TMI Blog2003 (11) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... Chand, his wife Smt. Vasavi Pratap Chand and son Shri Sidharth Pratap Chand. No construction after the purchase of the property in 1947 was ever made till date by any one of them. When Sidharth Pratap Chand became adult in 1969-70, a partial partition was done thereby dividing this property equally among the three and was accordingly shown in the income-tax returns. Shri Sidharth Pratap Chand after his marriage in 1977 started showing the property in his return in the HUF capacity. The total value of the property (in which both the assessees had 1/3rd share) was shown at ₹ 6 lakhs approximately in all. 3. The three co-owners made a collaboration agreement with Ansal Properties and Industries Ltd. for saving the land from Urban Land Ceiling Act (ULCA) and for developing the land and getting flats built on it. As per the agreement, the assessee along with other co-owners got built up area of 89136 sq.ft. which was 56 per cent of the total built up area as their share. Thereafter, the three co-owners entered into agreements with various buyers and sold the flats during the previous years relevant to assessment years 1993-94 to 1995-96. 4. During the year in question, the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal held that it was not a case of an adventure in the nature of trade and accordingly, the Tribunal directed the Assessing Officer to compute the cost of acquisition as well as the income under the head capital gains . In the fresh assessment proceedings in pursuance of the order of the ITAT dated 5-6-2000, the Assessing Officer rejected the cost of acquisition @ ₹ 1450 per sq.ft. adopted by assessee as, according to him, such cost was to be determined with reference to the date of 1st April, 1981 and not with reference to 31-3-1987 adopted by the assessee. The Assessing Officer also noticed that assessees had declared the value of 1/3rd share in the property at ₹ 2,03,000 in the wealth-tax returns which had been accepted by the department. Therefore, he adopted the cost of acquisition of the entire property at ₹ 6,10,000 as per the wealth-tax record and worked out the cost of acquisition for 18631 sq.ft. at ₹ 1,27,436 and consequently, the indexed cost of acquisition was worked out to ₹ 3,30,060. Since the sale consideration was ₹ 4,72,98,075, the capital gain was worked out at ₹ 4,69,68,015. The 1/3rd share of both the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same cost of acquisition as on 1-4-1981. The next contention, as an alternate contention, is that the sale of property was of an improved property and, therefore, the cost of acquisition would be equal to the cost of acquisition of 44 per cent of the land plus cost of improvement. According to him, the cost of improvement would be equal to the value of 44 per cent of land as on 2-5-1984 when the collaboration agreement was entered into. Regarding cost of acquisition of 56 per cent of land, it is submitted that one should assess the market value as on 10-12-1984 when it was released from the ambit of ULCA since the character of the land should remain the same. According to him, the theory of escalation cannot be applied to such a situation. Alternatively, it is submitted that value of land assessed under section 7(4) of Wealth-tax Act does not represent the market value as on 1-4-1981 since by virtue of such provisions, the assessed value was the forzen value and not the market value. On the other hand, the learned DR has completely relied on the orders of CIT(A) and, therefore, need not be repeated. 7. Rival submissions of the parties have been considered carefully. After ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to convey, assign, transfer, alienate and sell the said property and the Vendors are competent to enter into and execute this Agreement to Sell. The perusal of the above clearly shows that the vendors were the owners of not only flat but also the land. The lawn could not have been transferred without the ownership of the land. Therefore, considering the entire facts, it cannot be said by any logic that the entire land was transferred by the assessee. In our considered opinion, what was transferred under the collaboration agreement by the assessee to the builder was only 44 per cent of land owned by them in consideration of 56 per cent of the built-up area and not entire land as contended by the learned counsel for the assessee. Consequently, it has also to be held that in year under consideration, the assessees not only transferred the flats but also the proportionate land. 8. The next question is as to at what point of time the land was transferred and at what consideration since the same would be relevant for determin-ing the cost of acquisition of 56 per cent of built-up area. Admittedly, no conveyance deed has been executed by the assessee. From the nature of the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the built up area. The reason is obvious. The sale consideration of 44 per cent land was in kind and, therefore, it also amounted to investment in the construction of built-up area. Hence, the same will be taken as cost of acquisition of flats after examining the record of the builder. 11. As far as cost of acquisition of land is concerned, we are of the considered view that it shall be the value of the land as on 1-4-1981. Admittedly, this property was purchased by the ancestors of the co-owners in 1947 and the co-owners inherited the same. Therefore, the value of land has to be taken as on 1-4-1981. No exercise has been made for determining the cost of acquisition of land as on 1-4-1981. While computing such value, the provisions of ULCA would also had to be taken into consideration as such provisions were in force on that date. However, on this aspect, we are not in agreement with the finding of the CIT(A) that the value of the land as declared under section 7(4) of the Wealth-tax Act should be adopted since, in our opinion, such value is a frozen value for the purpose of section 7(4) and does not represent the market value as on 1-4-1981. The Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of material as may be gathered by him and as may be furnished by the assessee before him. 13. Regarding the indexed cost of acquisition, we may point out that indexing is allowed only with reference to long-term capital assets. We are concerned with the property comprising of two different capital assets acquired at different point of time. As far as land is concerned, admittedly, it is long term capital asset and consequently, cost of acquisition which may be determined by the Assessing Officer as per our direction would further be enhanced as per the rule of indexation. However, there is some confusion regarding the date of acquisition of 56 per cent built up area. As pointed out earlier, we are informed by the learned counsel for the assessee that possession of flats were taken in financial year 1991-92 but there is no material before us in support of the same. This will be verified by the Assessing Officer and then determining the period of holding. If it is found that it is long-term capital asset then indexed cost would also be determined otherwise no indexation would be allowed. 14. In view of the above discussion, the orders of the CIT(A) are modified and the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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