Asif Khaleel (Individual) v. ITO [ITA Nos. 2494 to
2496/Bang/2019, dt. 3-12-2020] : 2020 TaxPub(DT) 5024 (Bang-Trib)
Method of computing Capital gains on property acquired thru
a JDA
Facts:
Assessee's along with their siblings entered into a Joint
Development Agreement (JDA) to develop a property separately by which on one
they were all entitled to 52,784-51 sq. ft. built up area. Possession was
handed over in F.Y. 2005-06 and assessee and their siblings also received 5
flats individually and 4 flats jointly in F.Y. 2011-12. The capital gains on
this was not offered in the assessment year 2006-07 by none of the Assessee's.
Separately during F.Y. 2008-09 only 4 of the assessee's siblings entered into
another JDA for another property where in possession was handed over and they
were entitled to 37,537 sq. ft. commercial built up area and 36,301 sq. ft.
residential built up area. 32 flats were thus allotted under this JDA in
February 2013. This was also not offered to capital gains in the assessment
year 2009-10. During the F.Y. 2013-14/A.Y. 2014-15 (appeal year) the assessee's
sold 2 of the jointly held flats (from the first JDA of F.Y. 2005-06 and 4
flats jointly in out of the second JDA of F.Y. 2008-09). Assessee's originally
did not declare the capital gains here as well. Arising out of a notice they
filed a statement of computation of capital gains where they claimed cost of
acquisition was based on a range price of Rs. 13.67 lakhs to 15.90 besides also
claiming cost of improvement of 6.5 lakhs on each of these flats. On further
scrutiny the consideration in the sale agreement was taken as actual sale
consideration which was not disputed. It was the case of the revenue that since
both the JDA were not offered to capital gains tax the indexation benefit of the
cost of land alone can be given and negated cost of improvement as well. On
appeal Commissioner (Appeals) voiced the views of the assessing officer except
allowing cost of improvement @ 3 lakhs per flat. On further appeal assessee's
claim was that the capital gains be computed in two stages --
1. At the time of JDA the fair
market value of the allotted property to the assessee be taken as the cost of
acquisition and then the capital gains of this be derived.
2. Against the sale
consideration now the said fair value already taxed be offered as indexed cost
and capital gains be computed proportionately for the said flats.
This did not meet the eye of the Commissioner (Appeals). On
further appeal --
Held in favour of the assessee that the method of
computation has to be as per the assessee, the revenue cannot take the plea
that since they did not offer the capital gains on the JDA the cost of
acquisition at fair value cannot be taken now at the time of the actual sale.
To recompute the capital gains the case was restored to the assessing officer
accordingly.
Applied: Dr. T.K.
Dayalu (2011) 14 taxmann.com 120 (Karnataka-HC) : 2011 TaxPub(DT) 1642
(Karn-HC)