TMI Blog2015 (3) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee having acquired title to the land as early as on 21.10.2004 and having sold the land together with Villa under an agreement dated 5.5.2008, it is to be held that the transaction of sale has to be bifurcated as one relating to land and the other relating to building. As far as the transaction of sale of land is concerned, the gain on such sale should be construed as long term capital gain because the assessee held the land for a period of more than 36 months. The conclusions of the CIT(Appeals) that the expression “held” as used in the definition of long term capital asset in the Act means physical possession, in our view, is erroneous and is not contemplated by the provisions of section 2(42A) of the Act. The law is well settled that when there is a transfer of capital asset being land together with building and where the land is held for a period of more than 36 months and the building held for less than 36 months, the capital gain on land and building has to be bifurcated as one relating to land and the other relating to building. If the land is held for more than 36 months, then capital gain on sale of land has to be treated as long term capital gain. Thus bifurcation of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his sale deed is a sum of ₹ 21 lakhs. The Revenue has not chosen to take cognizance of the sale consideration as reflected in the sale deed, but has proceeded only on the basis of sale consideration as set out in the agreement dated 5.5.2008. 5. It is not in dispute that the agreement for sale dated 5.5.2008 by which the land as well as Villa was agreed to be sold by the assessee to Shakti Mohan was a transfer and capital gain on such transfer was chargeable to tax in the A.Y. 2009-10. The assessee computed capital gain by bifurcating the capital gain on sale of land and capital gain on sale of Villa. According to assessee, the land was purchased under sale deed dated 21.10.2004 and was sold after construction of Villa thereon on 5.5.2008. The land, according to assessee, was held for a period of more than 36 months and therefore transfer of land would give rise to long term capital gain. 6. As far as Villa is concerned, construction of Villa was completed in 2008 and same was sold on 5.5.2008 within a short period and therefore sale of Villa would give rise to short term capital gain. The computation of long term and short term capital gains made by the assessee was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngle integrated transaction and therefore AO ought not to have accepted the bifurcation of capital gain on sale of land and building into long term and short term capital gains. The CIT(A) was of the view that consequent benefit and indexation while computing long term capital gain ought not to have been allowed to the assessee. The CIT(A) in this regard referred to agreement dated 4.10.2004 to construct the Villa on the land proposed to be purchased by the assessee from Concorde Housing and came to the conclusion that sale of land and construction of Villa was a single transaction. When the factum of land having already been registered in the name of assessee consequent to sale deed dated 21.10.2004 and the recital in the sale deed that assessee was given possession of the property by Concorde Housing was brought to the notice of the CIT(A), he observed that such possession was only a paper transfer. The CIT(A) also referred to the fact that the assessee was making composite payments for the land Villa and therefore the transaction with Concorde Housing and Concorde Shelters had to be treated by the assessee as one holistic transaction routed through a common ledger. 10. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shelters agreed to construct a Villa on the plot sold by Concorde Housing. Clause 5 of the said agreement is very material and it reads as follows:- 5. The first party hereby irrevocably permits and authorizes the second party to hold the schedule property to develop the same by constructing a residential villa for him by obtaining the sanctioned plan. The first party shall not revoke the permission so granted, till completion of the entire villa with the plan and the specifications agreed to in Annexure-I and II as the agency created herein is one coupled with interest in so far as the second party constructing a residential villa in the schedule property. 16. The land was sold by Concorde Housing to the assessee by a registered sale deed dated 21.10.2004. In the said sale deed, Concorde Hosing has affirmed that possession of the site sold to the assessee has been delivered and that the assessee will be in legal possession of the property from the date of sale deed. It is thus clear that the assessee acquired title to the land as early as on 21.10.2004. The possession of Concorde Shelters under agreement dated 4.10.2004, was only a license to carry out construction which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(42A) of the Act prescribed the period of thirty six months. The emphasis that is given in s. 2(42A) is that the capital assets should be held by an assessee for a period not more than 36 months immediately preceding the date for the asset to be termed as a short-term capital assets. Here also, the emphasis is given on the expression held by an assessee. The mode of computation of the capital gain is provided under s. 48 of the Act which reads as under : The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto . Sec. 80T of the Act grants deduction in respect of the long-term capital gains in the case of an assessee other than companies where the gross total income of an assessee not being a company includes any income chargeable under the head Capital gains relating to capital assets other than short-term capital assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication to the facts of this case as it deals with the case where compensation was payable in respect of land and building and in that situation, the Supreme Court has held that both the land and building should be valued as one unit and hence, the decision rendered by the Supreme Court with reference to determination of compensation under the Land Acquisition Act has no application, particularly in the light of s. 80T of the Act. It is impermissible for the learned counsel to rely on a decision for a point which was not decided in that case. In CIT vs. Vimal Chand Golecha (supra), the Rajasthan High Court held that even if the land and building are sold as one unit for a consolidated price, the assessee is entitled to bifurcate the same and the capital gain arising from the sale of the land had to be treated as longterm capital gains. We are in agreement with the view expressed by the Rajasthan High Court in the above case. We are of the view that the land can be regarded as capital asset as per s. 2(14) of the Act and in accordance with the scheme of the Act, land would be considered as a separate capital asset, even if a building is constructed thereon. We are also of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
