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TMI Blog2010 (10) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... is completed or not. It also matters not whether the building is constructed by the owner of the land or by some body else - the capital gain arising out of the sale the lease hold interest in the land in incomplete building will have required to be bifurcated into the gain arising out of a sale of lease hold interest in the land and the sale of the incomplete building - 59 of 2002 - - - Dated:- 29-10-2010 - D.G. Karnik, and F.M. Reis, JJ Asha Dessai, Adv. for the Appellant P.J. Pardiwalla, Sr. Adv. with V. Korgaonkar, Adv. for the Respondent No.1 JUDGMENT D.G. Karnik, J 1. This appeal is directed against the judgment and order dated 1st October, 2001 passed by the Income Tax Appellate Tribunal (for short "the Tribunal"). 2. The respondent is a company incorporated and registered under the Companies Act, 1956. The main object of the company is establishing and running of hotels. By a lease deed dated 17th March, 1988 the respondent took on perpetual lease a plot of land bearing plot no. 18 admeasuring 1992.50 square metres situated at village Morombi-OPequeno Goa from the Economic Development Corporation of Goa (For short the EDC) by paying a premium of Rs.40,16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent filed an appeal before the Commissioner of Income Tax (Appeals) (for short CIT (appeals)). The CIT (appeals) held that the assessee had maintained the accounts properly and therefore it was possible to ascertain how much money was spent by the assessee on the hotel project up to 18th June, 1992 i.e. three years prior to the date of the sale and how much amount was spent thereafter. By considering the accounts and taking into the lease premium paid, and the expenses for the construction he held that Rs.2,01,41,361/- were spent by the assessee up to 18th June, 1992 and of Rs.1,18,53,282/- were spent between 19th June, 1992 to 18th June, 1992 i.e. the date of sale. He held that the capital gain therefore should be apportioned in the proportion of the money spent prior to 18th June, 1992 and the money spent after 18th June, 1992. He further held that the amount of capital gain attributable to the money spent prior to 18th June, 1992 should be treated as a long term capital gain and that attributable to the money spent after 18th June, 1992 should be treated as a short term capital gain. He also allowed indexation on the basis of the actual date of spending of the money. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing should be treated as a short term capital gain. It accordingly partly allowed the appeal of the respondent. Being aggrieved by the decision of the Tribunal, the revenue is in appeal. 5. By order dated 12th August, 2002 this Court while admitting the appeal framed the following substantial questions of law: (A) Whether on the facts and in the circumstances of the case, the amount of Rs.11 crores, received by the assessee as the sale consideration for transfer of incomplete building, would be termed as long term capital gains or short term capital gains, in the hands of the assessee? (B) Whether the finding of the ITAT based on the approved valuer's estimate, that the value of the super structure as on the date of transfer is to be adopted at Rs.2.15 crores, out of which after deducting 1.85 crores being actual cost of construction, capital gain of Rs.30,00,000/- has to be apportioned between long term capital gain, and short term capital gain in the ratio of expenditure incurred by the assessee within three years or beyond three years, is contrary to the provision of the IT Act? (C) Whether the finding of the ITAT that the balance capital gains of Rs.8.85 crores, as long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith airconditioning plant, equipment, installations and fixtures for a sum of Rs. 30 lakh. In the conveyance the price was allocated: for the land Rs. 14,00,000/-; for the building Rs.9,00,000/- and for the air-conditioning plant, equipment, installations and fixtures Rs.7,00,000/-. The assessee claimed the short term capital gain of Rs.26,242/- on the sale of house property and a long term capital gain of Rs.4,87,913/- on the sale of land. This working was not accepted by the Assessing Officer who took the view that the house had been constructed on the land and the gain arising on a transfer of this house which was not held for a period of three years was a short term capital gain. The Tribunal however held that the profit arising out of sale of a land be computed as a long term capital gain and profit arising out of sale of a building be computed a short term capital gain. Confirming the decision of the Tribunal, this Court held that the land was an independent and identifiable capital asset and would continue to so even after the construction of the building thereon. If the land was held by the assessee for a period of more than the period prescribed under Section 2(42A) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of the building has been completed or not would also not make any difference. It is well settled by now that, unlike in England, in India, the concept of dual ownership is recognised in the sense that the land may belong to one person and the building standing thereon may belong to another. Reference may be made in that connection to the decision of the Supreme Court in Dr. K. A. Dhairyawan V/s J. R. Thakur, AIR 1958 SC 789 and a decision of the Division Bench of this Court in CIT V/s Fazalbhoy Investment Co. Pvt. Ltd. (1977) 109 ITR 802. Once the concept of dual ownership is accepted it matters not whether the construction of a building is completed or not. It also matters not whether the building is constructed by the owner of the land or by some body else. In case of a lease hold land, the lease hold right would also be a capital asset under Section 2(14) of the Income Tax Act in the hands of the lessee. In a given case the owner of the land and the owner of the building may be same person but that does not mean that two assets merge merely because they are owned by the same person. The capital gain arising out of sale of the land of the building can and would be r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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