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TMI Blog2018 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ’s share cannot be assessed in the assessment year 2006-07 and relates back to the assessment year 2001-02. Hence, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The revenue’ appeal on this ground is dismissed. Sale consideration of 3 row houses - AO taxed the market value of the four row houses as long term capital gains for transfer of land in A.Y.2006-07 - Held that:- The sale value of the three row houses involve the long term capital gains in respect of transfer of land and short term capital gains in respect of the row houses. The assessee has sold the land which was acquired in the year 1999 in the year 2005-06. Therefore, the consideration received for transfer of land would be taxed as long term capital gains and the consideration received for sale of row houses would be taxed as the short term capital gains. Ld.CIT(A) also has taken the same view. Since there was a difference in actual sale consideration the valuation as per 50C of I.T.Act, the full value of consideration should be adopted as per the stamp valuation authority which was ₹ 89,51,843/-. Accordingly, we uphold the order of the Ld.CIT(A) and is dismiss the revenue’s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of taxing the capital gains, the taxing authority is right in his approach for the purpose of taxing capital gains of residential house as short term capital gains and the land as long term capital gains, when assessee has sold both in a single transaction, the assessee is entitled for deduction u/s 54(1) - I.T.A. No. 12-13/Viz/2014 - - - Dated:- 6-10-2017 - Shri V. Durga Rao, Judicial Member And Shri D. S. Sunder Singh, Accountant Member Assessee by : Shri G. V. N. Hari, AR Revenue by : Shri S. R. Sankaranarayanan, DR ORDER Per D. S. Sunder Singh, Accountant Member These cross appeals are filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Visakhapatnam vide ITA.No.557/11-12/ITO,Ward- 3(1)/VSP/2013-14 dated 31.10.2013 for the assessment year 2006-07. I.T.A.No.13/Viz/2014 2. The assessee filed return of income declaring total income of ₹ 3,02,130/-, the return was processed u/s 143(1) of I.T.Act and subsequently reopened the assessment u/s 147 by issue of Notice u/s 148 of IT Act on 16.10.2006. The assessee has acquired the vacant land of 1000 sq.yds.in a plot of 1500 sq.yar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed that the sale of row houses comprises sale of long term asset i.e. land and sale of short term asset i.e built up area. The Ld.CIT(A) observed that the constructed area came to existence and held by the assessee in the year 2005-06 and therefore it would take the character of short term capital asset. The land was acquired by the assessee in 1999 and sold in the year 2005-06 and hence it was a long term capital asset. The long term capital gains in respect of land required to be ascertained with reference to cost of acquisition of land, and the cost of acquisition of built up area has to be ascertained with reference to the cost of construction of the building. Accordingly, the Ld.CIT(A) held that the cost of constructed area to the developer should be taken as cost of acquisition with regard to row houses sold. Since the assessee has sold the constructed area in less than one year, it cannot be considered as long term capital asset and as a result the consideration received by the assessee on sale of row houses would be assessable to short term capital gains and not eligible for indexed cost of acquisition. The Ld.CIT(A) further held that the assessee has sold thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee owns more than one house, as on the date of transfer of row houses. 4. Aggrieved by the order of the CIT(A), the revenue has filed the appeal raising the following grounds : 1) The order of the Ld CIT (A) is erroneous on facts and in law. 2) The Ld. CIT(A) ought to have appreciated the facts of the case and upheld the action of the Assessing Officer. 3) The order of the Ld.CIT(A) is not acceptable as the CIT(A), Visakhapatnam, allowed the fresh additional grounds filed by the assessee which were never raised before the AO during the assessment proceedings and the revised stand of computation of LTCG was entirely different from the method adopted in his own computation of income filed along with return of income. 4) The Ld. CIT(A) erred in considering the sale consideration of 3 houses and leaving that of one house on the basis of period of sold, for computation of capital gains, when all the four houses were received under one development agreement. In other words, transfer took place in the year 2005-06 within the meaning of Section 2(47) of the I.T.Act when the assessee actually received (built up) 4 row houses in lieu of his land. 5) The Ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rightly taxed the receipt of four row houses as long term capital gains for transfer of 1000 sq.yds of site in the assessment year under consideration. 7. On the other hand, Ld.AR relied on the order of the Ld.CIT(A) and also the of the following decisions : (i) Giridhar G Yadalam Vs. CIT [284 CTR 433(SC)] (ii) Potla Nageswara Rao Vs. DCIT [365 ITR 249 (AP)] (iii) Hon ble ITAT Visakhapatnam Bench order dt.05.05.2010 in ITA No.51/Viz/2007 in the case of P Uma Bala Vs.ACIT. 8. We have heard the rival submissions and perused the material placed on record. The assessee has acquired the land on 23.03.1999 and given it for development to the developer vide agreement dated 24.12.2000. Further, as per the development agreement, the builder is allowed to construct the residential flats, row houses and deliver 50% of the constructed area to the owner and the remaining 50% would be retained by the developer. The developer is permitted to prepare the plan for construction of residential flats, row houses and submit the same to the municipal authorities for obtaining necessary sanctions. The entire development cost has to be borne by the developer and the developer was au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and allowed the developer to take up the construction and enter into all the contracts for obtaining the permission for civil authorities. The developer was also permitted to mortgage, transfer, create charge in respect of the 50% of the constructed area relating to the developer. Hence, the capital gains for transfer of land in respect of the developer s share cannot be assessed in the assessment year 2006-07 and relates back to the assessment year 2001-02. Hence, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The revenue appeal on this ground is dismissed. 9. Ground No.4 of the revenue is related to the sale consideration of 3 row houses. The assessing officer found that the assessee had received the four row houses for transfer of land to the developer in the year 2005-06, hence, the assessing officer taxed the market value of the four row houses as long term capital gains for transfer of land in A.Y.2006-07. With regard to the transfer of land relating to the developer, we have already answered in ground No.3 that the capital gains arises in the assessment year in which the land was transferred but not in the year in which the considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value paid to the developer. Therefore, the cost of construction of row houses received in exchange of land would be the cost of acquisition of built up area. This view is supported by the decision of ITAT,Hyd in DDIT vs G.Raghuram 39 SOT 406(2010) relied up on by the Ld.CIT(A). The Ld.CIT(A) directed the assessing officer to adopt the cost of construction to the builder for the constructed area. For the sake of clarity and convenience we extract the relevant part of the CIT(A) order as under 8.4. I have considered the submissions made. At the outset it is to be noted, that such a claim has not been made by the assessee In its computation of income. However, as the determination of capital gain integrally involves its computation, this issue is taken for consideration though it does not appear to have been raised at the assessment stage. It has to be seen whether in the facts and circumstances stated above the assessee would be entitled to deduction towards cost of acquisition of the constructed area, if any. Under the Development-Agreement the assessee has transferred certain portion of land in consideration of certain percentage of constructed area. It needs to be ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is partly allowed. 11. The assessee had acquired the his share of built up area in exchange of transfer of 50% of land. The transfer of land attract capital gains in the year of transfer as held by us. The assessee did not get the constructed area free of cost. Therefore the constructed area received by the assessee in exchange of land required to ascertained as per the cost incurred by the builder or the stamp valuation authorities and the same required to be allowed as deduction. Hence, we hold that CIT(A) has rightly held that assessee is entitled for deduction of cost of construction from the sale consideration. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. In the result, appeal of the revenue on this ground is dismissed. I.T.A.No.12/Viz/2014 12. In the assessee s appeal, the assessee has raised 5 grounds in total and also raised the additional ground claiming the deduction u/s 54 vide petition dated 29.04.2016. 13. Ground nos. 1 and 5 are general in nature which does not require any specific adjudication. 14. Ground No.2 is related to the assessment of sale of three row houses as short term capital gain ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has rightly rejected the claim of deduction u/s 54F of I.T.Act and we uphold the same. The assessee s appeal on this ground is dismissed. 16. Additional ground of the assessee raised during the appeal hearing for granting deduction u/s 54 of I.T.Act. The assessee contended that the assessee was allotted portions of the house vide development agreement dated 24.12.2000. Hence, this site is a long term capital asset. The appellant derived a right in the row houses on the day on which the development agreement was entered into. Further, Ld.AR submitted that the constructed area was sold along with undivided share of the land. The sale of the land and the constructed area should not be considered separately as the sale was directly linked to both the land and the row house. As per Section 54 of I.T.Act, the long term asset being buildings or the land appurtenant there to and being residential house would be eligible for exemption u/s 54. 16.1. In the instant case though the assessee has taken the possession of the house in 2005-06,the right in the share of constructed area was acquired by the assessee by the development agreement dated 24.12.2000 and hence the Ld.AR argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 54EC of I.T.Act holding that the agreement has been entered into in the year 2001-02 and the capital gain is accrued in the assessment year 2001-02. For ready reference, we reproduce hereunder the relevant part of the decision of the Coordinate Bench order reported in (2010) 131 TTJ 0229 as under : 6.10 From the above judicial pronouncements, it is clear that the completion certificate issued by the municipality is a certificate indicating that the building is complete and fit for habitation. Therefore, the said date cannot be held to be the date of acquisition of the said asset. The date of acquisition of an asset is the date on which the title of the said asset is passed on to the individual concerned. The actual date on which physical possession is acquired by an individual is of no consequence in the determination of the date of acquisition of the said asset. The CBDT vide their Circular No. 471, dt. 15th Oct., 1986 [[1987 ] 59 CTR ( St) 19 : [ 1986] 162 ITR (St) 41] and Circular No. 672, dt. 16th Dec, 1993 [[1993] 115 CTR (St) 73 : [1994] 205 ITR (St ) 47A] has made the issue clear as to what time does the legal ownership of a flat get transferred in favour of an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id land is not used for any commercial or non-residential purpose, the user of the land by the resident is for residential purpose only. If such a person chooses to sell only the land which he was using for residential purpose, the legislature has conferred the benefit in respect of / to the capital gains arising there from under Section 54(1) of the Act. If a land appurtenant to a residential house is entitled to the said benefit, we find it difficult to accept that the land on which the residential building is constructed is not entitled to the said benefit. 12. When a property, residential house is sold, the sale consideration includes the value of the land and the value of the construction. Though there is no two sale transactions involved for the purpose of the Act, in order to calculate the capital gains as rightly done by the Assessing authority, he has treated the sale of land on which the residential house is constructed as a long term capital gain and he has treated the building as short term capital gain. If, for levying tax under the Act, such a distinction could be made, we fail to understand why that distinction should not be kept in mind in extending the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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