Tribunal directs reassessment of capital gains, instructs AO to consider only relevant construction costs. Assessee's appeal partially allowed.

The Tribunal remanded the case to the AO for re-computation of capital gains, instructing to consider only relevant construction costs. The assessee's appeal was partly allowed for statistical purposes, with the AO directed to provide a fair opportunity for the assessee to present objections.

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Issues Involved:
1. Rejection of market value rate adopted by the Sub-Registrar for calculating Long Term Capital Gains (LTCG).
2. Consideration of the cost of construction incurred by the developer.
3. Inclusion of probable costs in the construction area.
4. Adoption of cost of construction for calculating LTCG.
5. Amount not paid by the developer to M/s Kohli Constructions as part of the cost of construction.
6. Adoption of Rs. 21,38,39,466 as consideration received under the development agreement.
7. Amount payable to M/s Kohli Constructions offered to capital gains tax in Udai Health Care Private Limited.
8. Development rights of Rs. 4,24,08,889 as part of the cost of construction.

Detailed Analysis:

1. Rejection of Market Value Rate Adopted by Sub-Registrar:
The assessee contended that the Sub-Registrar’s market value rate should be used for calculating LTCG. The AO and CIT (A) rejected this, citing that the SRO value did not match the description of the assessee’s building and that the quality of construction varied. The Tribunal upheld this rejection, noting that the SRO value could be a guiding factor but not a substitute for actual cost.

2. Consideration of Cost of Construction Incurred by Developer:
The AO adopted the cost of construction incurred by the builder as the consideration received by the assessee, which the CIT (A) upheld. The assessee argued that the future cost of construction could not be accurately estimated at the time of filing the ROI. The Tribunal agreed that the actual cost of construction could not be estimated accurately at the time of filing the ROI and remanded the issue to the AO for re-computation, considering only relevant construction costs.

3. Inclusion of Probable Costs in Construction Area:
The assessee objected to the inclusion of probable costs in the construction area. The Tribunal directed the AO to exclude any costs not directly related to the construction, such as finance charges and compensation to Kohli Constructions, from the cost of construction.

4. Adoption of Cost of Construction for Calculating LTCG:
The AO adopted a cost of Rs. 3,381.65 per sq.ft for calculating LTCG, which the CIT (A) upheld. The Tribunal found this approach reasonable but directed the AO to re-compute the capital gains by considering only the relevant elements of construction cost.

5. Amount Not Paid by Developer to M/s Kohli Constructions:
The AO included the entire agreed amount of Rs. 1,76,00,000 to Kohli Constructions in the cost of construction, though only Rs. 60,00,000 was paid. The Tribunal directed the AO to consider only the actual payment of Rs. 60,00,000 in the re-computation of the cost of construction.

6. Adoption of Rs. 21,38,39,466 as Consideration Received Under Development Agreement:
The AO adopted Rs. 21,38,39,466 as the consideration received, which the CIT (A) upheld. The Tribunal found that the cost of construction should be the basis for consideration but directed the AO to re-compute this by excluding non-construction related costs.

7. Amount Payable to M/s Kohli Constructions Offered to Capital Gains Tax in Udai Health Care Private Limited:
The assessee argued that the amount payable to M/s Kohli Constructions was already offered to capital gains tax in Udai Health Care Private Limited. The Tribunal directed the AO to verify this claim during the re-computation process.

8. Development Rights of Rs. 4,24,08,889 as Part of Cost of Construction:
The assessee contended that the development rights offered to capital gains tax in Udai Health Care Private Limited should not be part of the cost of construction. The Tribunal directed the AO to verify and exclude such amounts from the cost of construction during re-computation.

Conclusion:
The Tribunal remanded the case to the AO for re-computation of capital gains, ensuring only relevant construction costs are considered. The assessee’s appeal was partly allowed for statistical purposes, and the AO was instructed to provide a fair opportunity for the assessee to present its objections.

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