TMI Blog2022 (3) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Computation of long term capital gains derived from transfer of property in pursuant to JDA - ownership of property by three co-owners and their respective share in right and interest in the property - HELD THAT:- Since, the assessee has 42.5% share in the property, the AO is right in considering 42.5% of consideration in the hands of the assessee for the purpose of computation of long term capital gains as a result of transfer of property in pursuant to JDA. The arguments of the assessee that, he had received consideration separately, as specified in the JDA, we find that receipt of entire non-refundable deposit by the assessee s father and one flat each by the assessee and his wife is an internal arrangement and which is nothing to do with computation of capital gains by adopting respective share of full value of consideration. As per law, when a property transferred, consideration received or accrued as a result of transfer should be taken into account according to their share in the property, but not as per the internal arrangement between the parties. Hence, the arguments of the assessee is rejected. Computation of capital gain - Admittedly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri V. Durga Rao, Hon ble Judicial Member And Shri G. Manjunatha, Hon ble Accountant Member For the Appellant : Mr.S.Sridhar, Adv. For the Respondent : Mr.AR.V.Sreenivasan, Addl.CIT ORDER PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-2, Chennai, dated 31.07.2017 and pertains to Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal: Grounds w.r.t. adding back of book depreciation twice i. Book depreciation has been incorrectly added back twice, solely on the ground that the inasmuch as the original return dt. 30-Mar-13 was belated, the correction made in the revised return dt. 29-May-13 could not be considered. ii. The appellant cannot be precluded from correcting/rectifying an error apparent on the record. iii. Even if the appellant had not rectified the same through his return dt.29-May-13, the department, on its own was bound to process the return by adjusting the apparent error in the return. iv. The CIT(A) has nowhere stated that the claim in incorrect and hence not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 03.03.2008. The assessee has been subsequently executed a Settlement Deed on 05.09.2011, and out of natural love and affection to his wife and father, settled a portion of the property in their favour. Thus, post the execution of the Settlement Deed, the ownership of the property pertaining to the house stood as follows: Name Relationship % of the property Dr.E.S.Krishnamoorthy Self 42.50% Dr.Krishnamoorthy Srinivas Father 15.00% Mrs. Gayathri Krishnamoorthy Spouse 42.50% 4. The assessee and other joint owners had executed a Joint Development Agreement (in short JDA ) on 08.09.2011 for development of the property with M/s.Coromandel Engg. Co. Ltd. As per the said JDA, the developer agreed to construct 4 flats with total saleable area of 16,368 sq.ft. Further, the owners shall receive a consideration of ₹ 2.25 Crs. as non-refundable deposit and 50% of the constructed area being the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: Date Cheque No. Amount (Rs.) 08.09.2011 549324 1,50,00,000 18.10.2011 004155 50,00,000 03.11.2011 550009 25,00,000 The assessee has received ₹ 2,25, 00,000/- from the Developer M/s.Coromandel Engineers besides which he was also in receipt of 2 flats each measuring at 4092 sq. fts. in lieu of the 50% UDS sold to the Developer. As such the cost of these two flats should be considered as sale consideration as well as for the reinvestment into the residential house(s). The deduction claimed u/s.54 for the assessee's part of 42.5% has to be allowed after deducting the Indexed cost of acquisition for the assessee's share in the old property transferred. The long term capital gain is reworked as under: The cost of the built up area alone as reported by the developer is calculated as under: Total cost of consideration for the four flats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Addition: LTCG ₹ 93,20,300/-) CREDIT CARD PAYMENTS The credit card statement of accounts in respect of credit card payments made through RBS and Standard Chartered Bank, for an amount of ₹ 7,15,893/-during the financial year relevant to Assessment year may be furnished to ascertain the allowability or otherwise. The show cause notice dt. 10.03.2015 covered the above point also. The assessee, till date, has not filed any objections/ offered any explanations, hence it is observed that he has no objections to the proposed assessment. As such the credit card payments are assessed as unexplained at ₹ 7,15,893/- in his case. (Addition: Credit Card payments ₹ 7,15,893/-) DEPRECIATION ON MOTOR CAR The assessee has claimed an amount of ₹ 1,12,955/- as Depreciation on Car. To cover the personal usage, 20% of the above i.e. ₹ 22,590/-is disaliowed and added to the income. (Addition: ₹ 22,590/-) 6. Being aggrieved the Assessment Order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee argued that long term capital gains computed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JDA. The fact with regard to impugned dispute are that the JDA between the assessee and his wife his father with M/s.Coromandel Engg. Co. Ltd., is not in dispute. As per the JDA between the parties, the developer has agreed to construct 4 flats and also agreed to share 50% of the constructed area along with payment of ₹ 2.25 Crs., non-refundable deposit to the land owners. In terms of JDA between the parties, the developer has paid a sum of ₹ 2.25 Crs. Non-refundable deposit to the land owners and the same has been paid into the account of Dr.Krishnamoorthy Srinivas (father of the assessee) and who is also holding 15% of share in the property. The developer had also allotted two flats in favour of the land owners and accordingly, registered 1st Floor Flat in the name of Dr.E.S.Krishnamoorthy (assessee) and the another Flat at 4th Floor to Mrs. Gayathri Krishnamoorthy (assessee s wife). The assessee had considered only a flat allotted in his favour for computation of long term capital gains pursuant to JDA. However, not considered nonrefundable deposit paid by the developer by claiming that non-refundable deposit had been offered to tax by his father (Dr.Krishnamoorth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustice. 11. The Ld.AR further submitted that the AO had also erred in adopting indexed cost of acquisition of the UDS of land at 42.5% without appreciating the fact that the assessee is having only 17.5% of UDS in land, because the remaining 50% of UDS in land has been transferred to developer. The Ld.AR further submitted that the AO also erred in determining the amount of investment in new asset to claim the benefit of exemption u/s.54 of the Act by taking into account 42.5% of cost of construction and further, restricted to ₹ 1,50,11,446/-. The Ld.AR for the assessee further submitted that the AO ought to have considered total construction cost incurred by the developer for 4 flats and as per which, one flat cost would be around ₹ 2,32,85,525/-. Since, one flat is allotted to the assessee, the cost of same should be considered for the purpose of provisions of Sec.54 of the Act. The Ld.AR further submitted that the AO and the Ld.CIT(A) erred in applying the cost of indexation from the AY 2007-08 being the year of settlement in favour of the assessee by the father of the assessee, whereas as per provisions of Sec.49(1) read with explanation (iii) below Sec.48 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... internal arrangement and which is nothing to do with computation of capital gains by adopting respective share of full value of consideration. As per law, when a property transferred, consideration received or accrued as a result of transfer should be taken into account according to their share in the property, but not as per the internal arrangement between the parties. Hence, the arguments of the assessee is rejected. 14. Having held so, let us come to computation of long term capital gains. The assessee has computed long term capital gains by taking into account cost of one flat received from the builder as full value of consideration. However, did not consider his share of non-refundable security deposit paid by the builder and received by his father for computing full value of consideration. The AO, on the other hand, considered cost incurred by the builder for construction of two flats and non-refundable deposit of ₹ 2.25 Crs. received by the land owners as full value of consideration agreed as a result of transfer pursuant to JDA. Thus, the AO has taken 42.5% of full value of consideration of ₹ 5,78,21,050/- and determined assessee s share of full value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow sec.48 of the Act, when a property is owned by the assessee by anyone of the modes specified therein, then the benefit of indexation should be allowed from the date when the previous owner held the asset. In this case, the assessee has inherited property from his grandfather by one of the mode specified u/s.49(1) of the Act and thus, he is entitled benefit of indexation from the date his grandfather held the property i.e. from the year 1962. Since, base year is 1981-82 for computing the benefit of cost of acquisition, the AO is directed to adopt the cost of acquisition as arrived at herein above and allow the benefit of indexation from the year 1981-82. 15. Coming back to exemption claimed u/s.54 of the Act. The assessee has claimed the benefit of exemption to the extent of cost of one flat at ₹ 1,76,60,525/-, because as per the terms of the agreement between the parties, the assessee had received one flat from the builder. The AO has allowed the benefit of deduction u/s.54 of the Act to the extent of 42.5% of cost of two flats which works out to ₹ 1,50,11,446/-. We have gone through the reasons given by the AO and we ourselves do not subscribe to the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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