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Tax Publishers Asif Khaleel (Individual) v. ITO [ITA Nos. 2494 to 2496/Bang/2019, dt. 3-12-2020] : 2020 TaxPub(DT) 5024 (Bang-Trib) Method of computing Capital gains on property acquired thru a JDA *Facts:* Assessee's along with their siblings entered into a Joint Development Agreement (JDA) to develop a property separately by which on one they were all entitled to 52,784-51 sq. ft. built up area. Possession was handed over in F.Y. 2005-06 and assessee and their siblings also received 5 flats individually and 4 flats jointly in F.Y. 2011-12. The capital gains on this was not offered in the assessment year 2006-07 by none of the Assessee's. Separately during F.Y. 2008-09 only 4 of the assessee's siblings entered into another JDA for another property where in possession was handed over and they were entitled to 37,537 sq. ft. commercial built up area and 36,301 sq. ft. residential built up area. 32 flats were thus allotted under this JDA in February 2013. This was also not offered to capital gains in the assessment year 2009-10. During the F.Y. 2013-14/A.Y. 2014-15 (appeal year) the assessee's sold 2 of the jointly held flats (from the first JDA of F.Y. 2005-06 and 4 flats jointly in out of the second JDA of F.Y. 2008-09). Assessee's originally did not declare the capital gains here as well. Arising out of a notice they filed a statement of computation of capital gains where they claimed cost of acquisition was based on a range price of Rs. 13.67 lakhs to 15.90 besides also claiming cost of improvement of 6.5 lakhs on each of these flats. On further scrutiny the consideration in the sale agreement was taken as actual sale consideration which was not disputed. It was the case of the revenue that since both the JDA were not offered to capital gains tax the indexation benefit of the cost of land alone can be given and negated cost of improvement as well. On appeal Commissioner (Appeals) voiced the views of the assessing officer except allowing cost of improvement @ 3 lakhs per flat. On further appeal assessee's claim was that the capital gains be computed in two stages -- 1. At the time of JDA the fair market value of the allotted property to the assessee be taken as the cost of acquisition and then the capital gains of this be derived. 2. Against the sale consideration now the said fair value already taxed be offered as indexed cost and capital gains be computed proportionately for the said flats. This did not meet the eye of the Commissioner (Appeals). On further appeal -- Held in favour of the assessee that the method of computation has to be as per the assessee, the revenue cannot take the plea that since they did not offer the capital gains on the JDA the cost of acquisition at fair value cannot be taken now at the time of the actual sale. To recompute the capital gains the case was restored to the assessing officer accordingly. *Applied:* Dr. T.K. Dayalu (2011) 14 taxmann.com 120 (Karnataka-HC) : 2011 TaxPub(DT) 1642 (Karn-HC)

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Asif Khaleel (Individual) v. ITO [ITA Nos. 2494 to 2496/Bang/2019, dt. 3-12-2020] : 2020 TaxPub(DT) 5024 (Bang-Trib)

Method of computing Capital gains on property acquired thru a JDA

Facts:

Assessee's along with their siblings entered into a Joint Development Agreement (JDA) to develop a property separately by which on one they were all entitled to 52,784-51 sq. ft. built up area. Possession was handed over in F.Y. 2005-06 and assessee and their siblings also received 5 flats individually and 4 flats jointly in F.Y. 2011-12. The capital gains on this was not offered in the assessment year 2006-07 by none of the Assessee's. Separately during F.Y. 2008-09 only 4 of the assessee's siblings entered into another JDA for another property where in possession was handed over and they were entitled to 37,537 sq. ft. commercial built up area and 36,301 sq. ft. residential built up area. 32 flats were thus allotted under this JDA in February 2013. This was also not offered to capital gains in the assessment year 2009-10. During the F.Y. 2013-14/A.Y. 2014-15 (appeal year) the assessee's sold 2 of the jointly held flats (from the first JDA of F.Y. 2005-06 and 4 flats jointly in out of the second JDA of F.Y. 2008-09). Assessee's originally did not declare the capital gains here as well. Arising out of a notice they filed a statement of computation of capital gains where they claimed cost of acquisition was based on a range price of Rs. 13.67 lakhs to 15.90 besides also claiming cost of improvement of 6.5 lakhs on each of these flats. On further scrutiny the consideration in the sale agreement was taken as actual sale consideration which was not disputed. It was the case of the revenue that since both the JDA were not offered to capital gains tax the indexation benefit of the cost of land alone can be given and negated cost of improvement as well. On appeal Commissioner (Appeals) voiced the views of the assessing officer except allowing cost of improvement @ 3 lakhs per flat. On further appeal assessee's claim was that the capital gains be computed in two stages --

1. At the time of JDA the fair market value of the allotted property to the assessee be taken as the cost of acquisition and then the capital gains of this be derived.

2. Against the sale consideration now the said fair value already taxed be offered as indexed cost and capital gains be computed proportionately for the said flats.

This did not meet the eye of the Commissioner (Appeals). On further appeal --

Held in favour of the assessee that the method of computation has to be as per the assessee, the revenue cannot take the plea that since they did not offer the capital gains on the JDA the cost of acquisition at fair value cannot be taken now at the time of the actual sale. To recompute the capital gains the case was restored to the assessing officer accordingly.

Applied: Dr. T.K. Dayalu (2011) 14 taxmann.com 120 (Karnataka-HC) : 2011 TaxPub(DT) 1642 (Karn-HC)