TaxTMI 
TaxTMI 
2018 (10) TMI 58
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.... as consideration received under development agreement. 3. The CIT (A) has erred in upholding the cost of construction incurred by the developer as consideration ignoring the fact that the assessing officer has overlooked the objection of inclusion of probable costs that may be incurred in construction area to be developed by Incor Infrastructure in the cost of construction. 4. The CIT (A) has erred in upholding the adoption of cost of construction incurred by the developer as consideration for calculating Long term capital gains. 5. The CIT (A) has erred in upholding the amount not paid by the developer to M/s Kohli Constuctions of Rs. 1,16,00,000 (Rs. 1,76,00,00 - 60,OO,OOO} as part of cost of construction. 6. The CIT (A) has erred in upholding the adoption of Rs. 21,38,39,466 as consideration received under development agreement for calculating capital gains. 7. The CIT (A) has erred in upholding the amount not paid by the developer to M/s Kohli constructions as part of cost of construction ignoring the fact that the amount payable to M/s Kohli Construction was offered to capital gains tax in Udai Health Care Private Limited as their ....
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....be adopted at Rs. 3199/- per sft. The assessee filed its reply dated 7.12.2016 submitting that as on the date of the filing of the return of income on 29.09.2014, the cost of construction was not available and therefore, the SRO value as on the date of the transfer was adopted as the cost of construction for computing the long term capital gains. 4. The AO was however, not convinced with the submission of the assessee and held that the cost of construction to the builder alone is to be adopted as the consideration received by the assessee. Further, he also observed that the assessee had entered into an agreement with M/s. Kohli Constructions prior to the agreement dated 5.10.2013, and that M/s. Incor Infrastructure Pvt. Ltd had agreed to pay Rs. 1,76,00,000 to the builder Kohli Constructions, but, in effect only Rs. 60.00 lakhs was paid. The AO, therefore, took the entire amount agreed to be paid as part of cost of construction and arrived at a sum of Rs. 21,38,39,466 as the total cost of construction for 63235 sq.ft and worked out the per sq.ft cost at Rs. 3,381.65. Taking the same into consideration, the AO worked out the long term capital gain falling to the share of the asse....
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....ed to the language used in section 50C where there is a reference to the SRO value as fair market value. He referred to clause (viia) and (viib) of section 56 of the I.T. Act, where it is provided that where an immovable property is transferred without consideration, the stamp duty value of which exceeds Rs. 50,000, the stamp duty value of such property shall be considered as the value of the property received. Therefore, according to him, the assessee had rightly adopted the SRO value and that should be accepted by the authorities below. 7. Without prejudice to the above arguments and in the alternative, the learned Counsel for the assessee submitted that if the cost of construction has to be taken into consideration, the matter should be remanded to the file of the AO for taking only the relevant factors constituting the cost of construction, such as the payment made to Kohli Construction, (the actual payment and not the agreed amount) and by reducing the finance and other costs incurred by the Developer. He submitted that as far as the assessee is concerned, the value of the property received by the assessee alone should be considered and that should be the actual cost of con....
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....wed this decision to hold as under: "6. There is no dispute that the appellant had transferred his shares in SISCO to Essar on the basis of the offer made by Essar. In the absence of any suggestion of bad faith or fraud, the true principle is that the taxing statute has to be applied in accordance with the legal rights of the parties to the transaction. When the transaction is embodied in a document, the liability to tax depends upon the meaning and context of the language used in accordance with the ordinary rules of construction [CIT v. Motors & General Stores (P) Ltd. (1967)] 66 ITR 692 (S.C). In the case of a sale for a price there is no question of any market value unlike in the case of an exchange. The consideration for transfer of the shares in the instant case is not only cash, but also shares. In a case where the value of a share is not specified in terms of cash, necessarily the same has to be fixed in terms of the market value [Motors & General Stores (P) Ltd. v. CIT (1967] 66 ITR 701 (A.P).. 7. We find that Essar in the offer has clearly stated that as on 28th Feb., 1991, the closing market price of Essar equity shares was Rs. 38.50 at Madras ....