Bifurcation of land and building sale consideration allowed, with capital gains taxed by each asset's holding period.

Consideration received on sale of upper floors with the proportionate undivided share in land can be apportioned between land and superstructure where the agreements cover both interests and the valuation supports separate attribution. The assessee had retained part of the land interest under the development arrangement, and the materials showed that the sale price was reasonably bifurcable. Applying the principle that land and building may be valued and taxed according to their respective holding periods, the land component was treated as long-term capital gain and the building component as short-term capital gain. The depreciation-based objection was rejected.

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Issues: Whether the consideration received on sale of the 4th to 7th floors of the building, together with the proportionate undivided share in the land underneath, could be bifurcated between land and superstructure so that the gain attributable to land is assessed as long-term capital gain and the gain attributable to the building as short-term capital gain.

Analysis: The assessee retained ownership of 43.2% of the land under the development arrangement and did not transfer that entire interest to the developer. The sale agreements for the four floors expressly covered the proportionate undivided share in the land underneath, common areas, and related facilities. On the materials on record, the consideration was capable of reasonable apportionment between land and building, and the valuation adopted by the registered valuer was not shown to be defective. The principle that land and superstructure can be separately valued and taxed according to their respective holding periods was applied, and the claimed depreciation objection was found unsustainable.

Conclusion: The bifurcation of sale consideration was upheld, and the gain relatable to the land was held to be long-term capital gain while the gain relatable to the superstructure was held to be short-term capital gain, in favour of the assessee.

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