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TMI Blog2014 (12) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that sale consideration cannot be taken on the basis of cost of construction to the developer - the sale consideration deemed to have been received by assessee has to be arrived at on the basis of FMV as on the date of development agreement i.e. on 04/05/06. Assessee’s share in the deemed sale consideration has to be worked out - during the assessment proceeding as well as before the first appellate authority, assessee has brought it on record that by virtue of a registered partition deed dated 23/06/1995, assessee is not absolute owner of the property, but, he owns 1/4th share along with his three sons - though, in the development agreement assessee along with E. Govinda Reddy have executed with developer by projecting them as absolute owners of land, but, on the basis of registered partition deed a ratification deed was executed on 23/04/07, wherein the other co-owners have also been made party to the development agreement - assessee’s claim for apportioning the taxable capital gain amongst all the co-owners has to be considered keeping in view the registered partition deed dated 23/06/95 and ratification deed dated 23/04/07 - as neither AO nor CIT(A) has properly appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidential area constructed as per the mutual understanding. He further noted that subsequently on 23/04/07, a ratification deed was executed which was also registered on 23/04/2007 vide document No. 4999/2007 to include B. Raghavendra Reddy, B. Srinivasa Reddy, B. Madhusudan Reddy and E. Pratap Reddy as partners to the development agreement being owners of the land. AO, further, noted that on 03/01/2009, a MoU was executed between E. Govinda Reddy and assessee with M/s BPR Infrastructure Ltd. specifying the sharing ratio between the land owners as 60:40. Thus, as per the MoU, assessee was owner of 40% of the land of 4.36 acre. As per the MoU, total 39 villas were to be constructed on the property known as Pearl County out of which 19 villas each were to be taken by owners and developer and the remaining one villa was to be sold and the sale proceeds is to be distributed between developer and owner. AO noted that 19 villas of the owners were further divided amongst the land owners with E. Govinda Reddy getting 11 villas and assessee having 7 villas and the share from the sale proceeds of 39th villa is to be divided in 60:40 ratio between assessee and E. Govinda Reddy. 4. In cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is arrived at after completion of the total construction by the builder from the future course of action. It was submitted that cost incurred by builder was rightly made available to AO because search took place in the premises of the builder on 22/10/2008 after a lapse of 2 years from the date of development agreement. It was submitted, if AO opined that capital gain arises in the year in which development agreement took place is to be accepted, then, it will be illegal to arrive at the cost which would be incurred by builder during future course of his action and the value thus arrived at will be estimation on notional basis only, which is not a method prescribed in the statute. Further, argument was advanced by assessee to the effect that if at all capital gain is to be charged for arriving at the sale consideration, the value as per the SRO should be adopted, but, not on estimation basis. It was further submitted that AO also erred in taxing the entire income in the hands of assessee in stead of taxing him to the extent of his share. Alternative argument was also taken that land transferred being an agricultural land cannot be treated as capital asset as per section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled. Second contention of ld. AR is, AO has totally erred while considering the sale consideration at ₹ 3,72,74,900 to be assessee s share on the basis of the cost of construction incurred by the builder. Ld. AR submitted that sale consideration has to be taken on the basis of fair market value as on the date of execution of the development agreement on 04/05/06. Ld. AR referring to the development agreement submitted that as per the stamp duty valuation of the sub-registrar, the value of the property is ₹ 5,41,20,000 for the total land whereas assessee and his co-owner E. Govinda Reedy have given 50% of the land to the developer for development activity and 50% of the land was retained by land owners. Therefore, the value of 50% land given to the developer will be ₹ 2,70,60,000. It was submitted that even this ₹ 2,70,60,000 again is to be distributed between the land owners at the ratio of 60:40. Therefore, assessee s 40% share would come to ₹ 1,08,24,000. After deducting the cost of acquisition of ₹ 3,11,400, taxable capital gain at the hands of assessee would be ₹ 1,05,12,600. Ld. AR submitted that even this taxable capital gain of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find merit in the contention of ld. AR that sale consideration cannot be taken on the basis of cost of construction to the developer. Moreover, the sale consideration deemed to have been received by assessee has to be arrived at on the basis of FMV as on the date of development agreement i.e. on 04/05/06. On a reference to registered development agreement, a copy of which is at page 22 of paper book, it is evident that the SRO has valued the property for stamp duty purpose at ₹ 5,41,20,000. In that view of the matter, unless, there is evidence to show that the FMV of the property is more than the value adopted by SRO for stamp duty purpose, the value adopted by SRO has to be considered as FMV of the property. Taking that into aspect, assessee s share in the deemed sale consideration has to be worked out. Moreover, it is a fact on record that during the assessment proceeding as well as before the first appellate authority, assessee has brought it on record that by virtue of a registered partition deed dated 23/06/1995, assessee is not absolute owner of the property, but, he owns 1/4th share along with his three sons. It is also a fact on record, though, in the development a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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