INCOME TAX ACT, 1961

Section 48

Capital gains - Computation - Cost of acquisition - Value of land to be considered for purposes of computing capital gains

Assessee was in business of manufacture and sale of allopathy medicines and entered into joint development agreement with M/s P and also executed a supplementary agreement. Assessee accordingly handed over the possession of factory building duly converted into vacant land. AO was of the opinion that, capital gain arose to assessee during the previous year when JDA was executed and the possession of land was handed over to developer. Assessee was called upon by AO to show cause as to why capital gain should not be worked out, taking into account cost of construction attributable to the developer, as reflected in their books of account, as sale consideration received, for purposes of computing capital gains. Assessee filed various details and submitted that developer handed over physical possession of constructed premises to assessee, and transferred 50% undivided interest in the land during accounting year ended and as per section 50C, the value of undivided right must be determined as per the guidance value fixed by the registration authority as the JDA entered was registered. AO after considering submissions, rejected claim of assessee and thus, computed capital gains in hands of assessee. Held: Decision of High Court in case of CIT v. Ved Prakash Rakhra (2012) 210 Taxman 605 (Karn) : 2012 TaxPub(DT) 3206 (Karn-HC) wherein it was submitted that there was substantial difference between cost of construction adopted for purpose of computing capital gains on sale of capital assets and expenditure booked by the developer in the course of construction activity. Therefore, appeal of assessee was allowed.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2006-07

INCOME TAX ACT, 1961

Section 48

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