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2019 (3) TMI 636 - AT - Income TaxComputation of capital gains on transfer of land to partnership firm - invoking the provisions of section 50C and applying DM circle rates - HELD THAT:- The assessee made the entire payment including stamp duty charges and recorded the same in the books under the head 'Land'. A portion of the said land was subsequently sold to SICC on which long-term capital gain was offered by the assessee, adopting fair market value as on 1-4-1981 as the cost of acquisition. The revenue, however, disputed this and adopted nil value as cost of acquisition on the ground that the assessee had shown nil value in the books. Later, the assessee entered into a partnership with SICC and 'A' as partner and contributed a large portion of its remaining land to the partnership as its capital contribution, and its value was recorded in the books of the partnership. In the partnership firm, the assessee was given 5 per cent shares whereas SICC and 'A' were given 90 per cent and 5 per cent shares respectively. For the purpose of computing capital gains on transfer of land to partnership firm, the Assessing Officer by invoking the provisions of section 50C and applying DM circle rates, computed the total consideration for the transfer and calculated long-term capital gains. AO while applying the provisions of section 50C mentioned that considering the terms and conditions of the partnership, transfer of land to the firm was only a sale, and that section 50C would be applicable even in a situation covered by section 45(3) In Chiraayu Estate & Dev. Pvt. Ltd. [2011 (8) TMI 1316 - ITAT MUMBAI] has held that the profits or gains would arise only when the transfer has been made at a price which is more than the cost price and the difference between the cost price and amount at which the transfer has taken place can be charged u/s 45(3). It further held that as per provisions of section 45(3), price of land recorded in the books of joint venture is required to be considered as receipt of full value of consideration received or accrued as a result of transfer of capital assets. Once the price recorded in the joint venture’s books is treated as full value of consideration, the provisions do not permit substitution of any value so as to make the addition u/s 45(3). Claim u/s 54F disallowed observing that he had more than one house property - HELD THAT:- Referring Hon’ble Madras High Court in Dr. Smt. P.K.Vasanthi Rangarajan v. CIT [2012 (7) TMI 563 - MADRAS HIGH COURT] wherein it is held that joint ownership of a property could not be held to stand in assessee’s way of claiming exemption u/s 54F, dismissed the appeal filed by the revenue. Disallowance of 15% of expenses - HELD THAT:- Disallowance has been made on ad-hoc basis without any specific finding. Such being the case, we delete the disallowance made by the AO. Thus the 2nd ground of appeal is allowed.
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