TMI Blog2019 (12) TMI 1588X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the breakup of the cost of project/construction, we direct the AO to collect the breakup of the cost of the project/construction from the developer and calculate only the cost of construction and eliminate all those promotional expenditures and the expenditure which is not relating to the cost of construction. Therefore, we are inclined to remit this issue to the file of AO to re-calculate the cost of construction. Accordingly, this ground raised by the assessee is allowed for statistical purposes. Deduction u/s 54 - Combining of flats - how combined portion of the area will be treated as one single unit? - We notice that assessee has modified the development agreement for construction of the flats from 40 flats to 36 flats and 2 penthouses and distributed between them as per terms of original agreement. Therefore, the modified agreement and its schedule, which is placed on record at page no. 43 of the paper book clearly indicates that the intention of the developer and the assessee to make 2 penthouses in 11th and 12th floor as penthouses and assessee was regularly pleading that these 2 penthouses were constructed by combining 4 flats at floors 11th and 12th. AO has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at will get an automatic membership in the cooperative society in proportion to the undivided share. Since cooperative society owns the total area of the land and being a member of the society, he gets the ownership of the undivided share. As per the sale deed, it is clear that assessee gets a membership on the cooperative societies, it does mean that flat owners not only owns a super structure and also ownership right on the undivided share, therefore we are inclined to accept the findings of Ld. CIT(A) in distributing the sale proceeds into sale proceeds attributable to the land and super structure. Accordingly, we reject the contentions of the revenue and dismiss the grounds of appeal raised by the revenue. - I.T.A. No. 2972/Mum/2012 And I.T.A. No. 1112/Mum/2013 - - - Dated:- 10-12-2019 - Shri S. Rifaur Rahman, AM And Shri Ravish Sood, JM For the Appellant : Shri Hiro Rai, AR. For the Respondent : Shri R. Manjunatha Swamy Shri Amit Pratap Singh, DRs. ORDER PER S. RIFAUR RAHMAN (ACCOUNTANTMEMBER): The present two Appeals have been filed by the assessee and revenue against the order of Commissioner of Income Tax (Appeals)-3, Mumbai, dated 19.03.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before Ld. CIT(A) and filed additional evidences before him against the additions made by AO. Ld. CIT(A) forwarded the additional evidence to AO to make necessary enquiries. After verification, AO filed a remand report dated 14.02.12, in which AO brought on record the following facts relating to the transactions, they are: (i) development agreement of property between assessee along with his son and developer M/s Lokhandwala Construction Pvt. Ltd on 06.02.2004 and (ii) an amount of ₹ 2.06 crore was received from the developer (iii) The income is chargeable to tax in AY 2004-05, the issue of chargeability of the order of taxation was settled i.e. the tax chargeable in AY 2004-05. (iv) Further, AO observed that assessee and his son having sharing ratio 73:29. (v) with regard to adoption of fair market value on 01.04.81, the AO strongly advocated the adoption of DVO value of ₹ 62,54,000/- instead of ₹ 40,73,896/- adopted by the assessee in its calculation. This issue is not contested by the assessee before us as the assessee is not pressing the ground no 2, raised before us. Accordingly the value adopted by the AO reached finality. 5. The oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Construction 8,22,48,571 Cash received 2,06.00,000 Total consideration 10,28.48.571 10,28,48,571 Cost of Acquisition Value as on 01 .04.1 981 62,54,000 Proportionate FMV of the area sold (1 3,475 / 35,987) x 6254000 = 23,41,857 Less: Indexed cost { 463 7100} x 23,41,857 = (1,08,42,799) Capital Gains 9.20.05,772 8. A copy of the remand report was forwarded to assessee and in response the assessee made the following objections, which are: (a) The consideration received in cash component of ₹ 2.06 crores is part of the cost of construction declared by the developer. (b) The AO considered the brokerage @ 1% instead of 2%. (c) The cost of construction declared by the developer which includes cash component for development rights, stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her noticed that the claim of the appellant that all the 6 flats were intended for occupation of Shri Sunil Dutt and his family members and it is only on account of his demise shortly after the buildings was ready that the flats were divided amongst his family members. This itself shows that there was only intention to occupy the 6 flats but that intention was never materialized. Therefore, the AO was correct in holding that only 1 flat is eligible for exemption u/s. 54 of the Act. The exemption u/s. 54F is available in respect of which one residential house. It is also, noticed that flat No. 1002 was already let out and not occupied by the late assessee's children. Thus the appellant has used one single unit for his occupation. Therefore, exemption is available in respect of appellant. This view is also supported by the decision in the case of Spl. Bench ITAT in the case of ITO Vs. Sushila M Javeri 292 ITR 1 (Mum.). The case law relied by the AR is not applicable in the case of appellant as in the said case it was proved that both flats i.e. 301 302 were adjacent to each other and enteredinto and used as one residential house and the investment had been made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The learned Commissioner (Appeals) erred in confirming the computation of the exemption u/s 54F made by the learned Assessing Officer at ₹ 57,00,610. 8. The learned Commissioner (Appeals) failed to appreciate that the appellants had already\ furnished evidence of the two flats being regarded as one house. 9. The learned Commissioner (Appeals) erred in not allowing exemption u/s.54F separately to I each of the joint owners for one house each. Relief Sought 10. Your appellants pray that the order of the learned Commissioner (Appeals) be modified by recomputing the capital gains by: a. Adopting the fair market value of the property as at 1st April 1981 as per the stamp dutyreckoner valuation; b. Adopting consideration received in the form of construction by taking the stamp dutyready reckoner cost of such construction; or alternatively, reducing various expensesnot forming part of cost of construction from the project cost taken by the AssessingOfficer as the value of construction; c. c. Allowing exemption u/s.54F in respect of one penthouse, each consisting of two flats,for each joint owner separately. Your appellants crave l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the developer is inclusive of the cash component given to the assessee as the part of the development cost considering the fact that the developer has declared the total cost incurred to construct the whole project. The cash component given to assessee also a part of cost of construction. Now, the same cash component cannot be added once again in determining the sale consideration. 15. Ld. AR further submitted that the total project cost submitted by the developer which may include other cost which many not be part of the cost of construction. He brought to our notice at para no. 1.2.2 of the order of Ld. CIT(A), in which AO has adopted the above cost submitted by the developer, which may include cost of other expenditure like interest expenditure, stamp duty and registration charges, etc, which Ld. CIT(A) has not considered and the objection raised by the assessee was not adjudicated in his order. He prayed that it may be remanded back to the file of AO to determine the actual cost of construction and any other expenditure which is not part of cost of construction, should be eliminated and to determine proper cost of construction. 16. With regard to exemption u/s 54F of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it was not brought to the notice of authorities below about the combined flats and further he submitted that it is not proved by the assessee that the flats were combined during the assessment year under consideration. He supported the findings of Ld. CIT(A) which is in para 2.2 and 2.3 of the order of CIT(A). He further submitted that the case laws relied by the assessee are distinguishable and not relevant to the present case. With regard to sales consideration adopted by the AO, he supported and relied on the findings of Ld CIT(A). 18. Considered the rival submission and material placed on record, we notice from the records that assessee alongwith his son entered into development agreement with M/s Lokhandwala Construction Industries Pvt. Ltd. to construct 40 flats and distribute the above flats between them in the ratio of 24:16 and the development agreement was entered on 06.02.04. Subsequently, the above development agreement was modified on 31.08.04 to construct 36 flats and 2 penthouse in 11th 12th floors. The details of the above modification is placed on record at page no. 43 of the paper book and distributed between them 22 flats and 2 penthouse to the assessee al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as included the cash component received by the assessee i.e. 2.06 crores as part of sale consideration. Ld. AR submitted that the cost of construction to the developer will naturally include the cost paid to the assessee as part of the project expenditure and the same cannot be included one more time. Further, Ld. AR brought to our notice the cost adopted by the AO as cost of construction which does not have the breakup of the same, even though the above objection raised before the Ld. CIT(A). The same was not adjudicated and he prayed that this may be remanded back to the AO to determine the proper cost of construction eliminating the other cost which is not part of cost of construction relevant for the assessee. 21. In our considered view that assessee has valid point that AO should have considered only the cost of construction, not the cost of the project, as per the submission made by the developer and the cash component will definitely be part of the project cost to the developer when the AO adopts the actual cost to the developer as the relevant cost for the fair value to the assessee. He should have restricted himself to calculate the sale consideration only to the portio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atena of cases in which courts have held that when there exists two portion of flats with one ketchen then the whole combined portion of the area will be treated as one single unit for the purpose of granting exemption u/s 54 as well as 54F. Accordingly, we direct the AO to grant exemption u/s 54F of the Act to each assessee and as per their choice. On record, assessee prefers to get penthouse occupied by his daughter as exemption u/s 54F and by legally AO should allow this penthouse as exemption u/s 54F of the Act. Accordingly, this ground raised by the assessee is allowed. 25. Now coming to ITA No. 1112/Mum/2013 for AY 2005-06 filed by the revenue on the following grounds:- 1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in allowing Long Term Capital Gains on sale of land while the agreement entered into by the assessee with buyers of the flats does not state that ownership of land has been transferred to the buyers. 2. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the flat purchaser has irrecoverably consented to the same. Therefore, he rejected the contention of the assessee to bifurcate the sale proceeds between land and cost of flat. Further, he submitted that there is no mention in the sale deed entered by the assessee with the purchaser of the flats which indicates that assessee transferred the ownership of the land alongwith super structure. He contended that this case is special and different from the other transactions and therefore this capital gain earned by the assessee, can only be classified as short term capital gain and Ld. CIT(A) is not justified in classifying the transaction of sale into land and super structure. 34. On the other hand, Ld. AR brought to our notice the page no. 28 of the paper book filed by the assessee i.e. original development agreement in which Class-34, which states as, when the developer complete the construction of the flats and after completing, obtain occupation certificate of the above said constructed properties from concerned authoritiesand owners shall execute the convenience in respect of the above said properties in favour of the cooperative society that may be confirmed by the purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
