TMI Blog2023 (5) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... ts mentioned in the valuation report. Deduction u/s 54 - AO committed basic error in combining the share of both brothers and proportionately calculating the share of the assessee in context to the share left with the assessee in furtherance of Joint Development Agreement with builder. AO while giving the benefit of Section 54 considered the fact that as per the sale deed 67.5% ownership rights have been transferred to the builder for Rs. 5,50,00,000/- and what remained with the assessee is 33.5% and accordingly proportionate value of 32.5% being the cost of new property u/s 54 was arrived at 2,64,81,481/- What Ld. AO missed was the fact that the assessee on the basis of agreement with the builder had got entire basement, entire ground floor, 1/4th portion of entire stilt area including space for parking, space for one utility with common WC also in the new construction. The 32.5% undivided, indivisible and impartibly ownership rights in the said plot of measuring 300 square yards was the share in the land alone. Which was not transferred and was retained in favor of the assessee while the two brothers jointly sold 67.5% of the land. Cost of new property however is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Consequent to this agreement a sale deed was executed between the builder and the assessee. 3. On the basis of sale deed executed for 67.5% of the plot, the Ld. AO considered it to be the transfer of 67.5% of the property for Rs. 5,50,00,000/-, which was the sales consideration mentioned in the sale deed. The Ld. AO observed that the assessee was getting only 32.5% share in the new property. Thus, for the purpose of Section 54 of the Act, the Ld. AO considered that the brothers together have sold 67.5% of the property to the builder for 5,50,00,000/-, so in view of the same, the share consideration value of 32.5% ownership rights, which remained with the assessee after completion of construction was calculated by Ld. AO as follows :- 5,50,00,000 X 32.5 = 2,64,81,481/- 67.5% 3.1 Thus, the cost of new property for the purpose of Section 54 of the Act, was taken at Rs. 2,64,81,481/- and the same was considered to be investment in new property. The cost of acquisition was considered to be 99,250/- and taking share consideration payable to assessee at 4,53,75,000/- and reduci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. DR however, supported the findings of ld. Tax authorities below. It can be appreciated from the order of ld. AO that he has specifically mentioned that with respect to cost of improvement of the property, the assessee has provided the valuation report and based upon the same value of land at Rs. 17,40,000/- and value of building at Rs. 1,10,000/-, total Rs. 18,50,000/- is accepted and based upon the half share of assessee, the same was taken at Rs. 9,25,000/-. There appears to be no justification in accepting the cost of improvement provided by the valuer for improvements done during 1982 whereby 685 sq. ft. was added on the 2nd floor. It is quite unreasonable to expect production of bills and invoices as assessee along with brother has inherited the property, in 2009 on the death of their father. Thus, this ground no. 1 and 2 are allowed with direction to the Ld. AO to take into consideration the cost of improvements mentioned in the valuation report. 6. As with regard to ground no. 3 ; Ld. AR submitted that Ld. AO committed basic error in combining the share of both brothers and proportionately calculating the share of the assessee in context to the share left with the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- (Twenty five lacs only) vide Ch. No. 063037 dt. 16.11.15 favouring Dr. Ramesh Chandna. Both drawn Yes Bank. 8. Further, relevant is the clause 8 available at page no. 118 of the paper book :- 8. That it is made clear that the said shri Naresh Chandna (the First party herein) shall only be entitled to a sum of Rs. 4,53,75,000/- (Four crores fifty three lacs seventy five thousand Rs. only) from as stated above and upon receipt of said amount, the First Party shall be left with no right, title, interest, claim or concern of any nature with the said property or any part thereof. 9. Further para no. 15 and 16 are relevant and same are reproduced as follows :- 15. That as mentioned hereinabove, the building shall be consisting of Basement, Stilt, Ground Floor, First Floor, Second Floor and Third Floor with Terrace. The Builder shall apply Form B-1, obtain Form B-2 and Completion Certificate in respect of the newly constructed building. 16. That the allocations of the respective parties shall be as under :- FIRST PARTY (SHRI NARESH CHANDNA) Rs. 4,53,75,000/- (Rs. Four Crores Fifty Three Lacs Seventy Five Thousand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nections, structure standing thereon, with all rights in common entrances, passages, driveway, staircase, and other common facilities and amenities to be provided therein, hereinafter referred to as THE SAID PORTIONS OF THE SAID PROEPRTY for a total consideration of Rs. 5,50,00,000/- (Rs. Five Crores Fifty Lacs Only). 11. Further clause 16 of the sale deed available at page no. 74 of the paper book is relevant and same is reproduced for convenience :- 16. That it is hereby also clarified that at present the said property is very old and therefore as and when the said property is re-constructed afresh, then in that event the share/ entitlement/ portions hereby sold to the Vendee shall not be changed/ affected and/ or diluted in any manner of whatsoever and accordingly, the vendee in lieu of its rights, title and interests etc. purchased under this Sale Deed, shall be entitled to re-develop and re-construct and be the absolute and exclusive owner of the Entire First Floor, Entire Second Floor, Entire Third Floor, Entire Terraces over and above the Entire Third Floor and also 3/4th Portion of Entire Stilt Area including space for Car parkings and space for Three Utilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67.5% ownership rights have been transferred to the builder for Rs. 5,50,00,000/- and what remained with the assessee is 33.5% and accordingly proportionate value of 32.5% being the cost of new property u/s 54 was arrived at 2,64,81,481/-. 16. The bench is of considered opinion that what Ld. AO missed was the fact that the assessee on the basis of agreement with the builder had got entire basement, entire ground floor, 1/4th portion of entire stilt area including space for parking, space for one utility with common WC also in the new construction. The 32.5% undivided, indivisible and impartibly ownership rights in the said plot of measuring 300 square yards was the share in the land alone. Which was not transferred and was retained in favor of the assessee while the two brothers jointly sold 67.5% of the land. Cost of new property however is not the cost of share in the plot alone but all the other constructed and covered area received by the assessee. Thus, for the purpose of Section 54 of the Act, mere value of 32.5% ownership rights on the proportionate basis of share consideration of Rs. 5,50,00,000/- is not correct and the cost of new property has to be assumed to be Rs. Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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