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2012 (10) TMI 286 - HC - Income TaxComputation of long term capital gain - Exemption under Section 54 - actual cost of construction reported by the Developer v/s market value of the property as on the date of development agreement - Held that:- In respect of the property situated at Aga Abba Ali Road, the assessee and his brothers entered into a Joint Development Agreement with M/s.Embassy Investments and the said property was handed, over to the Developer on 06-05-1995 itself for construction of the residential apartment. As per the Development Agreement, 50% of the apartment shall be handed over to the owners of the property. In that the assessee is entitled to 1/3 share. Hence, the fair market value as on 01-04-1981 has to be adopted though the construction of the apartment was completed in the year 2000. As per the Development Agreement, the value of the apartment was fixed at ₹ 66,00,000/-. Taking into consideration 50% of the cost of construction, the Assessing Authority has arrived at the capital gain, which is totally incorrect - in favour of assessee. The exchange value in consideration of 50% of the land was agreed to be conveyed to the Developer and/or his nominee/s valued at ₹ 1,16,70,000/-. The fair market value as on 01-04-1981 as per the Sub-Registrar valuation has to be taken into consideration. However, the Assessing Authority has not taken into consideration this aspect of the matter. Taking into consideration the project cost incurred by the developer on the basis of their letter dated 01-02-2004, which includes all expenditure connected with the construction of the Residential Apartment. The exchange value as specified in the project development agreement can be taken as the basis for computation of the construction in joint development. The consideration specified in the said document represents the market value on the date of entering into the agreement. The assessment made by assessing authority is contrary to law - against the Revenue. Claim benefit under section 54 - Held that:- As per the Development Agreement entered into between the parties, the assessee and his brothers have demolished this existing residential building and handed over the vacant space to an extent of 16800 sq.ft. to the Developer for construction of the apartment they are not entitled to claim benefit under section 54. At the most they are entitled to benefit under Section 54F. The order passed by the Appellate Authority directing the Assessing Authority to allow the deduction under Section 54 is contrary to law and the same cannot be sustained - against the assessee.
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