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Deputy Commissioner of Income-tax 24 (3) , Mumbai Versus M/s. S.C. Brothers

2015 (10) TMI 2298 - ITAT MUMBAI

Transfer of the property by way of distribution of assets on retirement of two partners - LTCG or STCG - assessee contended that what has been transferred to the retiring partner is 50% of the FSI retained by the assessee firm which would naturally result into a LTCG to the firm - Held that:- What was available with the assessee after transfer of land under DA is only 50% of the land along with FSI available on the said 50% of the land. Accordingly, we find that the AO was not justified in consi .....

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ong term capital asset and the gain arising there-from it will be a LTCG. Thus, the Hon’ble High Court has held that if there is a construction on the land which is a depreciable asset then the land and building has to be bifurcated and the super structure has to be treated as STCG and the land will be treated as LTCG. Similar view has been taken in the case of Hindustan Hotel Ltd. (2010 (10) TMI 16 - Bombay High Court). Accordingly, in view of the above facts and circumstances as well as the ju .....

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The Respondent : Dr.K.Shivaram & Ms.Neelam C.Jadhav ORDER Per VIJAY PAL RAO, JM: This appeal by the revenue is directed against the order dated 28/01/2011 of the CIT(A)-34, Mumbai, for the assessment year 2007-08. 2. The revenue has raised the following grounds: 1. "On the facts & in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the Assessing Officer to treat the income, from transfer of the property by way of distribution of assets on retirement of two .....

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y under transfer, without considering the clause of supplementary agreement between the assessee and M/s K.Raheja Universal Pvt. Ltd. which clearly states that the owners have been allotted one of the two units on the ground floor and entire 1st, 2nd and 3rd floors of the new building constituting 50% of total super built up area. Further, in the development agreement also it is mentioned that the developer shall construct and hand over to the owners, free of cost commercial units having 50% of .....

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ement dated 28/11/2005 with M/s.K.Raheja Universal Pvt. Ltd., for development of the said land. As per the terms of Development Agreement (DA), assessee was entitled to receive 50% of the developed property + ₹ 4.80 crores. The said DA was registered with the stamp authority which valued the same at ₹ 10,62,50,000/- for the purpose of stamp duty. The assessee offered capital gains for tax on the said amount of ₹ 10,62,50,000/- after deducting indexed cost of 50% of land for the .....

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t sharing ratio in the property of the firm i.e. land and FSI present as well as future. Accordingly, the firm gave 50% of land and FSI and right to get the developed property from M/s.K.Raheja Universal Pvt. Ltd., to the retiring partners. Thus as per the provisions of sec.45(2), assessee offered long-term capital gains (LTCG) to tax on account of distribution of asset to retiring partners by considering 50% of the land and FSI as well as 50% share in the developed property to be received from .....

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n appeal before the CIT(A) and contended that vide DA dated 28/11/2005, the assessee transferred 50% of the land for development against consideration. The said DA was valued by the stamp authority at ₹ 10,62,50,000/- which was offered to tax for the assessment year 2006-07. Therefore, the assessee remained with only 50% of the land along with FSI as well as right to receive 50% of the developed property from M/s.K.Raheja Universal Pvt. Ltd. under the DA. The AO, for the assessment year 20 .....

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by way of distribution on retirement of partners is only the asset being 50% of the land along with FSI retained by the assessee-firm and the same is LTCG under section 45(4). The CIT(A) also allowed the indexation of cost of acquisition for the purpose of computing LTCG, as it was done by the AO in the earlier assessment year while accepting LTCG on transfer of land under the DA. Accordingly, he directed the AO to re-compute the capital gain by allowing indexation on the cost w.e.f. 1/4/1981. T .....

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the land but only having right to receive the super built up area upon the land transferred to the developer M/s.K.Raheja Universal Pvt. Ltd., Thus, the learned DR has submitted that the asset remained with the assessee was only to receive the developed property which was rightly treated by the AO as STCG subsequent to the DA dated 28/11/2005. He has further contended that the AO has righty taken into account FSI on the entire land instead of 50% of the land. 6.1 On the other hand, the learned .....

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s further submitted that as far as the transfer of land vide DA dated 28/11/2005, the entire capital gain arising from the said transfer has already been offered to tax for the assessment year 2006-07 which was accepted by the AO while passing the assessment order under section 143(3) therefore, the said 50% of the land which was transferred to the developer cannot be considered as the asset of the assessee for the purpose of distribution to the retiring partner. The learned authorised represent .....

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e jurisdictional High Court in the case of CIT vs. Hindustan Hotels Ltd. (335 ITR 60) and CIT vs. Citibank (261 ITR 570) as well as the decision of this Tribunal in the case of ACIT vs. Jaimal K Shah (137 ITD 376)(Mum). Thus, the learned authorised representative of the assessee has submitted that only ½ portion of the land was retained by the assessee after the DA which is to be distributed to the retiring partners. The FSI has no value without the land on which construction is to be car .....

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greed between the parties as per the DA was to received by the assessee partly in cash and partly in the shape of developed property, however, the assessee offered capital gains arising from the transfer of the land along with FSI under the DA on the basis of the full value consideration as per the stamp value at ₹ 10,62,50,000/-. We find that the AO, for the assessment year 2006-07 accepted the LTCG offered by the assessee arising from the DA dated 28/11/2005. After transfer of 50% of the .....

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