INCOME TAX ACT, 1961

Section 45 Section 50C

Capital gains - Computation - Exchange of land -

Assessee had claimed total capital loss from exchange of lands with lands from another person at Rs. 83,06,380 and claimed set-off against long term capital gains. Before AO, the assessee argued that when layout was formed with various survey numbers lands belonging to other persons including Smt. Ambikavathy was by mistake included. Therefore, a compromise arrangement was entered into with owners of other lands and accordingly exchanged his land with their lands by way of registered sale deed. However, there was no consideration received for transfer of lands. Therefore, he computed capital gains/loss by taking into account market value of land transferred by him in exchange of market value of land received from other persons. AO, however, was not convinced with explanation furnished by assessee. According to AO, as per section 2(47), transfer in relation to capital asset, included (i) the sale, exchange or relinquishment of the asset or (ii) the extinguishment of any rights therein. Since there was no disagreement with the submissions of assessee that exchange of properties fell within the ambit of transfer, AO by taking into account guideline value of the property, as per section 50C computed long-term capital gains, after allowing cost of acquisition of properties. Held: Once, the impugned transfer or sale of land in exchange fell within the definition of 'transfer' under section 2(14), then capital gains arising out of transfer of said land was to be computed in accordance with law by taking into account full value of consideration. In the instant case assessee computed capital loss by taking into account market value of land transferred by him in exchange of market value of land received from other persons, and computed capital loss. While AO computed long-term capital gains by taking into account full value of consideration accruing as a result of transfer by applying section 50C and adopted guideline value of the property as on the date of transfer. Further, AO allowed cost of acquisition in accordance with law and arrived at net capital gains in respect of both the properties. The method adopted by AO was in accordance with law and did not call for any interference.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 254(1)

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