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2021 (2) TMI 21 - AT - Income TaxCapital gain computation - Cost of acquisition of flats sold - JDA entered by assessee along with another brother and 2 sisters with M/s. Kuteer Builders to develop the land - assessee had handed over his possession of the land on the date of entering into JDA and in return the assessee had received 5 flats individually and 4 flats jointly in the Financial year 2011-12 - HELD THAT:- In the instant cases, the assessee herein have sold part of the constructed area received by them in the form of flats. When the capital gain is assessed/assessable at the time of entering the JDA, sale consideration has to be determined by taking Fair market value of the constructed area that will be received by the assessees. Since the fair market value so determined is liable for capital gains taxation, the said Fair Market Value shall become cost of the constructed area. When the constructed area in the form of flats are sold subsequently, the cost of acquisition/indexed cost of acquisition of flats are required to be deducted in order to ascertain the capital gain, which shall be the Fair market value. AO did not allow the deduction of cost of acquisition of flats solely for the reason that the assessees have not declared capital gains in the year in which JDA was entered. It is well settled proposition of law that the income of a particular year is assessable in that year only. Hence the capital gain arising on entering JDA is assessable only in the year in which the JDA was entered. If the assessees have not declared capital gains in the appropriate year, the AO may take appropriate action to tax the same in accordance with the law. Failure of the assessee to offer capital gains in the appropriate year will not disentitle the assessee to claim cost of acquisition. Accordingly, we are of the view that the AO was also not right in law in rejecting the said claim of the assessee for deduction of correct amount of cost of acquisition/indexed cost of acquisition. The issue of computation of capital gains, particularly the claim for deduction of cost of acquisition of flats, requires to be examined afresh by the AO. Appeals of the assessee allowed for statistical purposes.
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