TaxTMI 
TaxTMI 
2019 (11) TMI 329
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee has not incurred any cost in acquiring the constructed area of 41,257 sq. ft. from M/s Keshav and Co. For this assessee has raised the following ground No. 1 in the original grounds of appeal: - "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 17,22,43,975/- by considering the cost of acquisition by the assessee at market value even when the assessee has not incurred any cost of acquiring the constructed area of 41,257/- sq. ft. from M/s Kesav & Co." 3. Subsequently, the Revenue has raised the additional grounds, which are exactly on the same issue and the grounds are also argumentative but for the sake of clarity, we are reproduced these grounds which are as under: - "1. (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the cost of 41,257 sq.ft. of area in the hands of the assessee to be equal to the consideration of Rs. 17,22,43,975/- received from M/s. Keshav & Co., accordingly, the capital gain would be NIL, without considering the fact that 41,257 sq.ft. of area was part of 76,752 sq.ft. of which the assessee received along with Rs. 16,30,00,000/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e retired from the firm vide retirement deed dated 30.04.2005 and as per retirement deed he is entitled to receive certain amount in cash or certain share in property to be constructed by the firm. The following were noted by the AO in assessment order: - "1. Rs. 16,30,00,000/- inclusive of amount standing to credit. 2. Constructed Area of 76,752 sq. ft. in the property developed by the firm. 3. Out of 76752, 41257 sq. ft. the continuing partner had the right to purchase for Rs.17,22,47,975/-." 5. The AO noted that in view of the retirement deed, the assessee received a sum of Rs.16.30 crores as against the sum of Rs.13,65,87,588/- i.e. an excess amount of Rs.3,64,16,412, which was treated by the AO as capital receipt but CIT(A) deleted the same and Revenue is not in appeal against the order of the Assessing Officer. The AO assessed the amount of Rs.17,22,47,975/- as a short term capital gain on account of surrender of 41,257 sq. ft of area. The facts relating to this issue are that the assessee owned a piece of land admeasuring 21,457.36 sq. mtrs at cadastral survey number 156 of Lower Parel division 95 Ganpat Rao Kadamb Marg, Lower Parel Mumbai-13. Under deed of partnershi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has not been specified even in section 49 Therefore, provision of section 49 cannot be made applicable to the appellant and therefore, cost cannot be determined u/s 49 of the income Tax Act. 1961. Thus, the cost cannot be determined either under section 49 or under normal provisions. Under section 55(2), certain situations have been specified where cost of acquisition shall be 'NIL', however, in the present case 'cost of acquisition' cannot be 'nil as the same has not been specified u/s 55. Since cost cannot be determined under any of the provisions specified under the Income Tax Act 1961, the general guidelines available in view of the ruling given by the Hon'ble Court as specified above and relied upon by the appellant shall prevail, therefore, market value on the date of receipt needs to be considered as cost of acquisition. 11.1 Since the appellant has received the entitlement of the 41.252 sq. ft. constructed area on 30.04.05, market value as on 30.04.05, needs to be considered as Cost of Acquisition. Since market value of the entitlement as on 30.04.05 is of Rs. 17,22,47,975/- is the same as of 'sale value', there remained no capital gain There....
X X X X Extracts X X X X
X X X X Extracts X X X X
....firm M/s Keshav and Co. exercise its option whereby the constructed area of 41,257 sq. ft. there purchase from the assessee for a sum of Rs.17,22,47,975/-. We noted that the learned Counsel for the assessee before us argued that the right to receive the constructed area was acquired by the assessee vide retirement deed dated 30.04.2005 and therefore, the market rate prevailing on such date need to be considered as cost of acquisition on such cost of acquisition capital gain having need to be calculated. But, the learned Counsel argued that the cost of acquisition could be nil only when specifically provided in the statute book under section 55(2) of the Act. The assessee company further argued that once the cost of acquisition is taken at prevailing market rate as on 30.04.2005 then there will not be any capital gain as market value as on 30.04.2005 and sale consideration remain the same. To support this, the assessee submitted the copy of circle rates i.e. ready reckoner rate of sub registrar issued from time to time. Now, the question arises whether the sale of 47,257 sq. ft. area out of the total area received from firm as 76,752 sq. ft. for a sale consideration of Rs.17,22,47,9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the cost of 35495 sq. ft. of area in the hands of the assessee @ Rs. 4,175 per sq. ft. to be equal to the consideration of Rs. 77,35,36,269/- received from M/S. Keshav & Co., accordingly holding that without considering the fact that 35495 sq. ft. of area was part of 76,752 sq. ft. of area which the assessee received along with Rs. 16,30,00,000/- vide Clause 6 of the Retirement deed dated 30/04/2005 in lieu and in full satisfaction of its 50% share in partnership firm and the assets thereof. (II) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that cost of acquisition for 35495 sq. ft. area should be taken as the market price as there is no statutory provision in the Act to take cost of acquisition to be equal to the market price of what is acquired'. (iii) On the facts and circumstances of the case and in law, the Ld. ClT(A) erred in holding that the cost of 35495 sq. ft. of area in the hands of the assessee was equal to the market price as on the date of acquisition without appreciating the fact that the assessee has forgone a sum of Rs. 2,65,83,588/- (Rs. 12,65,83,587/- shown in capital account - Rs. 70,00,00,000/- received back....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions and the relevant computation read as under: - "Full value of consideration 237325000 (Apsara Cinema on 05.09.2008) Less: Cost of Acquisition Date of Retirement Deed 30.04.2005 (35495 sq. ft @ 4175) 148191625 Indexed cost of acquisition 148191625 X 582 = 173536269 497 Stamp Duty 5933125 179469394 57855606." 11. The AO adopted the cost of acquisition at nil in the current year in respect of this balance area of 35,495 sq. ft. and computed the entire consideration as capital gain amounting to Rs.23,73,25,000 as against computed by assessee at Rs.5,78,55,606/-. Thereby the AO made addition under the head capital gains at Rs.73,35,36,269/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the addition by taking the market value considered as cost of acquisition as on 30.04.2005 and deduct the market value as on 30.40.2005 being ready reckoner rate at the rate of 4175. For this the CIT(A) directed the AO as under: - "3.5 In essence, it has been held by my Ld. Predecessor that the appellant received the entitlement of the 76752 sq. ft. constructed area on 30.04.2005; therefore, the market value as on 30....