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TMI Blog2016 (4) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... he construction. - Decided against revenue - ITA No.35(Bang) 2015 - - - Dated:- 18-3-2016 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI NARENDRA KUMAR CHOUDHRY, JUDICIAL MEMBER For The Revenue : Smt. Neera Malhotra, CIT For The Assessee : Smt Sheetal Borkar, Advocate ORDER PER SHRI NARENDRA KUMAR CHOUDHRY, JM: 1. This appeal by the revenue is directed against the orders dated 04- 2.07-2007 of CIT(A), Mysore for the assessment year : 2010-11. 2. The revenue raised the following grounds; 1. Based on the facts and circumstances of the case, ld.CIT(A) has erred in not appreciating the fact that as can be seen on the date of JDA, the portion of the constructed apartments that are to be assigned to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DDIT (Inv.) thereafter the assessment was re-opened u/s 147 of the IT Act, 1961. In response to notice u/s 148, the assessee has filed one more revised return declaring a long term capital loss of ₹ 2,01,04,068/- based on the guidance value of the land and the assessment was completed u/s 143(3) on 23-07-2014 for the assessment year 2010-11. During the assessment proceedings, the AO observed that the long term capital gains based on the joint development agreement was treated as the cost of construction at ₹ 1,250/- per sq.ft as value of the building when building itself was not completed. 4. The Assessee aggrieved by the order of the Ld AO, challenged the Order before Ld CIT(A), who after considering various judgments all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of transfer which is held as the date of signing of JDA. There is no finding regarding the working of capital gains. There is no dispute about the issue of application of section 2(47) since the appellant is also admitting that, it is liable for capital gains as on the date of JDA. Hence, the . _ case law in the case of Dr. T.K. Dayalu decided by Hon'ble Karnataka High Court is followed. The issue that arises now is, what is the value of consideration to be adopted for computation of capital gain. The A.0 held that since the appellant is entitled to receive certain area of constructed building in lieu of transfer of portion of land, the estimated value of likely investment into the built-up area is the consideration for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue. It is also informed by the appellant that in fact, actual construction is still going on till date. It may be noted that, only their right has been extinguished while entering into joint development agreement. Appellant has duly computed the long term capital gains for the extinguishment of right in the land by adopting the fair market value as per the guidance value. 5.8 I find strength in this argument of the appellant that for the deemed transfer on the date of JDA the logical deemed consideration would be the guidance value of the property. This would take the character of cost of acquisition for the builtup area to be handed over by the developer as and when it is handed Dyer or the value of right to receive that area in bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both parties and have considered the relevant material available on record. The learned DR argued that the portion of the constructed apartment that are to be assigned to the assessee has already been decided and crystallized and considering the scenario, it is only logical that the value of these apartment be considered as sale consideration. Further it was argued by the learned DR that assessee should only treat the cost of construction as sale consideration and not the market value of the asset because, the assessee is not selling the apartment and is only receiving them hence, the true value of asset is the cost of construction which is actually money spent in bringing the assets to life. The learned DR further relied on the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT Vs Dr. T.K.Dayalu 292 Taxman.com531 is relevant for deciding the present controversy. We are of the view, because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction. With the above observation we dismiss the appeal of the revenue. Order pronounced in the open court on the 18 th March, 2016. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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