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TMI Blog2024 (5) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... mponents of undivided share of land and ownership of building is necessary to complete title to a flat. Generally, when a JDA is entered into the owner of the land offers it to a developer with an understanding that he will retain undivided share of land proportionate to his share of built-up area and the undivided share of land proportionate to the built-up area which falls to the share of the developer is agreed to be sold. Therefore, the owner of the property retains undivided share of land proportionate to his share of built-up area. When the built-up area is delivered to the owner of the land and when he sells his share, he again transfers not only the built-up area but also proportionate undivided share of land. In such transaction, there will be no bifurcation of cost of land and building. AO has to call for details and arrive at the cost of undivided share of land and built-up area. When the owner sells his share of built-up area, the built-up area is acquired when the developer delivers possession of the built-up area to the owner but the undivided share of land is already owned by the owner. When an owner sells his share of property under a JDA he sells two components one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid sale consideration as appropriated to land and building as per Annexure or other documents attached with the registered sale deed could be adopted for the purpose of computing the capital gains. If the sale consideration is lesser than the value adopted or assessable by the Registration Authority for stamp duty purposes, then such value so adopted by the Registration Authority as appropriated between the land and building could be adopted as deemed sale consideration for the respective assets for the purpose of computing the capital gains. Thus we are of the view that the Ld. CIT has erred while invoking the powers u/s. 263 of the Act without considering the appropriation between land and building, and hence the order u/s. 263 deserves to be quashed. It would be just and appropriate to direct the AO to examine the issue afresh in the light of the directions as given above. We therefore allow the ground raised by the assessee for statistical purposes. - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Assessees : Ms. P. Chandini, AR For the Revenue : Dr. Satyasai Rath, CIT-DR ORDER PER S. BALAKRISHNAN, ACCOUNTANT MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, wherein the Tribunal vide order dated 02/08/2019 directed the Ld. AO to allow deduction u/s. 54 of the Act,which was denied due to delay in construction of the property, the Tribunal observed that the delay is not on account of the assessee but of the builder. Subsequently, it was noticed that the assessee sold the same flat on 12/12/2012 for a consideration of Rs. 44,15,000/-. However, the assessee has not once again filed the return of income for the AY 2013-14 disclosing the sale of immovable property. The case was therefore reopened by the Ld. AO u/s. 147 of the Act and a notice u/s. 148 was issued on 08/01/2021. In response, the assessee filed the return of income declaring the total income of Rs. 7,74,600/ and disclosing the capital gains of NIL on the sale of flat after claiming the cost of indexation and cost of improvement. The Ld. AO partly disallowing the cost of indexation and cost of improvement and after considering the investment u/s. 54EC of the Act, computed the taxable income under capital gains at Rs. 5,435/-. The Ld. AO thus completed the assessment u/s. 143(3) r.w.s 147 of the Act on 19/03/2022 assessing the total income at Rs. 7,80,035/-. 3. Thereafter, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Joint Development agreement on 21/7/2008 and has claimed deduction u/s. 54 of the Act for extinguishing rights on the 40% share of the land given to the developer M/s. MSR Life Care Services Pvt. Ltd. The Ld. AR also argued that based on the investment in the residential property, the assessee has also claimed deduction u/s. 54 of the Act in the AY 2009-10. Since the assessee has subsequently sold the same property on 12/12/2012, the Ld. AR argued that the date of purchase of the capital asset should be considered as the date of development agreement and not the date of delivery / possession of the flat which is on 01/11/2011. The Ld. AR further submitted that the Tribunal in the first round of appeal has allowed deduction u/s. 54 of the Act based on the date of Joint Development Agreement. The Ld AR further submitted an alternative plea that the UDS of land should be considered as Long Term, and shall be bifurcated from the lumpsum consideration. The Ld. AR therefore pleaded that the sale of asset on 12/12/2012 should be considered as long term capital asset and accordingly deduction u/s. 54EC claimed by the assessee should be allowed. 6. Per contra, the Ld. Departmental Represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation 1. For the purposes of sub-clauses (v) and (vi), immovable property shall have the same meaning as in clause (d) of section 269UA. Explanation 2. For the removal of doubts, it is hereby clarified that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfers not only the built-up area but also proportionate undivided share of land. In such transaction, there will be no bifurcation of cost of land and building. The AO has to call for details and arrive at the cost of undivided share of land and built-up area. When the owner sells his share of built-up area, the built-up area is acquired when the developer delivers possession of the built-up area to the owner but the undivided share of land is already owned by the owner. When an owner sells his share of property under a JDA he sells two components one is undivided share of land which he held for a longer period than the building and the building which he gets from the developer on completion of the building and the period of holding of the building is much shorter than the period of holding of the land. The concept of bifurcation of undivided share of land and built-up area is a well recognized concept. In practice, a building and the land appurtenant thereto held by an assessee, could be transferred together to a transferee through a single conveyance deed against a lumpsum monetary consideration. In such cases, the question on the method of computing the long term capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the immovable property transferred as indicated in the sale deed will be equivalent to the actual sale consideration received by the transferor from the transferee. If this value exceeds the value adopted or assessable by the Registration Authority for stamp duty purposes, the said sale consideration as appropriated to land and building as per Annexure or other documents attached with the registered sale deed could be adopted for the purpose of computing the capital gains. If the sale consideration is lesser than the value adopted or assessable by the Registration Authority for stamp duty purposes, then such value so adopted by the Registration Authority as appropriated between the land and building could be adopted as deemed sale consideration for the respective assets for the purpose of computing the capital gains. In view of the above discussion, we are of the view that the Ld. CIT has erred while invoking the powers u/s. 263 of the Act without considering the appropriation between land and building, and hence the order u/s. 263 deserves to be quashed. It would be just and appropriate to direct the Ld AO to examine the issue afresh in the light of the directions as given above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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