ASSISTANT COMMISSIONER OF INCOME TAX,, MANGALORE vs. M/S CPC LOGISTICS LTD, MANGALORE

Per Shri Vijay Pal Rao, J.M. : This appeal by the revenue is directed against the order dt.13.08.2014 of Commissioner of Income Tax (Appeals), Mysore for the Assessment Year 2006-07.

“1. The order of the learned CIT (Appeals) is opposed to law and facts of the case.

3. The learned CIT (Appeals) erred in holding that the two properties located in Kodialbail village were not located in the same area despite evidence to the contrary available in the schedule to the sale deeds.

4. For these and such other grounds it is urged that the order of the learned CIT (Appeals), on the above points may be set aside and the order of the Assessing Officer be restored.

5. The appellant craves leave to add, alter or amend all or any of the grounds of appeal before or at the time of the hearing of the appeal.”

4. We have heard the learned D.R. as well as learned A.R. and considered the relevant material on record. The CIT (Appeals) in the impugned order has held that the capital gains in respect of the land has arisen on the date of JDA in view of the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. Dr.T.K. Dayalu 292 Taxman 531 wherein the Hon'ble High Court has held that the transfer of the land under JDA constitutes transfer as per the provisions of Section 2(47)(v)

r.ws. 53A of the Transfer of Property Act. However, the CIT (Appeals) has further held that the deemed consideration of the land should be adopted as fair market value of the built up area to be received by the assessee as on the date of JDA and based on the Govt. records in para 6.9 as under :

6.9 I find that the admission of the appellant is also in line with the decision of Hon'ble Karnataka High Court in as much as the appellant is admitting the capital gains on the date of sale deed treating it as transfer. JDA is also in the same previous year. The only dispute is regarding the value of consideration and in my considered opinion I find strength in the argument of the appellant that it would be reasonable to adopt the fair market value based on the government records as deemed consideration on admitted consideration whichever is higher for the purpose of calculation of capital gains. Hence, subject to the observations regarding the cascading effect of this in future, I direct the Assessing Officer to compute the capital gains accordingly.

“ 7. We have heard both parties and have considered the relevant material available on record.

The learned DR argued that the portion of the constructed apartment that are to be assigned to the assessee has already been decided and crystallized and considering the scenario, it is only logical that the value of these apartment be considered as sale consideration. Further it was argued by the learned DR that assessee should only treat the cost of construction as sale consideration and not the market value of the asset because, the assessee is not selling the apartment and is only receiving them hence, the true value of asset is the cost of construction which is actually money spent in bringing the assets to life.

The learned DR further relied on the judgment of the Coordinate Bench of the ITAT at Hyderabad in case of Smt Prathima Reddy Vs ITO, Ward-6(4) (2012) 25 Taxmann.com 264(Hyd.) and emphasized that similar issue was decided by the said Bench, as the said Bench determined the cost of construction while transferring the assets.

On the other hand, learned AR relied on the orders of CIT(A) and submitted that the learned CIT(A) was agreed on the submissions of the assessee that for the deemed transfer of JDA the logical deemed consideration has to be guidance value of property and even otherwise it was observed by the CIT(A). Even on the date of transfer, the capital gains can only be worked out on the deemed market value of the property as per municipal records which has some basis.

We have given our thoughtful consideration and rival submissions and facts and circumstances of the case and also gone through the order of the authorities below.

As the case referred as Smt Prathima Reddy Vs ITO, Ward- 6(4) (2012) 25 Taxmann.com 264(Hyd.) by the learned DR actually dissimilar to the facts of the present case because in the said case, the controversy was with regard to the assessment year, but the determination of value was not in dispute. However, in the instant case, the main controversy is not with regard to the assessment year, but it is of the valuation of property whether market value as on the date of JDA has to be considered or Construction cost has to be considered. The judgment passed by the jurisdictional High Court in the case of CIT Vs Dr. T.K.Dayalu 292 Taxman.com531 is relevant for deciding the present controversy.

We are of the view, because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction. With the above observation we dismiss the appeal of the revenue.”

It is clear to note that the co-ordinate bench of this Tribunal has followed the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. Dr.T.K. Dayalu reported in 292 Taxman 531 and therefore by following the decision of the co-ordinate bench (supra), we do not find any reason to interfere with the impugned order of the CIT (Appeals) on this issue.”

Accordingly, by following the earlier order of this Tribunal, we do not find any reason to interfere with the impugned order of CIT (Appeals) on this issue.