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2022 (4) TMI 447 - AT - Income TaxDeduction under section 54F - Denial of deduction as income derived from sale of assessee’s share of built-up area which the assessee was to receive under the JDA had to be regarded as income from business - whether the sale proceeds of the built-up area which the assessee was to receive from the Developer as his share of built-up area under the JDA is to be assessed as Capital Gain or Business Income? - HELD THAT:- 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 gains arises (i.e.) whether the long term capital gain/short term capital gain could be computed for land and building separately? This question assumes paramount importance since the period of holding will decide whether the capital gain is long term or shorter and the indexed cost of acquisition and improvement thereto in respect of these assets will vary depending upon the period of holding. In order to claim the capital gains separately for land and building, the assessee is required to give basic details like the original cost of acquisition of land and building, the year acquisition etc separately duly supported by necessary documentary evidences as they may be required at the time of scrutiny assessment. Based on the holding period of these assets, the capital gain is long term or short term and the indexed cost of acquisition could be computed. Likewise in order to claim the indexed cost of improvement necessary documents in support of the improvements done and the expenditure incurred thereon have to be also maintained by the assessee. How to appropriate the sale consideration for the transfer of land and building if a lump-sum monetary consideration is received by the transferor from the transferee when the transfer is effected through a single conveyance deed? - In all the registered conveyance deeds, wherein transfer of land and building is involved, an Annexure is appended or there are documents wherein the market values are furnished for the land and the building separately for the purpose of stamp duty valuation. The market value of 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. We are of the view that it would be just and appropriate to direct the AO to examine the issue afresh in the light of the directions as given above. The AO will afford opportunity of being heard to the assessee in the set aside proceedings. Appeal of the Revenue is accordingly treated as partly allowed for statistical purposes.
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