TaxTMI 
TaxTMI 
TaxTMI 
2011 (4) TMI 855
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..... 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. (ii) The above said building was demolished for redevelopm....
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....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/- Bonds u/s 54EC 50,00,000 Net capital gain 42,75,340/- 3.3 The Assessing Officer, thereafter, noted that in the case of ....
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....at 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 amount actual cost of building as per balance sheet viz Rs. 7,43,534/- can be reduced to find out cost of acquisition of land as on 1.4.81, even though valuati....
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....me, 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 was further submitted that when the agreement was put up for registration, stamp valuation authorities took the value at Rs. 3,82,50,000/- and the Assessing Officer has invoked provisions of sec. 50C to adopt this figure of Rs. 3,82,50,000/-. The assessee ascertained....
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....bsp; 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. (c) The working filed by the assessee at Rs. 39,32,160/- may kindly be accepted. The receipt of Rs. 1,09,17,500/- received as consideration includes the cost of the land and the bungalow thereon. (d) The appellant prays that the order of the Assessing Officer may....
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....ready 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 additional FSI, therefore, there is no capital gain. He further submitted that section 50C also cannot be applied to the assessee in view of the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia of Bombay (supra). Referring to the above decision, he drew the attention of the Ben....
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....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 Officer since it is a clear transfer of capital asset falling under the provisions of sec. 50C. 10.3 The ld counsel for the assessee, in his rejoinder submitted that there is no transfer of land and the land continued to be belonging to the assessee. Only the builder brought new FSI/TDR and no FSI, which were originally with the as....
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....dditional 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 in property. It is submitted that even though there was no sale of plot of land or transfer of right, title and interest in the said plot of land and the assessee continues to be the joint holder - owner of plot in the record of the society, in fact and in substance, the assessee is a holder/owner on paper because the plot is not open p....
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.... 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 lacs thirty five thousand only and therefore each owner is liable to pay Rs. 59,17,500/- i.e ( Rupees fifty nine lacs seventeen thousand five hundred only) Against the receipt the balance amount mentioned in clause 4.1(b) the owners will pay the developers the said costs of construction in advance." Cl.l7:On the license being granted the Developers shall be....
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....he 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 to the developer and therefore, provisions of sec. 50C are clearly applicable to the facts of the present case. In this view of the matter, grounds of appeal no.2 by the assessee, is dismissed. 17. So far as grounds of appeal no3 is concerned, we find the assessee has not produced any documentary evidence before us to substantiate that in the case of spouse, who is a....