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The Asst. Commissioner of Income Tax, Circle-2 (1) , Mangalore Versus M/s Shankar Vittal Motor Co. Ltd.

2016 (4) TMI 1129 - ITAT BANGALORE

Valuation of the capital gain - joint development agreement - adoption of FMV/asset as deemed consideration or cost of the construction - Held that:- Because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the c .....

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), Mysore for the assessment year : 2010-11. 2. The revenue raised the following grounds; 1. Based on the facts and circumstances of the case, ld.CIT(A) has erred in not appreciating the fact that as can be seen on the date of JDA, the portion of the constructed apartments that are to be assigned to the assessee has already been decided and crystallized and considering this scenario, it is only logical that the value of these apartments be considered as State Consideration. 2. Based on the facts .....

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he Case are as Under:- 3. The assessee a company engaged in the business of transport operators filed return of income declaring a loss of ₹ 58,98,255/- for the assessment year 2010-11. Subsequently, the assessee filed revised return on 20-12-2012 declaring total income at ₹ 4,24,97,188/- which includes addition income of ₹ 4,83,95,449/- on account of capital gains on the transfer of immovable property situated at Attavar Village, Mangalore comprised in R.S.No.762,784,782,780/1 .....

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ased on the guidance value of the land and the assessment was completed u/s 143(3) on 23-07-2014 for the assessment year 2010-11. During the assessment proceedings, the AO observed that the long term capital gains based on the joint development agreement was treated as the cost of construction at ₹ 1,250/- per sq.ft as value of the building when building itself was not completed. 4. The Assessee aggrieved by the order of the Ld AO, challenged the Order before Ld CIT(A), who after consideri .....

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ted by the developer which will be made available to that assessee free of cost. (ii) Accordingly, the possession of the property has been handed over on 30.05.1996. (iii) Accordingly, that assessee returned L TCGs of ₹ 29, 19,570/- contending that the capital gain arises in the year 2003 when the project was completed. 5.4 On these set of facts, it was observed by Hon'ble High Court that since, the assessee had received non-refundable amount or ₹ 45,00,000/- and handed over the .....

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which is held as the date of signing of JDA. There is no finding regarding the working of capital gains. There is no dispute about the issue of application of section 2(47) since the appellant is also admitting that, it is liable for capital gains as on the date of JDA. Hence, the . _ case law in the case of Dr. T.K. Dayalu decided by Hon'ble Karnataka High Court is followed. The issue that arises now is, what is the value of consideration to be adopted for computation of capital gain. The .....

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not completing the project or not honoring his commitment are always there till the project is completed. The possibility of termination of contract itself for any reason cannot be ruled out. That being the case, estimating the value of property even before it is received by the appellant, is not realistic. Hon'ble Karnataka High Court only held that there is a transfer on the date of JDA. If transfer is deemed, then what can be taxed, is the market value of the property on the date of tran .....

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Under these circumstances, it is argued by the appellant that the capital gains do arise in the hands of the appellant on the date of JDA and the value of consideration is The market value which can be ascertained from guidance value. It is also informed by the appellant that in fact, actual construction is still going on till date. It may be noted that, only their right has been extinguished while entering into joint development agreement. Appellant has duly computed the long term capital gains .....

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r this right to receive the property or the property when received is sold, the appellant would be gaining further income which needs to be taxed in the respective years. Hence, I find that as on the date of entering of JDA even on deemed status of transfer the capital gains can only be worked out on the deemed market value of the property as per municipal records which has some basis as admitted by the appellant. Hence, even if the appellant's second revised return is ignored by the AO the .....

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sfer u/s.2(47)(v). The only dispute is regarding the value of consideration and in my considered opinion I find strength in the argument of the appellant that, it would be reasonable to adopt the fair market value as deemed consideration for the purpose of calculation of capital gains. Hence, I direct the AO to compute the capital gains accordingly . 6. Aggrieved by the order of the CIT(A), the revenue preferred the present appeal. 7. We have heard both parties and have considered the relevant m .....

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rtment and is only receiving them hence, the true value of asset is the cost of construction which is actually money spent in bringing the assets to life. The learned DR further relied on the judgment of the Coordinate Bench of the ITAT at Hyderabad in case of Smt Prathima Reddy Vs ITO, Ward-6(4) (2012) 25 Taxmann.com 264(Hyd.) and emphasized that similar issue was decided by the said Bench, as the said Bench determined the cost of construction while transferring the assets. On the other hand, l .....

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