ₹ 7.5 crores along with stamp duty totalling to ₹ 7,99,50,636. The assessee s share in the value of property is ₹ 3,99,75,318 on which the assessee is entitled to deduction u/s. 54. The same is directed to be granted.
Issues Involved:
1. Valuation of land as on 1.4.1981. 2. Determination of value for the surrender of land to the developer. 3. Calculation of short-term capital gain on the sale of built-up area. 4. Denial of exemption under section 54 of the Income Tax Act. Detailed Analysis: 1. Valuation of Land as on 1.4.1981: The revenue contended that the CIT(A) adopted the value of land as on 1.4.1981 at ?250 per sq.ft. without providing a comparable sale instance, whereas the AO took the value at ?100 per sq.ft. based on three comparable sale instances from the sub-registrar. The assessee argued that the reverse indexation method indicated a value of ?781.25 per sq.ft. as on 1.4.1981, making the CIT(A)'s valuation of ?250 per sq.ft. reasonable. The Tribunal upheld the CIT(A)'s valuation, noting that the AO failed to specify the exact nature and address of the properties used for comparison. 2. Determination of Value for the Surrender of Land to the Developer: The revenue argued that the CIT(A) incorrectly valued 11,475 sq.ft. of constructed area at ?2,86,87,500 while valuing 11,934 sq.ft. at ?13,30,00,000. The assessee contended that the JDA and supplementary agreement should be read together, indicating a transfer of 75.72% of the undivided share in the land to the developer. The Tribunal agreed with the CIT(A)'s valuation, stating that the valuation of the 11,934 sq.ft. constructed area could not be compared with the 11,475 sq.ft. retained by the owner. 3. Calculation of Short-Term Capital Gain on the Sale of Built-Up Area: The revenue contended that the CIT(A) incorrectly calculated the short-term capital gain on the sale of the built-up area at nil. The Tribunal found that the JDA and supplementary agreement should be read together, indicating a single transaction of transferring 75.72% of the undivided share in the land to the developer. Consequently, no short-term capital gain was computable as done by the AO, and the CIT(A)'s calculation was upheld. 4. Denial of Exemption under Section 54 of the Income Tax Act: The assessee appealed against the denial of exemption under section 54. The CIT(A) denied the exemption, citing that the assessee owned more than one residential house at the time of transfer. The Tribunal noted that during the relevant assessment year, there was no prohibition on owning more than one residential house for claiming exemption under section 54. The Tribunal directed that the exemption under section 54 be granted for the assessee's share in the new residential house property valued at ?3,99,75,318. Conclusion: The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, granting the exemption under section 54 and upholding the CIT(A)'s valuations and calculations.
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