TMI Blog2021 (8) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the assessee has transferred 75.72% proportionate share of undivided interest in land as against the original transfer of 51.85% of undivided share in land and assessee will retain only 24.28% of proportionate share of undivided interest in land - HELD THAT:- When we read JDA dated 13.10.2014 along with supplementary agreement it shows that assessee transferred only 24.28% of undivided interest in land to the developer for a consideration of ₹ 13.30 crores and 11475 sq.ft. of constructed area. Further, the 6 flats agreed to be surrendered by the landlord by the revised JDA agreement comprises of two components i.e., land and building. The value of proportionate area of undivided interest in the landed property of 8957.37 sq.ft at ₹ 24,611.64 per sq.ft. and the value of building of constructed area of 11934 sq.ft. charged at ₹ 2,500 per sq.ft. works out to ₹ 2,98,35,000. The land value will be ₹ 10,91,65,000 worked out at ₹ 24,611.44 per sq.ft. The registered valuer has given the value of land in his report at ₹ 20,000 to ₹ 22,000 per sq.ft. which is kept on record at page 127 of PB. Therefore, the valuation adopted for 11934 sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following ground:- Sl. No. G rounds T ax effect 1. The learned CIT (A) erred in passing the order in the manner which he did. General 2 . On the facts the learned CIT(A) ought to have given the full exemption u/s 54 of the Act in respect of entire cost of the residential building acquired by the appellant. ₹ 39,975,318 3 . The learned CIT(A) ought to have appreciated that the Appellant has sold residential house and investment made in the residential house, accordingly the Appellant is eligible for the exemption u/s 54 of the Act. ₹ 39,975,318 4 . Without prejudice the addition is excessive arbitrary and excessive and ought to be reduced substantially. General 5 . The learned CIT(A) erred in upholding the interest under sec 234B of the Act Interest 6 . For thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reed that developer will acquire 11934 sq.ft. built up area along with undivided share in the land from the share of land owner for a lumpsum consideration of ₹ 13,30,00,000 which was also paid to the owners after TDS @ 1 per cent on the sale consideration. Accordingly, the long term capital gains in respect of surrendering of 52.61% of the undivided share in the land to the developer was determined estimating cost at ₹ 2500 per sq.ft. While doing so, the owners have also valued the land as on 1.4.81 at ₹ 500 per sq.ft. which was supported by the Valuation Report of an approved Valuation Officer. Also the Owners claimed deduction towards value of the existing building on the site which was around 5000 sq.ft. and further improvement cost of ₹ 20 lakhs in respect of improvement made in the year 2007-08 and thereafter applied cost inflation index to arrive at the total cost for determination of proportionate capital gains. The assessee computed the capital gain as follows:- Computation of Long Term Capital Gain Sale consideration for 6 flats agreed to be sold with net super built up area of 11934 sq.ft. 13,30,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,500 Sale consideration under the estimated cost of constructed method adopted by the assessee (Method II) 58,522,500 The method adopted by the assessee is beneficial and hence concluded under II method A 58,522,500 Share of sale proceeds of each co-owner on the basis of JDA B = A/2 29,261,250 Less FMV as on 1.4.1981 since the property is inherited. Value adopted at ₹ 100 per sq.ft. for 9552.63 sq.ft 955,263 Indexed cost of acquisition 1024/100 C 9,781,893 Indexed cost of acquisition Share of each assessee D = C/2 4,890,947 as claimed by the assessee 2500 x 100 x 1024 / 100 = 25,60,000 E 25,60,000 Assessee share in indexed cost of improvement F = E/2 12,80,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale value of apartments with built up area 11,934 sq.ft considered for STCG S = R-I 1,00,304,350 Assessee s share T = S/2 50,152,175 Cost of apartment @ ₹ 2500 per sq.ft for 11934 adopted for LTCG U 29,835,000 Assessee s share V = U/2 14,917,500 Short term capital gain subject to tax W = T-V 35,234,675 7. The AO while concluding the assessment did not accept the capital gains as computed by the assessee. He estimated the value as on 1.4.81 at ₹ 100 per sq ft. However he did not accept the cost of improvement alleging that there was lack of evidence. The AO held that the buyback agreement was an independent transaction and worked out short term capital gains in respect of super structure to be constructed and to be transferred. Thus, the long term capital gains was computed excessively. With regard to the superstructure of the apartments the capital gains w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,09,95,402 Investment in Capital Gain account Scheme 12,500,000 Long Term Capital Gains 2,84,95,402 Short Term Capital Gain on Building Building Consideration (2500*11934) 29,835,000 50% Share 14,917,500 Less: Cost of Acquisition (2500*11934) 29,835,000 50% Share 14,917,500 Short Term Capital Gain - Revenue s appeal 9. First we will take up revenue s appeal for consideration. The first ground of the revenue is that the CIT(Appeals) adopted the value of land as on 1.4.1981 at ₹ 250/sq.ft. as against ₹ 100/sq.ft. by the AO. 10. The contention of the ld. DR is that adopting value of land as on 1.4.1981 at ₹ 250 / sq.ft. by the CIT(A) without providing a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered a part (11475 sq.ft.) of the corresponding built-up area of 23,409 sq.ft. at ₹ 2,86,87,500 when the almost equal remaining part of 11934 sq.ft. was rightly valued at ₹ 13,30,00,000. Alternately, the CIT(A) considered the sale consideration as a short term asset i.e., built-up area as the sale consideration of the long term asset i.e., the land and therefore incorrectly calculated the short term capital gain of the built-up area at Nil. 15. The contention of the ld. DR is that the CIT(Appeals) considered the value of 11934 sq.ft. of constructed area at ₹ 13.30 crores which was sold to the Developer vide supplementary agreement to JDA. However, he also considered the balance 11475 sq.ft. of constructed area returned by the land owner at ₹ 2,86,87,500 which is wrong. According to the ld. DR, the value of 11475 sq.ft. of constructed area to be valued in line with the valuation of 11934 sq.ft. of constructed area and he prayed accordingly. 16. The ld. AR submitted that the JDA has to be read along with supplementary agreement to JDA which suggests that the assessee has transferred 75.72% proportionate share of undivided interest in land as ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m capital gain to be computed as done by the AO. In our opinion, this argument of the ld. DR is misconceived. The assessee herein transferred 75.72% of undivided share in land to the developer. The JDA and supplementary agreement cannot be read isolatedly and it gives distorted picture on transfer of landed property to the developer. When we read JDA dated 13.10.2014 along with supplementary agreement to JDA dated 19.8.2015, it suggests that the whole arrangement is to transfer 75.72% of undivided share in land to the developer and this is a single transaction so that there is no computation of short term capital gain in this case as computed by the AO. The CIT(Appeals) has given relief on a different count and computed the short term capital gain at Nil. The same is confirmed. Assessee s appeal 19. The grievance of the assessee is with regard to denial of exemption u/s. 54 of the Act. In this case, originally the AO granted deduction u/s. 54 at ₹ 3,99,75,318. However, this was withdrawn by the CIT(Appeals) by placing reliance on the provisions of section 54F and observed that the assessee could not have more than one residential house. The CIT(Appeals) observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement you are requested to show cause as to why the LTCG should not be reworked and denied the claim of deduction u/s 54 and with a view to give an opportunity of being heard as per the principles of natural justice, your explanation should reach to this office on or before 22/03/2019. 20. In our opinion, in this case the deduction was claimed by assessee u/s. 54 of the Act and there was no prohibition in this assessment year with regard to owning more than one residential house so as to deny exemption u/s. 54. We reproduce the provisions of section 54 of the Act as it stood in the relevant assessment year as follows:- 54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- ( i ) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and ( ii ) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 21. Thus, the condition for granting deduction u/s. 54 is as follows:- 1 Nature Transfer of residential house 2 Available to Individual , HUF 3 Period held before transfer More than 36 Month (Thus only Long Term Assets) 4 Amount exemption of If capital Gain amount invested= full amount If capital Gain amount invested= Difference is taxable 5 Conditions Any residential house prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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