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TMI Blog2015 (10) TMI 2298X X X X Extracts X X X X X X X X Extracts X X X X ..... e income, from transfer of the property by way of distribution of assets on retirement of two partners, as long term capital gain u/s 45(4) instead of short term capital gain as treated by the Assessing Officer w. ithout appreciating the fact that the Development Agreement was entered on 28/11/2005 and partners were retired on 31-12-2006 and thus the holding period is less than three years." 2. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the Assessing Officer to restrict computation to the disclosed area of land and property under transfer, without considering the clause of supplementary agreement between the assessee and M/s K.Raheja Universal Pvt. Ltd. which clearly states that the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raheja Universal Pvt. Ltd.. Subsequently on 31/12/2006, two partners viz. S/Shri Yogendra Dhirajlal Sanghavi (YDS) and Somin Yogendra Sanghavi (SYS) having 34% and 16% share in the profits of the firm retired vide Retirement Deed of even dated. These two partners were also entitled to receive share in their profit sharing ratio in the property of the firm i.e. land and FSI present as well as future. Accordingly, the firm gave 50% of land and FSI and right to get the developed property from M/s.K.Raheja Universal Pvt. Ltd., to the retiring partners. Thus as per the provisions of sec.45(2), assessee offered long-term capital gains (LTCG) to tax on account of distribution of asset to retiring partners by considering 50% of the land and FSI as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005. Thus, the CIT(A) has observed that what was transferred by way of distribution on retirement of partners is only the asset being 50% of the land along with FSI retained by the assessee-firm and the same is LTCG under section 45(4). The CIT(A) also allowed the indexation of cost of acquisition for the purpose of computing LTCG, as it was done by the AO in the earlier assessment year while accepting LTCG on transfer of land under the DA. Accordingly, he directed the AO to re-compute the capital gain by allowing indexation on the cost w.e.f. 1/4/1981. The CIT(A) found that the AO was not justified in increasing area by 25% on the ground that super built up should be considered for the valuation as there was no provision in the IT Act to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2006-07 which was accepted by the AO while passing the assessment order under section 143(3) therefore, the said 50% of the land which was transferred to the developer cannot be considered as the asset of the assessee for the purpose of distribution to the retiring partner. The learned authorised representative of the assessee has submitted that the CIT(A) has taken a correct view by allowing the claim of the assessee in computation of LTCG in respect of the land retained by the assessee along with FSI. He has specifically pointed out that only 50% of the land was transferred for development as per the DA dated 28/11/2005 and therefore, the AO was not justified in taking into consideration FSI over the entire land while computing the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the DA dated 28/11/2005. After transfer of 50% of the land along with FSI available on the said land, the assessee was remained with 50% land along with available FSI on the said retained portion of 50%. Thus it is apparent that at the time of retirement of two partners what was to be distributed is the asset which was retained by the assessee subsequent to the DA and therefore, the value of 50% of land retained by the assessee along with available FSI was taken into consideration for the purpose of capital gain as per the provisions of sec.45(4). Thus, it is manifest from the record that what was available with the assessee after transfer of land under DA is only 50% of the land along with FSI available on the said 50% of the land. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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