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2015 (8) TMI 468 - KARNATAKA HIGH COURT

2015 (8) TMI 468 - KARNATAKA HIGH COURT - [2016] 380 ITR 215 - Calculation of capital gain - addition made by the Assessing Officer on the basis of the 18% of the project cost - Commissioner after having noticed that the dispute was with regard to calculation of value of gross consideration received by the assessee held that advertisement cost, extra amounts paid to land lord and the assessee are not part of actual cost of construction, hence deleted the addition also confirmed by ITAT - Held th .....

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the said valuation. In fact it requires to be noticed at this juncture itself that developer has provided certain extra amenities in respect of 18% of super built area to be delivered to the assessee for which the assessee has paid a sum of ₹ 90,55,695/- which also came to be allowed by the Assessing Officer.

The cost of construction having been agreed upon between parties at ₹ 800/- per sq. ft. and same being the full value of consideration which was agreed to between the .....

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on and it is also held that same is in consonance with the Tripartiate Agreement entered into between the parties and in that view of the matter it is to be held that the Appellate Authorities were correct in holding that the addition of ₹ 56 lakh made by the Assessing Officer on the basis of project cost indicated by the developer is liable to be deleted. The Assessing Officer has not gone into the issue of valuation adopted by the assessee, about and with regard to its correctness, the C .....

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Tribunal (ITAT) passed in ITA No.1110/Bang/2008 dated 31.03.2009 whereunder the appeal filed by the Revenue questioning the order of the CIT (Appeals), came to be dismissed by accepting the plea of the respondent-assessee and allowed the appeal of the assessee which was allowed, came to be confirmed. 2. The assessee is a firm and was in occupation of the premises No.135/1, Residency Road as a tenant for long numbers of years, having taken on lease from Sri.Mohd. Musa Sait Wakf. On account of th .....

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rty in question and proportionate super built area for a period of 65 years in favour of tenant. In furtherance of said memorandum of understanding, the necessary permissions/approvals were taken and thereafter a Tripartiate agreement was entered into on 23.08.2001 between the parties i.e. the land lord (1st party), the tenant (assessee-2nd party) as well as the developer (3rd party). 3. Assessee filed his Return of Income for the assessment year 2005-06 in which it was declared that assessee ha .....

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r the purposes of arriving at the correct capital gains and accordingly made certain additions by adopting the value as indicated by the builder. Thereafter a tax demand was raised on the assessee, who being aggrieved by the said order of assessment filed an appeal before the CIT (Appeals). Appellate Commissioner after having noticed that the dispute was with regard to calculation of value of gross consideration received by the assessee held that advertisement cost, extra amounts paid to land lo .....

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eted by the CIT (Appeals) came to be confirmed vide order dated 31.3.2009, which is under challenge in this appeal. 5. We have heard the learned Advocates i.e. Sri.K.V.Aravind, learned counsel appearing for the Revenue and Sri.A.Shankar, learned counsel appearing for the assessee. 6. Sri.K.V.Aravind would contend that Tribunal has committed an error in proceeding to decide the matter on merits when the assessment order itself was set aside by the Commissioner in exercise of his power under Secti .....

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d by the Appellate Commissioner which was without taking into consideration the additional expenditure incurred by the assessee and also not noticing the fact that agreement which was relied upon by the assessee was subject to MOU and the issue regarding cost of construction was not required to be examined inasmuch as it is the percentage of constructed area i.e., 18% of super-built area to which the assessee was entitled which was to be taken into consideration and it was this precise exercise .....

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tial questions of law formulated be considered in favour of the Revenue and against the assessee. 7. Per contra, learned counsel for the assessee would support the orders passed by the Appellate Commissioner as well as the Tribunal and contends that in the return of income filed by the assessee, the valuation as indicated in the agreement dated 23.8.2001 clearly indicated the basis for calculation of capital gains and the cost of construction having been indicated at ₹ 800/- per sq ft., pr .....

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said purpose Section 48 of the Act requires to be looked into which would indicate that for the purposes of arriving at the valuation, it is full value of consideration as agreed to between the parties which has to be taken into consideration. Hence, he submits that substantial questions of law be answered in favour of the assessee by rejecting the appeal of the Revenue. 8. This Court has admitted the appeal to consider the following two substantial questions of law: a) Whether the Tribunal was .....

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377; 19.43 crores is liable to be deleted without taking into consideration the additional expenditure incurred by the assessee for extra amenities? 9. We have heard learned counsel for the parties and perused the records. RE.SUBSTANTIAL QUESTION OF LAW NO.1:- 10. Insofar as this question of law is concerned, we are of the considered view the said issue is no more res integra in view of the fact that in ITA NO.775/2009 we have answered the same in favour of the assessee and as such it does not d .....

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rm capital gains. Besides this, ₹ 20,00,000 paid by the developer towards non-refundable deposit has also been included, which was also reflected in the agreement dated 23.8.2001. Accordingly, the same was also offered for long term capital gains. However, the Assessing Officer without rejecting the said calculation adopted by the assessee has proceeded to calculate the long term capital gain on the basis of the information that was received from the developer/builder whose books of accoun .....

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e assessee. A perusal of the assessment order would clearly indicate the calculation in respect of cost of construction made by the assessee has not been rejected by the Assessing Officer. However, he has substituted a different mode viz. adopted different valuation i.e., project cost valuation on the basis of cost of construction indicated by the builder in its books of accounts and same has been taken into consideration as the total project cost. In fact, Appellate Commissioner has noticed tha .....

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st of construction. The non-refundable amounts paid to the land lord as well as the assessee was to acquire the vacant possession of the property in question and remotely taken up held to be part of cost of construction and so also advertisement cost which had been incurred by the developer. What was agreed to between the parties under the Tripartiate agreement 23.8.2001 was that the assessee was to be given on lease 18% of the undivided share in the land and proportionate super built area. At t .....

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1,30,00,000/- (Rupees One Crore Thirty Lakhs only) on receipt of No-Objection Certificate under Chapter XX-C of the Income Tax Act, 1961, against delivery of possession of the schedule property and against execution of a power of Attorney and /or registration of lease deed as per Clause 15.3 below whichever is later; VALUATION: For the purpose of the valuation of the lease of the undivided 50% (Fifty percent) share in the land in favour of the Third Party or anyone nominated by the Third Party .....

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q.ft. as the super built up area i.e. 50% of the constructed super built area by adopting the rate of construction at ₹ 800/- per sq.ft. and accordingly, the total sum payable has been arrived at Rupees Four Crore and the consideration of ₹ 1,40,00,000/- paid to the land lord has also been included in the said valuation. In fact it requires to be noticed at this juncture itself that developer has provided certain extra amenities in respect of 18% of super built area to be delivered t .....

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