TaxTMI 
TaxTMI 
2015 (3) TMI 1016
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....rporation (hereinafter referred to as "Concorde Housing"), a developer of residential layout of sites as well as builder, developed housing sites known as Silicon Valley in Sy. Nos. 85, 164, 165 & 166 of Doddathogur Village, Begur Hobli, Bangalore South Taluk. The assessee purchased a house site bearing No.197. Concorde Housing also agreed to convey the land and construct a Villa for the assessee. One of its sister concerns, Concorde Shelters Pvt. Ltd. (hereinafter referred to "Concorde Shelters") agreed to construct a villa on the site sold by Concorde Housing to the assessee. By a registered sale deed dated 21.10.2004, the site was conveyed to the assessee for a sale consideration of Rs. 9 lakhs. The cost of construction of Villa was Rs. 24,39,526. The assessee had to pay the cost of construction of Villa in instalments as set out in the agreement dated 4.10.2004 between the assessee and Concorde Shelters. Ultimately construction of Villa got completed in the year 2008 only. The assessee agreed to sell the land as well as Villa under an agreement for sale dated 5.5.2008 to one Shakti Mohan for a consideration of Rs. 58,96,006. The land as well as Villa was ultimately sold to Shak....
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....nd the cost of any improvement thereto. In view of the above provision, he was of the view that the sum of Rs. 7,82,394 claimed as deduction cannot be allowed as it is neither cost of acquisition or improvement to the land nor is it wholly and exclusively incurred in connection with the transfer. The AO therefore added the said amount to capital gains and brought to tax. 8. Aggrieved by the order of AO, the assessee preferred appeal before the CIT(Appeals). 9. The CIT(Appeals) had to address the question as to whether the interest paid on loans borrowed for acquiring the property which was not allowed as a deduction while computing capital gain, can be allowed as a deduction? The CIT(A) without going into this question, went into the question of correctness of the assessee having bifurcated the capital gain on sale of land and Villa into long term and short term capital gains. According to CIT(A), the transaction for purchase of land and building was a single integrated transaction and therefore AO ought not to have accepted the bifurcation of capital gain on sale of land and building into long term and short term capital gains. The CIT(A) was of the view that consequent bene....
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....spect of the component of 'land' comprised in the property sold to Sakthi Mohan. Since the period of holding of both the land and the constructed villa thereon was less than 36 months as discussed above, the proceeds of the transfer are to be considered for computation of Short Terms Capital Gains only." 12. The CIT(Appeals) ultimately directed the AO to assess the entire gain as short term capital gain by adopting the full value of consideration on transfer at Rs. 58,96,006. 13. Aggrieved by the order of CIT(Appeals), the assessee has preferred the present appeal before the Tribunal. 14. We have heard the rival submissions. The ld. counsel for the assessee reiterated submissions as were made before the AO/CIT(A). The ld. DR relied on the order of CIT(Appeals). 15. We have given a very careful consideration to the rival submissions. From a perusal of agreement dated 4.10.2004 between the assessee and Concorde Shelters, it is clear that Concorde Shelters agreed to construct a Villa on the plot sold by Concorde Housing. Clause 5 of the said agreement is very material and it reads as follows:- "5. The first party hereby irrevocably permits and authorizes the second part....
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....ave carefully considered the rival contentions of both parties. The expression "capital asset" is defined in s. 2(14) of the Act as under : "Capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include - (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or professions, .......... (iii) agricultural land in India, etc. The key words of the definitions of capital asset found in s. 2(14) are the property of any kind and the term comprehends and includes within itself any interest in the property. It may be movable or immovable property or any interest thereon. The term 'short-term capital asset' is defined in s. 2(42A) of the Act as under : "Short-term capital asset" means a capital asset held by an assessee for not more than sixty months immediately preceding the date of transfer". During the relevant period, s. 2(42A) of the Act prescribed the period of thirty six months. The emphasis that is given in s. 2(42A) is that the capital assets should be held by an assessee for a period not more than 36 months immediately preceding the date f....
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....nstruction of the building, that the land which was a longterm capital asset, has ceased to be a long-term capital asset. The land is an independent and an identifiable capital asset, and it continues to remain as an identifiable capital asset even after construction of building and at the time of the sale of the house. Since the land was held by the assessee for a period exceeding 36 months, the land cannot be regarded as a short-term capital asset only by virtue of the construction of building thereon. Hence we are unable to accept the contentions of learned counsel for the Revenue that it is not possible to bifurcate the capital asset into two. We are of the opinion that the Tribunal has come to a correct conclusion that it is possible to work out capital gain with reference to sale of building and land separately. The decision of the Supreme Court in State of Kerala vs. P. P. Hassan Koya (supra) relied on by the learned counsel for the Revenue has no application to the facts of this case as it deals with the case where compensation was payable in respect of land and building and in that situation, the Supreme Court has held that both the land and building should be valued as on....