2024 (4) TMI 1110 - AT - Income Tax

LTCG - year of assessment - deduction u/s 54 - assessee submitted that out of 10 flats allotted to the assessee two flats were combined into one contiguous unit - AO faulted the working of the assessee on the ground that entire costs attributable to all the flats allotted to the assessee were considered by the assessee towards the cost of the new asset meant for deduction u/s 54 - additional evidences submitted HELD THAT - Assessee himself has offered gains for the first time in this year only. In fact the gains have been offered in this year only and not in any other year. Nothing has been shown to us that these gains have ever been offered either in AY 2013-14 or in AY 2015-16 or in any other year. The assessee cannot take contrary stands. At the fag-end of assessment proceedings the assessee filed a letter stating that the gains would not be chargeable in this year but the same would be chargeable either in the year of entering into joint venture agreement and during the year when the possession of the new flats was given by the builder to the assessee. However it is nowhere been shown to us that the assessee himself has acted on these arguments and offered capital gains in any other assessment years. The assessee is only making contrary stand. Accepting the same would mean that the revenue would never be able to tax the impugned capital gains which could not be permitted. Therefore we are unable to accept these arguments. Secondly it is crystal clear that the case was selected for limited scrutiny to examine the issue of deduction claimed by the assessee under the head capital gains as offered by the assessee in the return of income. The year of taxability was not within the scope of limited scrutiny and the aforesaid question could not have been even gone into by Ld. AO. All these arguments as well as additional evidences as urged by Ld. AR could not find our acceptance and hence rejected. The Ld. CIT(A) in our considered opinion has clinched the issue in correct perspective. Computation of cost of land - As we find that the assessee has parted with only a part of the land. Therefore he is not correct in considering entire cost of land while computing the gains. Only proportionate cost could be allowed to the assessee. We confirm the stand of Ld.AO to that extent. FMV determination - Cost of building - AO has computed Fair Market Value (FMV) of the building as on 01-04-1981 by applying PWD rates and arrived at cost of building as Rs. 16.67 Lacs. Considering the plea of the assessee that building was made of superior construction Ld. AO adopted cost of building as on 01-04-1981 to be Rs. 20 Lacs. Since the building was 16 years old as on 01-04-1981 taking the life of building to be 80 years and salvage value of 10% Ld. AO depreciated the cost and revised the cost of building as on 01-04-1981 to Rs. 16.40 Lacs. We substantially concur with all these findings of Ld. AO except for the fact that when FMV of the building has been considered as on 01-04-1981 there is no further requirement to depreciate the same. Therefore we direct Ld. AO to adopt FMV of the building as on 01-04-1981 as Rs. 20 Lacs and re-compute the gains. Deduction u/s 54 assessee has attributed cash outflow service tax component and alteration cost of all the flats to two flats (which has been joined together) against which this deduction has been claimed.The same is not correct methodology. The working made by Ld. AO could not be faulted with. We concur with the same. Consequently ground Nos. I to K stand dismissed except to the extent that FMV of the building as on 01-04-1981 would be taken as Rs. 20 Lacs. The Ld. AO is directed to re-compute the gains.

Summary

Issues Involved:
1. Year of taxability of capital gains.
2. Computation of cost of acquisition of land and building.
3. Quantum of deduction u/s 54.

Summary:

1. Year of Taxability of Capital Gains:
The assessee argued that the gains should be assessed in AY 2013-14 based on the Joint Development Agreement (JDA) and possession handed over in April 2012. The CIT(A) rejected this, stating that substantial modifications in the agreement occurred in September 2013, and the original plan was not approved by CMDA. The Tribunal concurred, noting that the gains were offered in AY 2016-17 and not in any other year. The scope of limited scrutiny was to examine the deduction from capital gains, not the year of taxability. Hence, the gains were rightly taxed in AY 2016-17.

2. Computation of Cost of Acquisition of Land and Building:
The AO restricted the cost of land to the proportionate area transferred to the builder, resulting in an addition of Rs. 18,01,746/-. The Tribunal upheld this. Regarding the building, the assessee's claim of Rs. 35 Lacs spent in 1983-84 was unsubstantiated. The AO computed the Fair Market Value (FMV) of the building as on 01-04-1981 at Rs. 20 Lacs and depreciated it to Rs. 16.40 Lacs. The Tribunal directed the AO to adopt the FMV of Rs. 20 Lacs without depreciation.

3. Quantum of Deduction u/s 54:
The AO found that the assessee attributed costs of all flats to two flats combined into one unit, which was incorrect. The AO's computation of deduction u/s 54 was based on the cost per square foot for the entire built-up area of 33,200 sq. ft. The Tribunal upheld the AO's methodology and directed the AO to re-compute the gains accordingly.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the AO to re-compute the gains by adopting the FMV of the building as Rs. 20 Lacs as on 01-04-1981. The other grounds, including the year of taxability and the quantum of deduction u/s 54, were dismissed.