Udai Hospitals Private Limited, Hyderabad V. Income Tax Officer, Ward-17(3), Hyderabad

ITA 1755/Hyd/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7167 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 25-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: AJAY GANDHI
• Keywords: Sale consideration of property below Jantri Value; Business expenditure; Fair market value
• Section: 50C; 131; 56

Judgement Text

ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1755/HYD/2017 (ASSESSMENT YEAR: 2014-15) UDAI HOSPITALS PRIVATE LTD HYDERABAD PA N: AABCU1975A VS INCOME TAX OFFICER WARD 17 ( 3 ) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI AJAY GANDHI FOR REVENUE : SMT. N. SWAPNA, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-5, HYDERABAD, DATED 31.08. 2017. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE CIT (A) HAS ERRED IN UPHOLDING THE REJECTIO N OF THE MARKET VALUE RATE ADOPTED BY THE SUB-REGISTRAR RELA TABLE TO THE SUPERSTRUCTURE AS CONSIDERATION FOR CALCULAT ING LONG TERM CAPITAL GAINS. 2. THE CIT (A) HAS ERRED IN UPHOLDING THE COST OF CONSTRUCTION INCURRED BY THE DEVELOPER AS CONSIDERA TION IGNORING THE FACT THAT THE ASSESSING OFFICER HAS OV ERLOOKED THE REQUEST MADE DURING THE ASSESSMENT PROCEEDINGS TO PROVIDE EVIDENCES OF COST OF CONSTRUCTION INCURRED BY INCOR INFRASTRUCTURE FOR OFFERING DETAILED OBJECTIO NS FOR CONSIDERING THE COST OF CONSTRUCTION AS CONSIDERATI ON RECEIVED UNDER DEVELOPMENT AGREEMENT. 3. THE CIT (A) HAS ERRED IN UPHOLDING THE COST OF CONSTRUCTION INCURRED BY THE DEVELOPER AS CONSIDERA TION IGNORING THE FACT THAT THE ASSESSING OFFICER HAS OV ERLOOKED THE OBJECTION OF INCLUSION OF PROBABLE COSTS THAT M AY BE DATE OF HEARING: 05. 07. 201 8 DATE OF PRONOUNCEMENT: 28.09.2018 ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 2 OF 10 INCURRED IN CONSTRUCTION AREA TO BE DEVELOPED BY IN COR INFRASTRUCTURE IN THE COST OF CONSTRUCTION. 4. THE CIT (A) HAS ERRED IN UPHOLDING THE ADOPTION OF COST OF CONSTRUCTION INCURRED BY THE DEVELOPER AS CONSIDERATION FOR CALCULATING LONG TERM CAPITAL GAI NS. 5. THE CIT (A) HAS ERRED IN UPHOLDING THE AMOUNT NO T PAID BY THE DEVELOPER TO M/S KOHLI CONSTUCTIONS OF RS. 1,16,00,000 (RS. 1,76,00,00 - 60,OO,OOO} AS PART OF COST OF CONSTRUCTION. 6. THE CIT (A) HAS ERRED IN UPHOLDING THE ADOPTION OF RS.21,38,39,466 AS CONSIDERATION RECEIVED UNDER DEVELOPMENT AGREEMENT FOR CALCULATING CAPITAL GAINS . 7. THE CIT (A) HAS ERRED IN UPHOLDING THE AMOUNT NO T PAID BY THE DEVELOPER TO M/S KOHLI CONSTRUCTIONS AS PART OF COST OF CONSTRUCTION IGNORING THE FACT THAT THE AMO UNT PAYABLE TO M/S KOHLI CONSTRUCTION WAS OFFERED TO CA PITAL GAINS TAX IN UDAI HEALTH CARE PRIVATE LIMITED AS TH EIR SHARE OF CONSIDERATION RECEIVED UNDER DEVELOPMENT AGREEMENT. 8. THE CIT (A) HAS ERRED IN UPHOLDING THE AMOUNT OF DEVELOPMENT RIGHTS OF RS. 4,24,08,889 AS PART OF CO ST OF CONSTRUCTION IGNORING THE FACT THAT THE DEVELOPMENT RIGHTS WAS OFFERED TO CAPITAL GAINS TAX IN UDAI HEALTH CAR E PRIVATE LIMITED AS THEIR SHARE OF CONSIDERATION REC EIVED UNDER DEVELOPMENT AGREEMENT. 9. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D PURCHASED A PIECE OF LAND ON 19.08.2008 FOR A CONSI DERATION OF RS.1,60,05,000 PLUS REGISTRATION CHARGES. ITS SISTE R CONCERN M/S. UDAI HEALTHCARE PRIVATE LIMITED WAS ALSO THE OWNER OF THE ADJOINING PROPERTY. BOTH THE PARTIES HAD INITIALLY ENTERED INTO A DEVELOPMENT AGREEMENT WITH A BUILDER M/S. KOHLI CON STRUCTIONS. BUT, THE SAME WAS NOT CARRIED THROUGH AND THEREAFTE R, THEY ENTERED INTO ANOTHER DEVELOPMENT AGREEMENT WITH M/S . INCOR INFRASTRUCTURE PVT. LTD FOR CONSTRUCTION OF A HOSPI TAL BUILDING CONSISTING OF 63237 SQ.FT COVERING THE CELLAR AND G ROUND PLUS FIVE ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 3 OF 10 FLOORS. UNDER THE SAID AGREEMENT, THE ASSESSEE COMP ANY HANDED OVER 1000 SQ. YARDS OF LAND TO THE DEVELOPER, WHILE ITS SISTER CONCERN HAS HANDED OVER 1600 SQ. YARDS AND BOTH THE LAND OWNERS AND THE DEVELOPERS AGREED TO SHARE THE CONST RUCTED AREA AND THE UNDIVIDED LAND OF THE SCHEDULED PROPERTY IN THE RATIO OF 50:50. SINCE THE ASSESSEE HAD TRANSFERRED THE LAND DURING THE FINANCIAL YEAR 2013-14, BY ENTERING INTO THE DEVELO PMENT AGREEMENT CUM GPA, THE ASSESSEE OFFERED THE CAPITAL GAINS BY ADOPTING FAIR MARKET VALUE OF THE SHARE OF CONSTRUC TED AREA TO BE RECEIVED BY THE ASSESSEE AS SALE CONSIDERATION, WHI CH, AS PER THE SRO WAS RS.700 PER SQ. FT. THEREFORE, THE ASSESSEE REPORTED A LONG TERM CAPITAL LOSS OF RS.78,22,123 TO BE CARRIED FOR WARD. 3. IN ORDER TO VERIFY THE COST OF CONSTRUCTION OF T HE BUILDING, THE AO ISSUED A LETTER TO THE BUILDER M/S . INCOR INFRASTRUCTURE PVT. LTD U/S 131 REQUIRING IT TO FUR NISH THE RELEVANT INFORMATION. THE SAID BUILDER FURNISHED THE INFORMA TION, ACCORDING TO WHICH, THE TOTAL COST OF CONSTRUCTION OF THE BUILDING WAS RS.20,16,39,466. THE AO, THEREFORE, WORKED OUT THE COST OF CONSTRUCTION PER SQ. FEET AT RS.3199/- SQ.FT. SINCE THE ASSESSEE HAD ADOPTED THE VALUE AT RS.700/- PER SQ.FT, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY THE COST OF CO NSTRUCTION SHOULD NOT BE ADOPTED AT RS.3199/- PER SFT. THE ASS ESSEE FILED ITS REPLY DATED 7.12.2016 SUBMITTING THAT AS ON THE DAT E OF THE FILING OF THE RETURN OF INCOME ON 29.09.2014, THE COST OF CONSTRUCTION WAS NOT AVAILABLE AND THEREFORE, THE SRO VALUE AS O N THE DATE OF THE TRANSFER WAS ADOPTED AS THE COST OF CONSTRUCTIO N FOR COMPUTING THE LONG TERM CAPITAL GAINS. ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 4 OF 10 4. THE AO WAS HOWEVER, NOT CONVINCED WITH THE SUBMISSION OF THE ASSESSEE AND HELD THAT THE COST O F CONSTRUCTION TO THE BUILDER ALONE IS TO BE ADOPTED AS THE CONSID ERATION RECEIVED BY THE ASSESSEE. FURTHER, HE ALSO OBSERVED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. KOHLI CONSTRUCT IONS PRIOR TO THE AGREEMENT DATED 5.10.2013, AND THAT M/S. INCOR INFRASTRUCTURE PVT. LTD HAD AGREED TO PAY RS.1,76,0 0,000 TO THE BUILDER KOHLI CONSTRUCTIONS, BUT, IN EFFECT ONLY R S.60.00 LAKHS WAS PAID. THE AO, THEREFORE, TOOK THE ENTIRE AMOUNT AGREED TO BE PAID AS PART OF COST OF CONSTRUCTION AND ARRIVED AT A SUM OF RS.21,38,39,466 AS THE TOTAL COST OF CONSTRUCTION F OR 63235 SQ.FT AND WORKED OUT THE PER SQ.FT COST AT RS.3,381.65. T AKING THE SAME INTO CONSIDERATION, THE AO WORKED OUT THE LONG TERM CAPITAL GAIN FALLING TO THE SHARE OF THE ASSESSEE AT RS.2,47,88, 420 AND SINCE THE ASSESSEE HAS REPORTED LONG TERM CAPITAL LOSS OF RS.(-) 78,22,123/-, THE AO BROUGHT THE DIFFERENCE OF RS.3, 26,10,543 TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO, AND THE ASS ESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI AJAY GANDHI, WHILE REITERATING THE SUBMISSIONS MADE BY T HE ASSESSEE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE DEV ELOPMENT AGREEMENT IS NOT AN AGREEMENT OF SALE, BUT IS A TRA NSACTION OF EXCHANGE. HE SUBMITTED THAT THE ASSESSEE IS EXCHANG ING ITS LAND WITH THE BUILT-UP AREA AND THEREFORE, THERE IS NO S ALE AND THERE CANNOT BE ANY CAPITAL GAINS ARISING OUT OF SUCH TRA NSACTION. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CAS E OF MOTOR & GENERAL STORES VS. CIT REPORTED IN (1967) 66 ITR 07 01 WHICH HAS ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 5 OF 10 BEEN APPROVED BY THE HON'BLE SUPREME COURT AS REPOR TED IN (1967) 66 ITR 692 (S.C). HE ALSO PLACED RELIANCE UP ON THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF P.S . RAJAN VS. ASSTT. CIT REPORTED IN (2003) 263 ITR 279 (KER.) WH EREIN BY APPLYING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF MOTORS & GENERAL STORES (SUPRA), THE HON'BL E KERALA HIGH COURT HELD THAT WHERE THERE IS A TRANSACTION OF EXC HANGE, IT CANNOT BE CONSIDERED AS A SALE SINCE THERE IS NO EX CHANGE OF MONEY IN SUCH A TRANSACTION. 6. HE ALSO SUBMITTED THAT THE ASSESSEE IS RECEIVING BUILT UP AREA IN FUTURE AS THE CONSIDERATION FOR EXCHANGE OF ITS LAND AND THE FUTURE COST OF CONSTRUCTION CANNOT BE TAKEN AS A CONSIDERATION FOR THE ASSESSEE SINCE VARIED FACTORS SUCH AS THE P ERIOD OF CONSTRUCTION, FLUCTUATION IN THE PRICES OF BUILDING MATERIAL ETC., COULD AFFECT THE COST OF CONSTRUCTION AND THEREFORE , THE ACTUAL COST OF CONSTRUCTION CANNOT BE ESTIMATED AT THE STAGE OF FILING OF ROI OR TILL THE CONSTRUCTION IS COMPLETED. HE THEREFORE, P RAYED THAT THE SRO VALUE SHOULD BE CONSIDERED AS THE CONSIDERATION RECEIVABLE BY THE ASSESSEE SINCE THE CAPITAL GAINS IS BEING CO MPUTED ON THE EXECUTION OF JDS AND HANDING OVER OF POSSESSION. HE ALSO REFERRED TO THE SUB-SECTION 5A OF SECTION 45 OF THE INCOME T AX ACT FOR THE PROPOSITION THAT FOR PURPOSE OF COMPUTATION OF CAPI TAL GAINS, IT IS THE STAMP DUTY VALUE, WHICH IS TO BE ADOPTED. HE AL SO REFERRED TO THE LANGUAGE USED IN SECTION 50C WHERE THERE IS A R EFERENCE TO THE SRO VALUE AS FAIR MARKET VALUE. HE REFERRED TO CLAU SE (VIIA) AND (VIIB) OF SECTION 56 OF THE I.T. ACT, WHERE IT IS P ROVIDED THAT WHERE AN IMMOVABLE PROPERTY IS TRANSFERRED WITHOUT CONSID ERATION, THE STAMP DUTY VALUE OF WHICH EXCEEDS RS.50,000, THE ST AMP DUTY VALUE OF SUCH PROPERTY SHALL BE CONSIDERED AS THE V ALUE OF THE ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 6 OF 10 PROPERTY RECEIVED. THEREFORE, ACCORDING TO HIM, THE ASSESSEE HAD RIGHTLY ADOPTED THE SRO VALUE AND THAT SHOULD BE AC CEPTED BY THE AUTHORITIES BELOW. 7. WITHOUT PREJUDICE TO THE ABOVE ARGUMENTS AND IN THE ALTERNATIVE, THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT IF THE COST OF CONSTRUCTION HAS TO BE TAKEN INTO CONSI DERATION, THE MATTER SHOULD BE REMANDED TO THE FILE OF THE AO FOR TAKING ONLY THE RELEVANT FACTORS CONSTITUTING THE COST OF CONST RUCTION, SUCH AS THE PAYMENT MADE TO KOHLI CONSTRUCTION, (THE ACTUAL PAYMENT AND NOT THE AGREED AMOUNT) AND BY REDUCING THE FINA NCE AND OTHER COSTS INCURRED BY THE DEVELOPER. HE SUBMITTED THAT AS FAR AS THE ASSESSEE IS CONCERNED, THE VALUE OF THE PROPERT Y RECEIVED BY THE ASSESSEE ALONE SHOULD BE CONSIDERED AND THAT SH OULD BE THE ACTUAL COST OF CONSTRUCTION EXCLUDING ANY OTHER EXP ENDITURE WHICH MAY BE BUSINESS EXPENDITURE FOR THE BUILDER BUT DOE S NOT CONSTITUTE THE COST OF CONSTRUCTION. HE REFERRED TO THE SRO VALUE WHICH IS PLACED AT PAGE 52 OF THE PAPER BOOK FILED BY THE ASSESSEE. 8. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE SRO CERTIFICATE SUBMITTED BY THE ASSESSEE DOES NOT MENT ION THE PURPOSE FOR WHICH IT HAS BEEN OBTAINED. HE ALSO BRO UGHT OUT THE DISTINCTION BETWEEN THE NATURE OF THE BUILDING I.E. BUILDING OF THE ASSESSEE AND THE BUILDING MENTIONED IN SRO CERTIFIC ATE. HE POINTED OUT THAT THE BUILDING OF THE ASSESSEE CONSI STED OF CELLAR AND 5 FLOORS ABOVE, WHEREAS THE BUILDING IN THE SRO CERTIFICATE MENTIONED ONLY TWO FLOORS. HE SUBMITTED THAT THE SR O CERTIFICATE DOES NOT CONSIDER THE DIFFERENCES IN THE QUALITY OF THE BUILDINGS ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 7 OF 10 AND IS UNIFORM FOR ALL THE BUILDINGS IN THE VICINIT Y WHEREAS, THE ASSESSEE HAD MADE SPECIFIC REQUEST TO THE BUILDER T O CONSTRUCT THE BUILDING IN A PARTICULAR WAY AND THEREFORE, THOSE F ACTORS HAVE TO BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE CON STRUCTION COST OF THE BUILT UP AREA. HE SUBMITTED THAT THE AO HAS CLEARLY CONSIDERED ALL THE OBJECTIONS OF THE ASSESSEE ON TH E COST OF CONSTRUCTION AS GIVEN BY THE BUILDER AND THEREAFTER , HAS RIGHTLY REJECTED THE SAME. THEREFORE, ACCORDING TO HIM, THE COST OF CONSTRUCTION INCURRED BY THE BUILDER SHOULD BE ADOP TED AS AGAINST THE SRO VALUE ADOPTED BY THE ASSESSEE. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ARGUMENT OF THE ASSESSE E THAT THE JDA IS A TRANSACTION OF EXCHANGE AND NOT SALE, IS TO BE ADJUDICATED AT THE OUTSET. BY VIRTUE OF JDA, THE ASSESSEE IS PARTI NG WITH A PORTION OF ITS LAND AND IN CONSIDERATION THEREOF, IS RECEIV ING BUILT-UP AREA ON THE LAND RETAINED BY IT. WHETHER IT CAN BE TERME D AS A TRANSACTION OF EXCHANGE?. WHETHER THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF MOTORS & GENERAL STORE S (CITED SUPRA), WOULD APPLY TO THE FACTS OF THE CASE BEFORE US. IN THE SAID CASE, THE HON'BLE COURT WAS DEALING WITH A CASE OF EXCHANGE OF PROPERTY FOR A PERCENTAGE OF SHARES AND PERTAINED T O THE A.Y 1955- 56. THEREFORE, THIS DECISION IS CLEARLY DISTINGUISH ABLE ON FACTS AND THUS NOT APPLICABLE TO THE CASE ON HAND. FURTHER, T HE HON'BLE KERALA HIGH COURT IN THE CASE OF P.S. RAJAN (CITED SUPRA) HAS FOLLOWED THIS DECISION TO HOLD AS UNDER: 6. THERE IS NO DISPUTE THAT THE APPELLANT HAD TRANSFER RED HIS SHARES IN SISCO TO ESSAR ON THE BASIS OF THE OFFER MADE BY ESSAR. IN THE ABSENCE OF ANY SUGGESTION OF BAD FAITH OR FRAUD, TH E TRUE PRINCIPLE IS THAT THE TAXING STATUTE HAS TO BE APPLIED IN ACCORD ANCE WITH THE LEGAL RIGHTS OF THE PARTIES TO THE TRANSACTION. WHEN THE TRANSACTION IS ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 8 OF 10 EMBODIED IN A DOCUMENT, THE LIABILITY TO TAX DEPEND S UPON THE MEANING AND CONTEXT OF THE LANGUAGE USED IN ACCORDA NCE WITH THE ORDINARY RULES OF CONSTRUCTION [CIT V. MOTORS & GEN ERAL STORES (P) LTD. (1967)] 66 ITR 692 (S.C). IN THE CASE OF A SAL E FOR A PRICE THERE IS NO QUESTION OF ANY MARKET VALUE UNLIKE IN THE CASE OF AN EXCHANGE. THE CONSIDERATION FOR TRANSFER OF THE SHARES IN THE INSTANT CASE IS NOT ONLY CASH, BUT ALSO SHARES. IN A CASE WHERE THE VAL UE OF A SHARE IS NOT SPECIFIED IN TERMS OF CASH, NECESSARILY THE SAME HA S TO BE FIXED IN TERMS OF THE MARKET VALUE [MOTORS & GENERAL STORES (P) LTD. V. CIT (1967] 66 ITR 701 (A.P).. 7. WE FIND THAT ESSAR IN THE OFFER HAS CLEARLY STAT ED THAT AS ON 28TH FEB., 1991, THE CLOSING MARKET PRICE OF ESSAR EQUIT Y SHARES WAS RS. 38.50 AT MADRAS STOCK EXCHANGE AND RS. 37.50 AT BOM BAY STOCK EXCHANGE AND ESSAR HAS CLEARLY STATED THAT. 'BASED ON THESE PRICES, THE OFFER PRICE IS MORE THA N THE HIGHEST MARKET PRICE OF THE EQUITY SHARES OF SISCO DURING THE SIX MONTHS IMMEDIATELY PRECEDING TO THIS DATE.' 10. THUS, IT CAN BE SEEN THAT THERE IS NO FINDING B Y ANY OF THE COURTS THAT VIDE JDA, THERE IS NO TRANSFER OF P ROPERTY U/S 2(47)(V) OF THE ACT. IN FACT, IN LIEU OF PARTING OF A PORTION OF ITS LAND, THE ASSESSEE IS RECEIVING THE CONSIDERATION IN KIND (I.E. BY WAY OF SUPERSTRUCTURE ON THE LAND RETAINED BY IT) IN FUTUR E AND IS THEREFORE, A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT. 11. AS REGARDS THE QUANTIFICATION OF THE CONSIDERAT ION RECEIVED BY THE ASSESSEE, WE FIND THAT THE CAPITAL GAINS HAS ARISEN TO THE ASSESSEE ON ACCOUNT OF THE EXECUTION OF THE JOINT DEVELOPMENT AGREEMENT. THE ASSESSEE IS ENTITLED TO RECEIVE THE BUILT UP AREA OR SUPERSTRUCTURE TO ITS SHARE. AT TH E TIME OF JDA, THE ASSESSEE IS TRANSFERRING PART OF ITS LAND TO TH E DEVELOPER IN CONSIDERATION OF RECEIVING THE BUILT-UP AREA IN FUT URE. THEREFORE, AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR T HE ASSESSEE, IT IS NOT POSSIBLE, AT THIS STAGE OF TIME, TO ACCURATE LY ESTIMATE THE EXACT COST OF CONSTRUCTION FOR THE BUILDING AS MANY FACTORS WOULD AFFECT SUCH COST OF CONSTRUCTION. IT APPEARS THAT T HE ASSESSEE HAD ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 9 OF 10 EARLIER GIVEN THE PLOT OF LAND FOR DEVELOPMENT TO A NOTHER BUILDER, AND SUBSEQUENT BUILDER HAS AGREED TO COMPENSATE THE EARLIER BUILDER. THOUGH THERE WAS AGREEMENT TO PAY MORE THA N RS.1,76,00,000/-, IN EFFECT ONLY OF RS.60.00 LAKHS WAS PAID. THEREFORE, THE COST OF CONSTRUCTION SHOULD INCLUDE ONLY THE AMOUNT OF RS.60.00 LAKHS WHICH WAS ACTUALLY PAID AN D NOT THE ENTIRE AMOUNT WHICH WAS AGREED TO BE PAID. FURTHER, COST OF CONSTRUCTION ALSO VARIES DUE TO DURATION OF CONSTRU CTION AND ALSO OTHER CIRCUMSTANCES. THEREFORE, AT THE TIME OF FIL ING OF THE ROI IT IS DIFFICULT TO ESTIMATE AND CONSIDER THE COST OF C ONSTRUCTION TO THE BUILDER AS THE CONSIDERATION FOR THE LAND. WHEN THE ASSESSEE IS OFFERING THE CAPITAL GAINS, IT CAN ONLY DO SO, ON T HE BASIS OF MATERIAL AVAILABLE BEFORE IT AT THAT POINT OF TIME AND CANNOT PRESUME ABOUT THE EVENTS IN FUTURE. THEREFORE, THE ASSESSEE HAD ADOPTED THE SRO VALUE, BUT AS RIGHTLY POINTED OUT B Y THE AO AND THE CIT (A), THE SAME CANNOT BE RELIED UPON IN THE CASE AS THE DESCRIPTION OF THE NATURE OF THE BUILDING IN THE SR O CERTIFICATE DID NOT MATCH WITH THE DESCRIPTION OF ASSESSEES BUILDI NG. THE QUALITY OF CONSTRUCTION WOULD ALSO DIFFER BETWEEN BUILDING- TO-BUILDING. THE SRO VALUE CAN AT BEST BE A GUIDING FACTOR BUT C ANNOT BE A SUBSTITUTE. THEREFORE, WE REJECT THE ASSESSEES CON TENTION THAT THE SRO VALUE SHOULD BE ACCEPTED AS THE VALUE OF THE PR OPERTY RECEIVABLE BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE COST OF CONSTRUCTION OF THE BUILDI NG ALONE IS THE RIGHT CHOICE, AS AT THE TIME OF ASSESSMENT PROCEEDI NGS, THE COST OF CONSTRUCTION WAS AVAILABLE. HOWEVER, THE AO HAS TAK EN INTO CONSIDERATION CERTAIN EXPENDITURE INCURRED BY THE B UILDER WHICH IS NOT PART OF THE COST OF CONSTRUCTION OF THE BUILDIN G. FURTHER, THE ASSESSEES CONTENTION THAT CERTAIN PART OF CONSIDER ATION HAS ALREADY BEEN OFFERED TO TAX IN THE HANDS OF ITS SIS TER CONCERN ALSO ITA NO 1755 OF 2017 UDAI HOSPITALS PVT LTD HYDERABAD. PAGE 10 OF 10 HAS NOT BEEN VERIFIED BY THE AO/CIT (A). THEREFORE, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE A O WITH A DIRECTION TO RE-COMPUTE THE CAPITAL GAIN AGAIN BY C ONSIDERING ONLY ELEMENTS WHICH ARE NECESSARY FOR THE CONSTRUCTION O F THE BUILDING AS THE COST OF CONSTRUCTION, AND NOT THE ENTIRE EXP ENDITURE OF THE BUILDER, INCLUDING THE COMPENSATION AGREED TO BE PA ID TO KOHLI CONSTRUCTIONS AND ALSO THE FINANCE CHARGES ETC., WH ICH ARE NOT RELEVANT FOR COMPUTING THE COST OF THE CONSTRUCTION . THE OBJECTIONS OF THE ASSESSEE TO THE COST OF CONSTRUCT ION REPORTED BY THE BUILDER SHALL BE CONSIDERED AND DISPOSED OF BY A SPEAKING ORDER. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 28 TH SEPTEMBER, 2018. VINODAN/SPS COPY TO: 1 GANDHI & GANDHI, CAS, 1002, PAIGAH PLAZA, BASHEER BAGH, HYDERABAD 500063 2 ITO WARD 17(3), 9 TH FLOOR, SIGNATURE TOWERS, OPP: BOTANICAL GARDENS, KOTHAGUDA, KONDAPUR, HYDERABAD 500084 3 CIT (A)-5 HYDERABAD 4 PR. CIT 5, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER