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2015 (3) TMI 1016 - ITAT BANGALORE

2015 (3) TMI 1016 - ITAT BANGALORE - TMI - Sale of land and building - short term capital gain as per CIT(A) OR sale of land and building has to be bifurcated inasmuch as sale of land has to be considered as giving rise to long term capital gain and sale of building as giving rise to short term capital gain as per assessee - Held that:- From a perusal of agreement dated 4.10.2004 between the assessee and Concorde Shelters, it is clear that Concorde Shelters agreed to construct a Villa on the plo .....

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10.2004, was only a license to carry out construction which cannot be equated to possession as understood in legal parlance. The assessee 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 constru .....

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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 capital gain as made by the assessee should be accepted. - Decided in favour of assessee. - ITA No. 573/Bang/2014 - Dated:- 20-3-2015 - Shri N.V. Vasudevan And Shri Jaso .....

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l gain as against the claim of the assessee that sale of land and building has to be bifurcated inasmuch as sale of land has to be considered as giving rise to long term capital gain and sale of building as giving rise to short term capital gain. 3. The facts and circumstances under which the aforesaid issue arises for consideration are as follows. 4. One, M/s. Concorde Housing Corporation (hereinafter referred to as Concorde Housing ), a developer of residential layout of sites as well as build .....

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d 21.10.2004, the site was conveyed to the assessee for a sale consideration of ₹ 9 lakhs. The cost of construction of Villa was ₹ 24,39,526. The assessee had to pay the cost of construction of Villa in instalments as set out in the agreement dated 4.10.2004 between the assessee and Concorde Shelters. Ultimately construction of Villa got completed in the year 2008 only. The assessee agreed to sell the land as well as Villa under an agreement for sale dated 5.5.2008 to one Shakti Moha .....

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.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 .....

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0,920 = ₹ 12,01,491 480X 582 Interest paid on borrowing: ₹ 7,82,394 19,83,885 16,98,042 Building Concorde property building 22,14,080 Less: Cost of construction 22,14,080 7. The Assessing Officer accepted the aforesaid claim of the assessee. The only objection of the AO was with regard to claim of assessee for deduction of a sum of ₹ 7,82,394 which was interest paid on borrowing, which was claimed as deduction while computing long term capital gain on sale of land. According to .....

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#8377; 7,82,394 claimed as deduction cannot be allowed as it is neither cost of acquisition or improvement to the land nor is it wholly and exclusively incurred in connection with the transfer. The AO therefore added the said amount to capital gains and brought to tax. 8. Aggrieved by the order of AO, the assessee preferred appeal before the CIT(Appeals). 9. The CIT(Appeals) had to address the question as to whether the interest paid on loans borrowed for acquiring the property which was not all .....

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to 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 r .....

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one holistic transaction routed through a common ledger. 10. The assessee placed reliance on the decision of Hon ble Andhra Pradesh High court in CGT v. Ethirajalu, 93 ITR 366 and the jurisdictional ITAT decision in T.S. Krishnamurthy v. DCIT, ITA No.569/Bang/2012 dated 14.2.14, wherein the concept of possession and the expression held were held to be words not having the same meaning. 11. The CIT(A), however, rejected the aforesaid contention and held as follows:- 8.3 For purposes of consideri .....

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ntrol of this capital asset remained with the Concorde Group, and its possession along with the constructed villa, was handed over to the appellant in FY 2008-09 shortly before the entire property was sold to Sakthi Mohan. The issue in dispute here is not whether the sale consideration received from Sakthi Mohan could have been bifurcated into consideration for land and building with separate treatment of each. The issue, essentially, is the period of holding in respect of the component of land .....

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ssessee has preferred the present appeal before the Tribunal. 14. We have heard the rival submissions. The ld. counsel for the assessee reiterated submissions as were made before the AO/CIT(A). The ld. DR relied on the order of CIT(Appeals). 15. We have given a very careful consideration to the rival submissions. From a perusal of agreement dated 4.10.2004 between the assessee and Concorde Shelters, it is clear that Concorde Shelters agreed to construct a Villa on the plot sold by Concorde Housi .....

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erest 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. .....

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f 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 togethe .....

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The Hon ble Court held as follows:- 8. We have carefully considered the rival contentions of both parties. The expression "capital asset" is defined in s. 2(14) of the Act as under : "Capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include - (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or professions, .......... (iii) agricultural land in India, .....

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During the relevant period, s. 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 .....

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se 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. In the case of buildings or land, separate deduction is provided under s. 80J(b) of the Act. It is relevant to note when s. 80T grants deduction, it uses the expression both the buildings or land or any rights in building or lands. The question that arises for .....

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the ownership of the land. This view of the Privy Council was approved by the Supreme Court in Bishan Das vs. State of Punjab . In so far as the definition of capital asset is concerned, as already seen, the definition of capital asset includes property of any kind and the land held by the assessee is a capital asset and the building held by the assessee is also a capital asset and it is possible to bifurcate the capital gain arising with reference to the sale of the land and building even if t .....

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and was held by the assessee for a period exceeding 36 months, the land cannot be regarded as a short-term capital asset only by virtue of the construction of building thereon. Hence we are unable to accept the contentions of learned counsel for the Revenue that it is not possible to bifurcate the capital asset into two. We are of the opinion that the Tribunal has come to a correct conclusion that it is possible to work out capital gain with reference to sale of building and land separately. The .....

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