TMI Blog2021 (4) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital gain, same to be considered as cost of construction on sale of these 7 flats - This has been supported by the order ofSMT. JEEVA VADIVELU, VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 (1) , BANGALORE. [ 2012 (9) TMI 961 - ITAT BANGALORE] Being so, we direct the A.O. to consider the cost of construction of 7 flats while computing the capital gain from the sale of these 7 flats. This ground of assessee is allowed. Determining the value of land transferred to Sai Gokul Builders under JDA at ₹ 800/- p. sq.ft. instead of ₹ 500/- p.sq.ft. as guidance value notified by the Government of Karnataka - As carefully gone through the market guidance value published by the Government of Karnataka w.e.f. 19.4.2017 as per which, the impugned property bearing No.40B/3 40B Sai Gokula Builders situated at Hoodi s village, Bengaluru, East Taluk (erstwhile South Taluk), Mahadevapura, CMC Limits, Ward No.12, K.R. Puram Main Road, Hubli, Bengaluru and it is also noted that the property was converted for non-agricultural residential purposes vide sanction order ALN-SR-1175/1981-82 issued by the Tahsildar, South Taluk, situated at Hoodi s village, Bengaluru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to the said notice the Assessee has filed a return of income on 26-12- 2013 declaring income of ₹ 15.49.445/- as under:- a) Short Term Capital Gains on sale of 7 flats as reduced by the cost of land, cost of construction and incidental expenses ₹ 13,27.915/- b) Short Term Capital Gains on JDA. dtd 28-01-2008 entered into with M/s. Sai Gokul Builders. ₹ 1,73.450/- c) Short Term Capital Gains on sale of two sites as reduced by the cost and incidental expenses ₹ 48,080/- ₹ 15,49,445/- 3. The Ld. AO has completed the Scrutiny Re-Assessment u/s. 143(3) r.w.s 147 of the Act, dated 31-03-2014 determining the Total income at ₹ 68,85,955/- as against the declared income of ₹ 15,49,445/- in the return of income filed on 26-12-2013 in response to notice u/s. 148 of the Act. The break-up of the assessed income is as under :- a) Income from two sites (as asmitted) ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of ₹ 1,20,67,000/-. SI.No. Flat No. Floor Super Built Area Sale Consideration 1 A-01 Ground Floor 1153 sq.ft ₹ 16,22,000/- 2 A-02 Ground Floor 1190 sq.ft ₹ 16,71,000/- 3 A-03 Ground Floor 1190 sq.ft ₹ 16 71 000/- 4 A-04 Ground Floor 1203 sq.ft ₹ 16,88,000/- 5 A-05 Ground Floor 1162 sq.ft ₹ 16,34,000/- 6 A-06 Ground Floor 1332 sq.ft ₹ 18,59,000/- 7 A-07 Ground Floor 1380 sq.ft ₹ 19,22,000/- TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the Assessee and his Co-owner have jointly acquired said 7 flats in the Scheme of the Joint Development Agreement dtd: 02-06-2006 entered into with M/s. S.V Developers. 7. The Builders in lieu of the undivided portion of land deemed to have been transferred in their favour. have delivered the flats to the Assessee and his Co-owner as a consideration for such deemed transfer of land. The Builders have constructed the flats falling into the share of the Assessee and his Coowner by investing the funds attributable to the deemed transfer of undivided portion of land in the Scheme of Joint Development. The Assessee submits that the Builders cost represents the consideration for the transfer of undivided portion of land and therefore. it cannot be construed that the Assessee has never invested any amount in the construction of flats. In the Scheme of Joint Development the Owners of the land are entitled to receive a specified percentage of builtup area as a consideration for the deemed transfer of undivided portion of land in favour of the Developers. Therefore. the AO was not justified to hold that the Assessee has not made any investment in construction of flats. The Fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim was rejected. 10. Capital Gains of ₹ 10,08,500/- determined in view of JDA dated 28-01-2008 with M/s. Sai Gokul Builders :- The Assessee submits that a Joint Development Agreement dated 28-01-2008 was entered into with M/s. Sai Gokul Builders in respect of the property situated at Hoodi Village, K.R Puram. Bangalore East Taluk, Bangalore. According to a JDA, 62% undivided portion of the land was deemed to have been transferred in favour of the Developer against which the Assessee has not offered any Capital Gains for the Asst Year 2008-09. Therefore. the Ld. AO has issued a notice u/s. 148 of the Act to levy tax on the Capital Gains arising out of the JDA dated 28-01-2008 relating to the transfer of 62% of the undivided portion of the land. The Ld. AO in the re-assessment Order has held that the Capital Gains arising out of a JDA dated 28-01-2008 are chargeable to tax for the Asst Year 2008-09 as per Section 2(47)(v) of the Act r.w.s 53A of the Act and accordingly, the consideration was determined on the basis of the provisions of Section 50C of the Act by obtaining the guidance value at ₹ 800/- per sq.ft., from the Sub-registrar. Mahadevapura, Bangalore. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the land, the Ld. CIT(A) has rejected the contention of the Assessee as regards rate to be adopted at ₹ 500/- per sq.ft and held that the Guidance Value of ₹ 800/- per sq.ft adopted by the AO was in order. The Assessee is aggrieved with the order of the Ld. CIT(A) in upholding the value of ₹ 800/- per sq.ft adopted by the AO and hence this Appeal. 12. Regarding the first ground, Ld. A.R. submitted that while computing the capital gain on transfer of 7 flats, the A.O. has not considered the cost of construction of these flats. According to him, the assessee got 12 flats as per the terms of JDA with M/s. S.V. Developers. Out of 12 flats got from the developer vide JDA dated 2.6.2006, assessee sold 7 flats to various persons and deducted cost of construction out of the sale consideration of these 7 flats. The lower authorities has not considered the cost of construction of these 7 flts as incurred by the developer. 12.1 The Appellant and his Co-owner N. Prakash had entered into a Joint Development Agreement dtd: 02-06-2006 with M/s. S.V Developers in respect of the land measuring 10890 sq.ft situated in Sy. No. 115/2, B. Narayanapura Village, K.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer of 55% of the undivided portion of land in favour of the developer and therefore the Developer had incurred the expenditure. The Ld. CIT(A) has held that the claim of the Appellant in respect of cost of construction of the 7 flats was not allowable and accordingly the addition made by the AO was upheld. 12.3 The Appellant submits that the Co-ordinate Bench of the Hon'ble ITAT Bangalore in its order dtd: 07-09-2012 in the case of Jeeva Vadivelu in ITA No. 255/Bang/2011 (at para 31) has held that the Cost of Construction was allowable. Further the Hon'ble ITAT in its order dtd: 04-09-2015 in the case of Sri. K. Rajanna in ITA No. 928/Bang/2014 for the A.Y 2008-09 has held at para 10.4.2 (internal page 12) that the Appellant was entitled for the cost of construction. The Appellant further relies upon the decision of the Hon'ble CIT(A) Bangalore - 2, in the Appellate Order dtd: 28-02-2019 in the Appellant's own case for the A.Y 2010-11 wherein the cost of construction was allowed. The relevant findings as found on page 5 of the Appellate Order is reproduced as under The Cost of construction of two flats sold was claimed to an extent of ₹ 18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the A.O. denied the cost of construction incurred on 7 flats while computing the capital gain on the reason that assessee has not incurred this expenditure but it was incurred by developer. However, it has to be noted that the assessee has considered cost of these 7 flats as a consideration while computing the capital gain on entering into JDA. Once the assessee includes the cost of these 7 flats as sale consideration while determining capital gain on entering into JDA, the corresponding benefit shall be given on sale of these 7 flats. Now the issue is only with regard to the sale consideration adopted by assessee towards these 7 flats while offering the capital gain. The A.O. cannot overlook the computation of capital gain offered by assessee on entering into the JDA. Once the assessee adopted the cost of these 7 flats for the purpose of offering the capital gain, same to be considered as cost of construction on sale of these 7 flats. This has been supported by the order of the Tribunal in the case of Jiva Vadivelu in ITA No.255/Bang/2011 as follows: 30. As far as computation of income on sale of 5 flats is concerned, we are of the view that the revenue authorities have pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in the case of K. Ranjan in ITA No.928/Bang/2014, the Tribunal vide order dated 4.9.2015 held that 10.4.1 We have heard both parties and perused and carefully considered the material on record. As regards the allowability of the cost of acquisition of property to the assessee, we find that the co-ordinate bench of the Tribunal in the case of Smt. Jeeva Vadivelu (supra) at para 31 thereof has held as under: 31 .We are now concerned with the question as to whether the assessee should get the benefit of cost of construction of the 5 flats sold during the previous year. In our view, the assessee should be allowed the aforesaid benefit. Admittedly, the assessee had to pay a cost for acquiring these 5 flats. The Assessing Officer in the order of assessment has not given any cost to these flats. In our view, therefore the cost of 5 flats has to be worked out and for this purpose of working out the cost of acquisition of 5 flats, the matter is remanded to the Assessing Officer. The A.O. will verify the cost from the developer, who developed the properties and arrive at the cost of 8664 sq.ft . 15. Further, it was noted that in assessee s own case, in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obate is only a species of estoppel; it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income. 17. Further, it is appropriate to place reliance on the CBDT circular No.14(XL-35) of 1995 dated 11.4.1995 as per which the lower authorities should have got the assessee s to the correct proposition of the law regarding the taxability of the capital gain. For clarity, we reproduce the contents of the said circular. Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a tax payer in every reasonable way, particularly in the matter of claiming and securing relief and in this regard the officers should take the initiaitive in guiding a tax payer where proceedings or other particulars before them i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -03-2014 called upon the Assessee to file objections if any as to why the Capital Gains arising out of the JDA dated 28-01-2008 should not be chargeable to tax for the Asst Year 2008-09 adopting the guidance value of ₹ 800/- per sq.ft., as certified by the Sub-registered, Mahadevapura, Bangalore as against ₹ 500/- per sq.ft. adopted by the Assessee. The Assessee has filed a detailed objection vide letter dated 27-03-2014. However, the Ld. AO has not appreciated the objections filed by the Assessee and quantified the Capital Gains chargeable to tax arising out of the JDA dated 28-01-2008 at ₹ 10,08,500/- adopting the guidance value at ₹ 800/- per sq.ft., provided by the Sub-registrar. Mahadevapura, Bangalore. The Assessee submits that the rate of ₹ 800/- adopted by the AO is not justifiable, since the rate applicable was of ₹ 500/- sq.ft., as per the guidance value prescribed by the Government of Karnataka. The Assessee submits that the capital gains so determined at ₹ 10,08,500/- are arbitrary, unreasonable and opposed to the law and facts of the case and therefore an Appeal against the adoption of value at ₹ 800/- per sq.ft as aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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