A.C.I.T., CIRCLE- XXX,KOL, KOLKATA vs. M/S. BESCO LTD., KOLKATA

The assessee in the present case is a Company, which filed its return of income for the year under consideration on 01.12.2003 declaring total income at NIL and making payment of tax on the basis of book profit under section 115JB. As noted by the Assessing Officer during the course of the assessment proceedings, the assessee-company was the owner of a land situated at 8, Anil Maitra Road, Kolkata-700 019 and part of the same was put up for development as per the joint venture agreement entered into with M/s. Swastic Nirman Pvt. Limited on 26.12.2000. As per the said agreement, the assessee had retained the various flats forming part of the new building being 50% of the total built up area together with the corresponding 50% share in common areas as well as car parking space. Accordingly, total twenty flats of the total area of 27,094 sq.ft. along with 15 covered garages were received by the assessee under the joint venture agreement. Out of the said flats, the assessee during the year under consideration sold flats with total area of 23,872 sq.,ft. along with seven covered garages and three open garages. By relying on the decision of the Hon’ble Calcutta High Court in the case of CIT –vs.- Estate of Omprakash Jhunjhunwala reported in 254 ITR 152, the Assessing Officer computed long-term capital gain arising from the & sale proceeds of land and short-term capital gain arising from the sale proceeds of flats as under in the assessment completed under section 143(3) vide an order dated 31.03.2006:-

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the quantum of long-term and short-term capital gain computed by the Assessing Officer. After considering the submissions made by the assessee and the relevant material available on record, the ld. CIT(Appeals) confirmed the quantum of long-term capital gain as computed by the Assessing Officer. He, however, directed the Assessing Officer to re-compute the short-term capital gain after taking into consideration certain directions given by him, which resulted in the reduction of short-term capital gain from Rs.1,95,59,303/- to Rs.55,14,750/-. The working of the revised short-term capital gain as done by the Assessing Officer as per the direction of the ld. CIT(Appeals) is as under:-

We have heard the arguments of both the sides and also perused the relevant material available on record. The only grievance of the Revenue as projected in the solitary ground raised in its appeal and further reiterated by the ld. D.R. at the time of hearing before us is that the ld. CIT(Appeals) has allowed double deduction to the assessee while computing the short-term capital gain on account of cost of construction of flats and garages amounting to Rs.1,49,39,017/-, which is also taken as the sale proceeds received from the flat-holders towards land and allowed as deduction separately. After having gone through the relevant material available on record including the relevant portion of the impugned order of the ld. CIT(Appals) and the revised working made by the Assessing Officer of short-term capital gain as per the directions of the ld. CIT(Appeals), we are unable to accept the stand of the revenue that the ld. CIT(Appeals) has given double deduction of the amount of & Rs.1,49,39,017/-. It is not in dispute that the sale of flats by the assesee- company to the customers during the year under consideration gave rise to long-term capital gain to the extent the sale proceeds were towards the value of land and short-term capital gain to the extent the sale proceeds were towards the portion of building, i.e. construction. In so far as the computation of long-term capital gain, there is no dispute. The only dispute is relating to the computation of short term capital gain and that too about the deduction allowed by the ld. CIT(Appeals) firstly on account of sale proceeds received from the flat-holders towards the value of land and secondly on account of cost of construction, which according to the Revenue has resulted into double addition. It is pertinent to note here that while computing the short-term capital gain arising from the sale of flats, only the consideration received by the assessee from the flat- holders towards the value of building is required to be taken into consideration and to arrive at the same, the sale proceeds received towards the value of land are required to be reduced from the total sale proceeds. The net amount thus represented the consideration received by the assessee from the flat-holders towards constructed portion of building and the cost incurred on such construction is required to be reduced to compute the short-term capital gain arising to the assessee from the sale of constructed area of building. Since the assessee received 50% of the constructed area as consideration for land as per the development agreement and retained the rights in the land as attributable to such constructed area, the sale proceeds received by the assessee from flat-holders towards land and the cost of construction of the corresponding built-up area remained the same and this resulted in the creation of a confusion or misconception in the mind of the Revenue authorities that the ld. CIT(Appeals) has allowed double deduction to the assessee. In our opinion, there is no such double deduction allowed by the ld. CIT(Appeals) and there being no infirmity in the impugned order of the ld. CIT(Appeals), the re-computation of short-term capital gain as & made by the Assessing Officer while giving effect to the order of the ld. CIT(Appeals) is absolutely right. In that view of the matter, we find no merit in this appeal filed by the Revenue and dismiss the same.

In the result, the appeal of the Revenue is dismissed.

As regards the Cross Objection filed by the assessee, it is observed that some of the grounds raised therein merely in support the order of ld. CIT(Appeals) while others are not pressed by the ld. counsel for the assessee. We, therefore, dismiss the Cross Objection filed by the assessee.

In the result, the appeal of the Revenue as well as the Cross Objection filed by the assessee both are dismissed. Order pronounced in the open Court on April 29, 2016. (S.S. Viswanethra Ravi) Accountant Member Kolkata, the 29th day of April, 2016 Copies to : (1) Assistant Commissioner of Income Tax, Central Circle-XXX, Kolkata, Poddar Court, 18, Rabindra Sarani, Kolkata-700 001