MR. VIVEKANAND PADEGAL,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7(2)(1), BENGALURU

This appeal is filed by the assessee and the same is directed against order of learned CIT(A)-7, Bengaluru, dated 25.10.2017, for Assessment Year 2013-14.

The grounds raised by the assessee are as under:

In the course of hearing, it was submitted by learned AR of the assessee that in the present case, it is the case of the assessee that for computing Long Term Capital Gain (LTCG) in respect of the sale of land given for joint development, Guidance value of the land @ Rs.3,200/- per sq. ft. on the date of Joint Development Agreement should be adopted and the assessee has filed the return of income by declaring LTCG of Rs.35,85,121/- on this basis but the AO has obtained information under section 133(6) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) from the developers regarding cost of construction by the developer and as per letter dated 08.03.2015, the developer intimated to the AO that cost of Rs.1575/- per sq. ft. was incurred by the developer and the AO computed the capital gain on this basis. He placed reliance on the following Tribunal orders in support of his contention that guidance value of land should be adopted:

Thereafter he pointed out that in para 5.1 of his order, learned CIT(A) has decided the issue by following another Tribunal order rendered in the case of ITO Vs. N. S. Nagaraj as reported in 52 taxmann.com 511 (Bang), copy available on pages 42-48 of the Paper Book. He pointed out that in this case, the Assessment Year involved was Assessment Year 2007-08 but in the present case, the Assessment Year involved is Assessment Year 2013-14 and there is an amendment in the Income Tax Act w.e.f. 01.04.2013 i.e. relevant to A. Y. 2013-14 by way of insertion of a new section i.e., section 50D by Finance Act, 2012, as per which it is provided that if the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. He further submitted that in the present case, the JDA was entered on 05.12.2012 and therefore, the transfer has taken placed on this date and the consideration to be received by the assessee is 50% of the super built up area of commercial complex, etc., to be constructed by the builder and therefore, in the year of transfer of the asset, such cost of construction cannot be determined because

As against this, learned DR of the Revenue supported the orders of CIT(A) and AO and he pointed out that the Assessment Order is dated 28.03.2016 and it is noted by the AO on page 2 of the Assessment Order that reply is received from the builder as per letter dated 08.03.2016 as per which cost of construction was intimated by the builder at Rs.1575/- per sq. ft. and therefore, the cost of construction is available and hence, section 50D of the Act is not applicable.

We have considered the rival submissions and we find that in the facts of the present case, section 50D of the Act is applicable because the consideration to be received by the assessee is 50% of super built up area in the form of commercial complex etc. to be constructed by the builder and therefore, such cost of construction to be constructed in future cannot be determined in the year of transfer and hence, under these facts, section 50D of the Act is applicable and therefore, the stand of the assessee deserves to be accepted as per which the assessee has computed the long term capital gain by adopting guidance value of the land at Rs.3,200/- per sq. ft. transferred by the assessee to the builder and the stand of the AO is not acceptable. Hence, we decide the issue in favour of the assessee.

In the result, assessee’s appeal is allowed. Pronounced in the open court on the date mentioned on the caption page.