PANDHARINATH BALKRISHNA GHARAT,RAIGAD vs. ITO WD 2, PANVEL

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-2, Thane [in short CIT(A)], in appeal No. 072/14-5 dated 30.11.2015. The assessment was framed by the Income Tax Officer, Ward-2, Panvel (in short ‘ITO’/ ‘AO’) for the A.Y. 2011-12 vide order dated 14.03.2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

“1. The Ld. CIT(A) has erred in considering only the lease premium paid as cost and thus, has erred in disregarding the contention that fair market value on the date of allotment be treated as cost of the plot in addition to the lease premium paid.

2. The Ld. CIT(A) has erred in relying on the decision of ITAT, Mumbai in the case of ITO v. Hemant R. Tandel despite the fact that the issue had been already settled by a speaking decision of ITAT. Mumbai in Vie case of Shri Atul Puranik.

3. The Ld. CIT(A) has also erred in relying on the decision of ITAT, Mumbai in the case of ITO v. Hemant R. Tandel despite the fact that the said decision in Tandel's case was delivered without appreciating the true spirit of the decision in the Atul Puranik's case.”

acquired in the form of plots. In lieu of this notification, a plot was allotted to the assessee vide ‘sodat’ No. 4 dated 17.08.2007. Thereafter, CIDCO entered into lease with the assessee dated 14.07.2007 and assessee was allotted plot No. 67-A, Village Dronagiri, Tehsil-Uran District Raigad under 12.5% scheme of CIDCO. The assessee sold this plot to one Shri Shraddha Enterprises vide sale agreement dated 24.07.2010 entered into and sale consideration was ₹ 52.25 lakhs. The AO computed the capital gains on sale of this plot and adopted the stamp duty valuation of ₹ 69,38,500/- under section 50C of the Act instead of value of sale consideration declared by assessee at ₹ 52.25 lakhs. The AO computed the capital gains by taking the cost of acquisition being lease premium of ₹ 7845/-. The CIT(A) after going through the judgement of ITAT Mumbai in the case of ITO vs. Shri Hemant R. Tandel in for AY 2008-09 vide order dated 22.04.2015 decided by directing the AO to adopt the value of sale consideration as recorded in the registered sale deed and reproduced the observations of ITAT as under: -

“cost of acquisition. In the case of Shri Arul G Puranikl (supra) the Tribunal has held that the actual cost or alternatively the market value of the leasehold right should be taken as cost of acquisition. In the present case, the assessee has paid cost towards these impugned 2 plots as ₹ 1,63,212/- which has also been ascertained by the authorities and confirmed by them. As actual amount paid by the assessee for getting the leasehold right in these plots is available on record, it is necessary for adopting market value of the same. As mentioned above, the view is also supported by the decision in the case of Shri Atul G. Puranik (supra). Accordingly ₹ 1,63,212/- is the cost of acquisition of the two plots rightly taken by the Ld.

CIT(A) and therefore Tribunal does not find any error or infirmity in this finding the Ld. CIT(A). Ground No.1(a) of assessee’s appeal is accordingly dismissed.”

Aggrieved, now assessee is in appeal before Tribunal.

“10.5 Having held that sec. 49(1) is not applicable, the immediate question which arises for consideration then is that what is the cost of acquisition of rights in the Plot transferred on 25-08- 2005 to M/s. Pathik Construction. The ld. A.R. argued that the market value of the plot of land on the date of allotment should be taken as the cost of acquisition, as has been held by the Tribunal in ACIT v. Nirmal Bhogilal (supra). From the factual matrix of the case, it is noted that the assessee was allotted rights in the Plot on 16-08-2004 as compensation for the acquisition of lands acquired by the Special Land Acquisition Officer way back in the years 1970/72. The value of rights in the Plot is quid pro quo for the acquisition of lands from assessee's father in the past. In other words, the market value such rights in the Plot was considered by the State Govt. as compensation for acquisition of land in earlier years. If such rights in the Plot had not been allotted, then the assessee would have been given cash equivalent to the market value of such rights as compensation for acquisition of lands. As it is a transaction with the Government, the question of any under-hand payment also stands ruled out. Sec. 48 deals with the mode of computation of income chargeable under the head 'Capital gains'. It provides that such income shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the cost of acquisition of the asset and the cost of improvement, if any, along with the expenditure incurred wholly and exclusively in connection such transfer. The full value of the consideration received or accruing as a result of the acquisition by the Govt. is the amount given as consideration for such acquisition or in the alternative the market value of any other capital asset given to the assessee against such acquisition. As in the instant case the Govt. has allotted rights in the Plot as the full value of consideration on the acquisition of lands by it in the years 1970/72, the market value of such right is to be considered as full value of consideration at the time of computing capital gain on the first transaction in the preceding year. Once a particular amount is considered as full value of consideration at the time of its purchase, the same shall automatically become the cost of acquisition at the time when such capital asset is subsequently transferred. Thus, the full value of consideration should mean the market value of the lease rights in the Plot for sixty years at the time of the first transaction which was completed on 16-08-2004, and the Plot became subject matter of transfer in the current year on 25-08-2004. We, therefore, set aside the view taken by the ld. CIT(A) on this issue and hold that the market value of such lease rights for sixty years in the Plot as on 16-08-2004 shall constitute the cost of acquisition for the purpose of computing capital gain when it was assigned for a consideration of Rs.2.50 cores on 25-08- 2005. The AO is directed to determine the cost of acquisition in terms indicated above after allowing a reasonable opportunity of being heard to the assessee.”

term capital gain accordingly. This issue of assessee’s appeal is allowed for statistical purposes with the above directions.

“4. The Ld. CIT(A) has erred in not adjudicating upon the additional ground no 2 which states that; As the lease agreement was entered into between CIDCO and the appellant in respect of said Plot only on 141 July. 2010, the date of acquisition of plot be adopted as 141 July, 2010. The Appellant craves leave to add, amend, supplement, alter and/or delete any of the above Grounds of Appeal.”

Order pronounced in the open court on 21-08-2018.