TaxTMI 
TaxTMI 
2011 (4) TMI 855
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue of development agreement dated 26.2.2004. The net long term capital gain was shown as under: Amount of consideration received from Vinita Estate P Ltd - Builders and Developers (Wadhwas) Vasu Kamal, Bandra (W), Mumbai 50 on surrender of FSI of land plot on 8 Chiranjeev Bldg. JVPD Scheme Mumbai 400 049 (but in 1985 and occupied in March, 1985) vide Development Agreement dated 26.2.2004/5.4.2004 (Gross) Rs. 1,09,17,500.00 Deduct :Cost of land - Bldg on 31.3.2004 (As per Balance sheet) Rs. (-) 7,43,534,76 Net Long Term Capital Gain (More than 3 years holding and used for residence) Rs 1,01,73,965.25 The Assessing Officer asked the assessee to file a detailed note on redevelopment of building known as "Chiranjeev Building" and also to furnish copy of relevant agreement for development. 2.1 The assessee, vide letter dated 15.9.2006 stated as under: (i) The building called 'Chiranjeev' on plot no.8 in Greater Bombay CHS located on Gulmour Road no.4 JVPD Scheme Mumbai was built in 1985 and ground and first floor at the building along with plot of land was owned by assessee along with his wife Smt Chitra Khanna. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th the explanations given by the assessee. According to him, the assessee is claimed to have transferred a capital asset and shown capital gain on transfer of the same. Sec. 50C is a binding section on the Assessing Officer and therefore, the capital gain has to be worked out in accordance with the special provision for full value of consideration in certain cases. 3.2 During the course of assessment proceedings, on being allowed an opportunity to furnish the working keeping in view the provisions of sec. 50C of the Act, the assessee furnished the revised working after reducing indexed cost of the property at Rs. 39,32,160/ and calculated the taxable capital gain of Rs. 42,75,340/-, the details of which are as under: 50% of deemed consideration of Rs. 3,82,50,000/- 1,91,20,000/- Less: cost of property Rs. 10,24,000/- Being ½ share of 20,48,000/-as per valuers report dt 1.6.85. Indexation Rs. 10,24,000/ x 480/125 39,32,168/- Capital gain 1,51,92,840/- Exemption u/s 54 on New flat purchased 59,17,500/- Investment in Nabad 1,09,17,500/- Bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsent to assessees for joint development. Freedom and liberty of single ownership of plot is taken away and every use of plot is to be shared with other flat owners. The assessee submitted that such relinquishment and extinguishment or right, title and interest in plot of land was capital asset u/s 2(47) of the Act and the receipt of consideration of Rs. 1,09,17,500/- was a capital receipt and exigible to capital gain tax and consideration is not "income from other sources" since it is for plot and development share of developers. It was strongly contended that the consideration received from developer under the development agreement related to land and FSI of plot of land being capital asset and as such was a capital receipt exigible to capital gain tax. 3.7 The Assessing Officer noted that the structure admittedly came into being in 1985 and therefore, the assessee's working of cost as on 1.4.1981 as per valuer's report was not correct. On being questioned by the Assessing Officer, the assessee submitted his rely, the gist of which is as under: "To find out cost of acquisition of land as on 1.4.1981, we can consider the value of the valuer viz Rs. 10,24,000/- and from this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held that there is transfer of capital asset attracting capital gain. Rejecting the various explanations given by the assessee, he adopted the cost of land at Rs. 1,12,186 only. After indexing the same, the Assessing Officer recomputed the capital gain at Rs. 76,64,008/-, details of which are as under: 50% of deemed consideration of Rs. 3,82,50,000/- Rs 1,91,20,000 Less: Cost of property transferred Rs. 1,12,186/- as discussed Being ½ share of the same i.e. 1,40,233/- as per valuers report dated 1.6.85. Indexation Rs. 112186 x 480/100 5,38,492 Capital Gain 1,85,81,506/- Exemption u/s 54 on 59,17,500 New flat purchased Investment in Nabard Bond u/s 54EC 50,00,000 1,09,17,500 Net Capital Gain 76,64,008 5. Before the CIT(A), it was submitted that the assessee continued to own the land even after development. The owners would use the FSI of the land for construction at their cost. The owners received an amount of Rs. 2,18,35,000/- to be shared equally between the assessee and his wife. It ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; The ld CITIA) also erred in not considering the claim of appellant that in the case of his spouse who is the co-owner of the property no tax liability had been attached and therefore, the appellant being the other co-owner cannot be burdened with greater tax liability. 4 The ld CIT(A) also erred in not passing appropriate order on the following grounds of appeal raised in Form No. 35: (a) The ld ITO did not consider the cost of land as arrived by the assessee at Rs. 6,73,118/- viz Rs. 1,40,233/- (480/100) instead he has arrived at Rs. 5,38,492/- and the amount deducted at Rs. 5,38,492/- resulting in lesser by Rs. 1,34,626/- (b) The ld ITO did not consider the Indexation of building which is as per balance sheet is Rs. 7,43,534/- and the plot for development includes the cost of bungalow at the sight which is handed over to the builder/developers and whose entire debris, Malaba, etc., was taken by developers as per the development agreement and the cost since 1980 and as on 31.3.2004 is Rs. 7,43,534/-. It comes to Rs. 35,68,961/- or Rs. 37,17,670/-. The accrual of long term capital gains on land and building be accepted. &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee to protect his interest by taking the correct legal plea that on account of his transfer with M/s Vinita Estate Pvt Ltd., no income chargeable to tax including long term capital gains has arisen or accrued to the assessee. This legal stand of the assessee can be adjudicated on the basis of material already on record and no fresh enquiry is needed. This legal stand taken by the assessee is supported by several orders of the ITAT and various High Courts including the jurisdictional High Court of Bombay. 9. After hearing both the sides and following the decision of the of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 and in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85 (SC), the additional grounds raised by the assessee are admitted. 10. The ld counsel for the assessee submitted that the assessee has not acquired or received any constructed area over and above the area of 11835 sft., to which the assessee was entitled to. The additional FSI was actually brought by the new comer and the assessee has only permitted the developer to construct. Since no cost has been incurred for the additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Referring to the decision of the Tribunal in the case of Om Shanti Cooperative Society Ltd. (supra), he submitted that there was no demolition of building and there was further construction to the existing building. Referring to the copy of the agreement, he submitted that it is not clear as to how the assessee and his wife are owners of 11835 sqf. FSI. He further submitted that in the assessee's case, the entire building has been transferred. Referring to the various decisions cited by the ld counsel, he submitted that in all those cases, the existing building was not demolished and only further construction/modifications were done to the existing building. However, in the instant case, the entire building has been demolished and new construction took place. Therefore, the various decisions relied upon by the ld counsel for the assessee are not applicable to the facts of the present case. He submitted that the documents have been registered by the State Registration Authorities; therefore, the Assessing Officer had no other option but to apply provisions of sec. 50C. Here, there is a building. Therefore, the ld CIT(A) was justified in upholding the action of the Assessing Off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermined such capital gain at Rs. 1,85,81,506/-. After allowing exemption u/s 54/54EC, the Assessing Officer brought to tax the capital gain of Rs. 76,64,008/- which has been upheld by the CIT(A). It is the submission of the ld counsel for the assessee that since there is no transfer of land and since the builder/developer brought additional FSI and since no part of the FSI belonging to the assessee has been transferred; therefore, in view of the various decisions cited the assessee is not liable to pay capital gain tax. It is the submission of the ld DR that the decisions cited by the ld counsel for the assessee are not applicable to the facts of the present case since in none of the cases, there is demolition of the building and on those cases, there was only further construction or modification to the existing building. 12. We find merit in the above submissions of the ld DR. We find the assessee before the Assessing Officer vide his reply dated 27.11.2007 has submitted as under: "The assessee asserts that there is transfer of right, title and interest in the plot of land. The word transfer in sec. 2(47) includes extinguishment -relinquishment of right, title and interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Act, and the receipt of consideration of Rs. 1,09,17,500/- was a capital receipt and exigible to capital gain tax (long term in our case) and such consideration as not income from other sources, as it is for plot and development share of developers. Further the assessees feels and fees strongly that consideration received from developer under the development agreement related to land and FSI of plot of land being capital asset (and not any business activity or any other income earning activity) and as such was a capital receipt (not revenue receipt) exigible to capital gain tax." We find clause (p) at page 4 of the agreement reads as under: Cl.(p) "Since the owners are retaining 50% of the area the developers are entitled to develop the remaining 50% area and retain the same." Cl.4.3 at page 6 and clause 17 at page 8 and 9 of the agreement read as under: Cl.4.3: The owners have retained FSI of 11,835 sq.ft FSI originating from the said land and the owners have agreed to pay to the developers the costs of construction thereof fixed at Rs. 1000/- per sq. foot. The amount payable by the owners to the developers workout to Rs. 1,18,35,000/-(Rupees one core eighteen lac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her sources' as against 'capital gain' declared by the assessee and the CIT(A) directed the Assessing Officer to consider the same as 'capital gain' and allow deduction u/s 54 and 54EC. Therefore, that decision, in our opinion, is also not applicable to the facts of the present case. 13. Considering the totality of the facts of the present case and considering the fact that the assessee in the instant case has transferred the land and building to the developer through a document, which has been registered through State Registration Authorities; therefore, there is transfer of a capital asset, the capital gain on which is chargeable to income tax. In this view of the matter, both the additional grounds raised by the assessee are dismissed. 14-15. Now coming to the original grounds raised by the assessee, we find grounds of appeal nos 1, 5, 6 &7 are general in nature and, therefore, are dismissed. 16. So far as grounds of appeal no.2 is concerned, we find the CIT(A) has clearly mentioned that provisions of sec. 50C are clearly applicable to the facts of the present case. We have already held in the preceding paragraphs that in this case there is transfer of land and building....