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TMI Blog2011 (4) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, this ground by the assessee is dismissed. Valuation - Actual cost of land - Held that:- As the assessee has valued the cost of land as on 1.4.81 at Rs. 1,40,233/-, the same is on the basis of valuer's report in the year 1985. The assessee has not produced any documentary evidence before the AO to establish the actual cost of land that needs deduction from the consideration received - Thus, the value adopted by the AO at Rs. 1,12,186/-, hence justified. Valuation - Indexation of building - Held that:- As the balance sheet of the assessee shows the value of the building at Rs. 7,43,534/- However, no justification/reason has been given by the Assessing Officer as to how and why he has not considered the indexation of the building, which is as per the balance sheet, while calculating the capital gain - The CIT(A) has also not dealt with this issue - Thus, it deem proper to restore this issue back to the file of the Assessing Officer to pass a speaking order on this issue in accordance with law - Thus, appeal is accordingly allowed for statistical purpose. Land and the bungalow - Held that:- Regarding the working of capital gain filed by the assessee at Rs.39,32,160/-this g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jeev Building" and also to furnish copy of relevant agreement for development. 2.1 The assessee, vide letter dated 15.9.2006 stated as under: (i) The building called 'Chiranjeev' on plot no.8 in Greater Bombay CHS located on Gulmour Road no.4 JVPD Scheme Mumbai was built in 1985 and ground and first floor at the building along with plot of land was owned by assessee along with his wife Smt Chitra Khanna. (ii) The above said building was demolished for redevelopment vide agreement for development dt 26.2.2004 as entered into between the said owners and Vinita Estates Pvt Ltd. (iii) The owners owned jointly plot of land admeasuring 840 sq.mts i.e. 1005 sq.yards. Part of the first floor of the building was occupied by a tenant and the rest i.e. full ground floor and part of the first floor was occupied by owners. (iv) The owners entered into agreement with said developers to demolish the then structure and redevelop the said land into building into 50% - 50% sharing basis on the terms and conditions set out specifically in the agreement dt 26.2.2004. (v) As per the terms the plot of land will continue to be owned by the owners and developers have no right and title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: cost of property Rs. 10,24,000/- Being share of 20,48,000/-as per valuers report dt 1.6.85. Indexation Rs. 10,24,000/ x 480/125 39,32,168/- Capital gain 1,51,92,840/- Exemption u/s 54 on New flat purchased 59,17,500/- Investment in Nabad 1,09,17,500/- Bonds u/s 54EC 50,00,000 Net capital gain 42,75,340/- 3.3 The Assessing Officer, thereafter, noted that in the case of the co-owner's hand, the claim of existence of capital gain out of the said agreement was not accepted. Therefore, he asked the assessee to explain its position. 3.4 It was submitted by the assessee that there is transfer of right, title and interest in the plot of land. The word transfer in sec.2 (47) includes extinguishment - relinquishment of right, title and interest in property. It was submitted that even though there was sale of plot of land or transfer of right, title and interest in the said plot of land but the assessee continues to be the joint holder - owner of plot in the records o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gain tax. 3.7 The Assessing Officer noted that the structure admittedly came into being in 1985 and therefore, the assessee's working of cost as on 1.4.1981 as per valuer's report was not correct. On being questioned by the Assessing Officer, the assessee submitted his rely, the gist of which is as under: "To find out cost of acquisition of land as on 1.4.1981, we can consider the value of the valuer viz Rs. 10,24,000/- and from this amount actual cost of building as per balance sheet viz Rs. 7,43,534/- can be reduced to find out cost of acquisition of land as on 1.4.81, even though valuation by valuer was made on 31.3.1985 no appreciation in land prices between 1981 to 1985 was noted particularly area surrounding plot no. 8 was marshy land. Only few plots near the area were built. Thus, cost of land as on 1.4.81 (being cost of acquisition) would be: Total value as per valuers report Rs. 10,24,000/- Less: Cost of investment in building Rs. 7,43,534/- Balance being cost of land on 1.4.81 Rs. 2,80,466/- Rs. 280,466/- is to be considered as cost of acquisition against actual payment of Rs. 41,605/- made at the time of purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Gain 1,85,81,506/- Exemption u/s 54 on 59,17,500 New flat purchased Investment in Nabard Bond u/s 54EC 50,00,000 1,09,17,500 Net Capital Gain 76,64,008 5. Before the CIT(A), it was submitted that the assessee continued to own the land even after development. The owners would use the FSI of the land for construction at their cost. The owners received an amount of Rs. 2,18,35,000/- to be shared equally between the assessee and his wife. It was further submitted that when the agreement was put up for registration, stamp valuation authorities took the value at Rs. 3,82,50,000/- and the Assessing Officer has invoked provisions of sec. 50C to adopt this figure of Rs. 3,82,50,000/-. The assessee ascertained that the transfer of land and building or both fall within the ambit of sec. 50C. However, development rights on land and building don't come under the purview of sec. 50C. It was submitted that in the instant case the right of ownership continued to be with the assessee. Transfer of development right should be treated at par with transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO did not consider the Indexation of building which is as per balance sheet is Rs. 7,43,534/- and the plot for development includes the cost of bungalow at the sight which is handed over to the builder/developers and whose entire debris, Malaba, etc., was taken by developers as per the development agreement and the cost since 1980 and as on 31.3.2004 is Rs. 7,43,534/-. It comes to Rs. 35,68,961/- or Rs. 37,17,670/-. The accrual of long term capital gains on land and building be accepted. (c) The working filed by the assessee at Rs. 39,32,160/- may kindly be accepted. The receipt of Rs. 1,09,17,500/- received as consideration includes the cost of the land and the bungalow thereon. (d) The appellant prays that the order of the Assessing Officer may kindly be revised and necessary reduction of LTCG may kindly be allowed. 5 The above grounds of appeal are independent of each other and without prejudice to each other. 6 The addition mad by the AO to the appellant's income may b deleted. 7 The appellant craves liberty to add, amend, alter, and/or withdraw any of the above grounds of appeal. 8 Consequent to the ruling of the ITAT, Mumbai as reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 10. The ld counsel for the assessee submitted that the assessee has not acquired or received any constructed area over and above the area of 11835 sft., to which the assessee was entitled to. The additional FSI was actually brought by the new comer and the assessee has only permitted the developer to construct. Since no cost has been incurred for the additional FSI, therefore, there is no capital gain. He further submitted that section 50C also cannot be applied to the assessee in view of the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia of Bombay (supra). Referring to the above decision, he drew the attention of the Bench to the observation of the Hon'ble High Court at page 39 of the paper book, which reads under:. "In this case, the agreement is a development agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that development agreement does not transfer the interest in the property to the developer in general law and, therefore, sec. 2(47)(v) has been enacted and in such cases, even entering into such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents have been registered by the State Registration Authorities; therefore, the Assessing Officer had no other option but to apply provisions of sec. 50C. Here, there is a building. Therefore, the ld CIT(A) was justified in upholding the action of the Assessing Officer since it is a clear transfer of capital asset falling under the provisions of sec. 50C. 10.3 The ld counsel for the assessee, in his rejoinder submitted that there is no transfer of land and the land continued to be belonging to the assessee. Only the builder brought new FSI/TDR and no FSI, which were originally with the assessee, has been transferred to the developer. The assessee has only permitted the Developer to construct. Therefore, provisions of sec. 50C are not applicable to the facts of the present case and no liability for capital gain tax. As regards taking away of the debris by the developer, he submitted that it is a minor issue and we cannot come to a conclusion of this magnitude. He submitted that whatever cost of the debris - section 54 54EC will take care of it. It can be used for that part of the property which has come to me. He submitted that no FSI which was originally belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer vide his reply dated 27.11.2007 has submitted as under: "The assessee asserts that there is transfer of right, title and interest in the plot of land. The word transfer in sec. 2(47) includes extinguishment -relinquishment of right, title and interest in property. It is submitted that even though there was no sale of plot of land or transfer of right, title and interest in the said plot of land and the assessee continues to be the joint holder - owner of plot in the record of the society, in fact and in substance, the assessee is a holder/owner on paper because the plot is not open plot but covered with a new structure shared by assessee and developer and/or their nominees to whom developer sold flats pertaining to developers 50% share in the building. Further, the assessees cannot use this plot alone and cannot put up any construction of their own even, as no permissible open space available for sideways or above 11th floor, construction (BMC cannot allow any FSI against development regulations). In fact the rights of so called plot holder owners in plot of land have been surrendered in favour of developer's nominees, being purchasers of flats in the building w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI originating from the said land and the owners have agreed to pay to the developers the costs of construction thereof fixed at Rs. 1000/- per sq. foot. The amount payable by the owners to the developers workout to Rs. 1,18,35,000/-(Rupees one core eighteen lacs thirty five thousand only and therefore each owner is liable to pay Rs. 59,17,500/- i.e ( Rupees fifty nine lacs seventeen thousand five hundred only) Against the receipt the balance amount mentioned in clause 4.1(b) the owners will pay the developers the said costs of construction in advance." Cl.l7:On the license being granted the Developers shall be entitled to demolish the said existing building. The debris Katmal building material of the existing structures will belong to developers as the consideration thereof is included in the aforesaid consideration." 12.1 A perusal of the various clauses of the agreement and more particularly the above clauses including the submission of the assessee before the Assessing Officer, clearly indicate that there is transfer of land and building. Therefore, the provisions of sec 50 are clearly applicable to the facts of the present case. The various decisions relied on by the ld co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal no.2 is concerned, we find the CIT(A) has clearly mentioned that provisions of sec. 50C are clearly applicable to the facts of the present case. We have already held in the preceding paragraphs that in this case there is transfer of land and building to the developer and therefore, provisions of sec. 50C are clearly applicable to the facts of the present case. In this view of the matter, grounds of appeal no.2 by the assessee, is dismissed. 17. So far as grounds of appeal no3 is concerned, we find the assessee has not produced any documentary evidence before us to substantiate that in the case of spouse, who is a co-owner, no tax liability has been fastened. We, therefore, find no merit in the submission of the ld counsel for the assessee that he being other co-owner, cannot be burden to tax liability. From the order of the CIT(A) also, we find the assessee has not produced any documentary evidence before him. Since the assessee has failed to substantiate with evidence that no tax liability had been attached in the case of the spouse of the assessee, therefore, this ground by the assessee is dismissed. 18. So far as the grounds of appeal no.4(a) is concerned, although, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 sq,ft due to its land holding. The assessee transferred this entitlement for consideration of Rs. 48.96 lacs to the builder. Under these circumstances, it was held by the Tribunal that the assessee has not incurred any cost of acquisition in respect of the right which emanated from the 1991 Rules making the assessee eligible for additional FSI. Since there was no cost of acquisition for the additional FSI, the Tribunal, relying on a couple of decisions including the decision of the Hon'ble Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294/5 Taxman 1 held that no capital gain chargeable to tax has arisen. However, in the instant case, there is a transfer of existing land and building. It was demolished by the builder for fresh construction. The documents were registered by the State Registration Authorities. Therefore, the decision of the Tribunal in the case of New Shailaja Co-operative Housing Society Ltd. (supra), in our opinion is not applicable to the facts of the present case. In this view of the matter, the grounds of appeal no. 8 by the assessee, is dismissed. 23. In the result, the appeal filed by the assessee is partly allowed for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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