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TMI Blog2024 (5) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 292/Viz/2023 in the case of Sivakama Sundar Manthavadi as a lead appeal. 2. Briefly stated the facts of the case are that the assessee, a Non-Resident Indian, has sold his Flat No. 202, Old D.No.7-5-137, Pandurangapuram, Visakhapatnam on 12/12/2012 for a consideration of Rs. 44,15,000/-. The Ld. AO noticed that the assessee has not filed his return of income for the impugned assessment year admitting the capital gains arising out of the sale of the capital asset. The Ld. AO after making necessary enquiries with the SRO, Visakhapatnam noted that the assessee and his wife Smt. Mantravadi Vidyavathi had entered into a Development Agreement on 21/07/2008 with respect to the property admeasuring 450.11 sq yds for development on 60 : 40 basis to M/s. MSR Life Care Services Pvt Ltd, Visakhapatnam. It was noticed that as per the Development Agreement, the assessee is entitled to receive 6 residential flats for extinguishing 40% the land to M/s. MSR Life Care Services Pvt Ltd. Accordingly, while filing the return of income in response to the notice u/s 148, the assessee computed the capital gains and claimed deduction u/s. 54 for the Act for the AY 2009-10. The assessee has also not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n claimed u/s. 54EC of the Act is not allowable. The Ld. CIT did not consider the explanation provided by the assessee that the date of Development Agreement should be construed as date of acquisition of the capital asset for the purpose of computation of capital gains. The Ld CIT observed on perusal of the JDA, that the clauses-12 & 13 of the Development Agreement wherein it was mentioned that the delivery of possession of the built up area shall entitle the assessee as an absolute owner of the property. He therefore set-aside the assessment order and directed the Ld. AO to verify the claim of deduction of the assessee and reduce the cost of acquisition accordingly while computing the income from short term capital gains for the AY 2013-14. Further, the Ld. CIT also directed the Ld.AO to not allow deduction u/s. 54EC of the Act. The Ld. CIT directed the Ld. AO to examine the above issues and re-do the assessment after verification of the issues in accordance with law and after providing a reasonable opportunity of being heard to the assessee. Aggrieved by the order of the Ld. CIT, the assessee is in appeal before us. 4. Before the Tribunal, the assessee has raised the grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12/12/2012 shall be deemed to be short term capital gains and pleaded that no deduction can be allowed u/s. 54EC of the Act. 7. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities and also the written submissions made by the assessee. It is an admitted fact that the assessee is a regular non-filer as both for the AY 2009-10 and 2013-14, the returns were filed in response to the notice u/s. 148 in both the AYs. During the reassessment proceedings, the Ld.AO has considered the date of Joint Development agreement as date of purchase and has computed the capital gains accordingly. The Ld. CIT invoking the powers vested u/s. 263 of the Act considered the order as erroneous and prejudicial to the interest of the Revenue since the Ld. AO has erred in treating the asset as long term capital asset. It was contention of the Ld. CIT that the assessee got possession of the flat only during February, 2011 and hence the sale of flat on 12/12/2012 shall be considered as short term capital gains. In this context, we hereby extract below the provisions of section 2(47) of the Act which defines "transfer". "Sec: 2(47) "tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of construction of a residential flat which obviously came into existence only during February, 2011. The Ld. AR in the written submissions contested that the assessee has acquired a right on the apartment by transferring of his land to the builder. This contention could not be accepted because of the fact that the built up area was not in existence at that point of time. Merely because the deduction u/s. 54 was allowed based on the investment made in the residential flat does not entitle the assessee to consider the date of acquisition as date of Joint Development Agreement. Therefore it is the contention of the Ld.AR in the written submissions that since the deduction u/s 54 is claimed in AY 2009-10, the residential flat should be deemed to be in existence at that time. We do not agree that the residential flat was in existence at that time, since the completion and possession was granted during Feb 2011. In flats/multi-storied apartments/commercial complexes, the ownership consists of owning undivided share of land and built-up area and these together is the property. It has two components and ownership of both components of undivided share of land and ownership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n independent, identifiable asset and continues to remain as an identifiable capital asset even after construction of a building thereon. Identical views were taken by the Hon'ble Rajasthan High Court in the case of CIT vs Vimal Chand Golecha reported in [1993]201 ITR 442 and by the ITAT, Calcutta in the case of CIT vs Sri Sekhar Gupta[2001]114 Taxmann 122. However in order to claim the above capital gains separately for land and building, the assessee is required to give basic details like the original cost of acquisition of land and building, the year acquisition etc separately duly supported by necessary documentary evidences as they may be required at the time of assessment. Based on the holding period of these assets, the capital gain is long term or short term and the indexed cost of acquisition could be computed. Likewise in order to claim the indexed cost of improvement necessary documents in support of the improvements done and the expenditure incurred thereon have to be also maintained by the assessee. The next question is how to appropriate the sale consideration for the transfer of land and building if a lump-sum monetary consideration is received by the transferor from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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