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TMI Blog2022 (3) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to appreciate that the sustenance of the re-computation of Long Term Capital Gains on various facets was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) erred in sustaining the disallowance of the claim of improvements as well as the rejection of the plea for grant of appropriate indexation in relation thereto in the said re-computation of Long Term Capital Gains without assigning proper reasons and justification. 5. The CIT (Appeals) erred in sustaining the disallowance of the claim of the encumbrance cleared on making the payment of Rs. 20,92,7301- (the share of the appellant was quantified at Rs. 6,97,577/-) in the transfer of the capital asset(s) under consideration in the said re-computation of Long Term Capital Gains without assigning proper reasons and justification. 6. The CIT (Appeals) erred in sustaining the disallowance of the claim of the encumbrance cleared on making the payment of Rs. 17,16,000/- in the transfer of the capital asset(s) under consideration in the said re-computation of Long Term Capital Gains without assigning proper reasons and justification. 7. The CIT (Appeals) erred in sustaining the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea, in pursuant to transfer of 40% undivided share of land. As per agreement between the parties, the developer had paid Rs. 1.20 crores cash consideration and also five flats of 1500 sq.ft each for exchanging 40% undivided share in the land. Further, there was a change in terms & conditions with reference to sharing of constructed area, as per which 38.37% building along with UDS was accrued to the builder, as against 40% agreed in the joint development agreement. Therefore, the assessee has compensated the builder for less allotment of building @ Rs. 11,543 per sq.ft and paid a sum of Rs. 22,04,873/-. The assessee has computed long term capital gain by taking into account his share of cash consideration received from the builder and consideration for five flats by adopting cost of construction at Rs. 3500/- per sq.ft. Further, after claiming necessary cost of acquisition and indexed cost of improvement computed long term capital gain at Rs. 35,24,225/-, after claiming benefit of exemption u/s.54 of the Income Tax Act, 1961. 4. During the course of assessment proceedings, the assessee had also filed revised computation with reduced long term capital gain of Rs. 20,36,880/-, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given by the Assessing Officer to adopt sale consideration for transfer of property, has upheld findings of the Assessing Officer and rejected arguments of the assessee in respect of adoption of cost of construction of Rs. 3500 per sq.ft as against Rs. 6544 per sq.ft adopted by the Assessing Officer. The learned CIT(A) had also rejected arguments of the assessee in respect of amount paid to builder to compensate less super built up area shared by the assessee. The learned CIT(A) also rejected arguments of the assessee in respect of deduction claimed towards encumbrance cost / cost of improvement by holding that if previous owner mortgaged property and subsequent owner discharged mortgage by payment, then same partakes nature of cost of acquisition / improvement. Since, the previous owner was not mortgaged property, the assessee cannot claim benefit. Hence, the learned CIT(A) rejected arguments of the assessee and sustained additions made by the Assessing Officer towards recomputation of long term capital gain derived from transfer of property. 7. The learned A.R for the assessee submitted that the learned CIT(A) erred in not appreciating fact that even though the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities below. There is no dispute with regard to fact that the assessee along with his two brothers had entered into joint development agreement and agreed to share constructed building in the ratio of 60% & 40%, in lieu of transfer of undivided share in the land. The facts borne out from records clearly indicate that the assessee had agreed to transfer of 40% UDS in the land, in exchange of 60% constructed building. However, when final sharing was done, the builder was allotted 38.37% undivided share of land and building, which is lesser than 1.63%, when compared to 40% agreed between the parties in joint development agreement. The assessee has compensated the builder for loss in agreed share of building @ Rs. 11,543 per sq.ft and has paid compensation of Rs. 22,04,873/-. The assessee has adopted cost of construction of building to determine full value of consideration as per which the assessee has adopted a sum of Rs. 3500 per sq.ft, whereas the Assessing Officer has adopted Rs. 6544 per sq.ft., which is once again on the basis of compensation paid by the assessee to the builder. The assessee considered that cost of construction of building to determine full value of consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me filed before completion of assessment. Therefore, in our considered view, the Assessing Officer should have entertained claim of the assessee. Hence, we direct the Assessing Officer to allow claim of the assessee towards compensation paid to builder as expenses of transfer. 11. Insofar as deduction towards encumbrance cost / cost of improvement, although the assessee claims to have discharged encumbrance on the property by paying loan availed from banks. But on perusal of details filed by the assessee, we find that previous owner did not create encumbrance on the property. In fact, the assessee's father and mother have created mortgage and encumbrance on the property by availing loan from the bank and same has been discharged by the assessee and his brothers. It is well settled principle of law by the decision of the Hon'ble Supreme Court in the case of V.S.M.R. Jagadishchandran (Decd.) Vs.CIT [1997] 227 ITR 420 (SC), if previous owner creates encumbrance on the property and subsequent owner discharge encumbrance, then amount spent for discharging encumbrance amounts to cost of acquisition / improvement of the property. In this case, the assessee claims that there was encum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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