Shri. S.R. Madhavan (HUF), Bangalore V. ITO, Bangalore

ITA 4/BANG/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80690 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Cost of acquisition
• Section: 148; 54

Judgement Text

ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NOS.4 & 820/BANG/2011 (ASSESSMENT YEARS: 2005-06 & 2006-07) SHRI S.R. MADHAVAN (HUF) C/O VENKATESAN & CO. 31-33 2 ND FLOOR, SNS PLAZA KUMARA KRUPA ROAD BANGALORE 560001 PAN: AAIHS 8560 H VS. INCOME TAX OFFICER (INTERNATIONAL TAXATION) WARD 2(1) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI V. SRINIVASAN, CA DEPARTMENT BY: SHRI BIJOY KUMAR P ANDA, (DR) DATE OF HEARING: 07/08/2014 DATE OF PRONOUNCEMENT: 05/0 9/ 2014 O R D E R PER RAJPAL YADAV, J.M. THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTAN C E OF THE ASSESSEE AGAINST THE ORDERS OF THE LEARNED CIT (A) DATED 18.01.2010 AND 8.8.2011 PASSED IN ASSESSMENT YEARS 2005-06 AND 2006-07. THE ISSUES INVOLVED IN BOTH THE APPEAL S ARE COMMON, THEREFORE WE HEARD THEM TOGETHER AND DEEM I T FIT TO DISPOSE OF THEM BY THIS COMMON ORDER. 2. GROUND NO.1 IN BOTH THE A.Y ARE GENERAL GROUND O F APPEAL WHICH DO NOT CALL FOR RECORDING OF ANY SPECIFIC FIN DINGS. HENCE, THESE GROUNDS ARE REJECTED IN BOTH THE YEARS. ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 2 OF 12 3. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED REOP ENING OF THE ASSESSMENT BY ISSUANCE OF A NOTICE U/S 148 OF T HE I.T. ACT. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND IN BOTH THE YEARS,THEREFORE, GROUND NO.2 IS REJECTE D. 4. GROUND NO.3 IS INTERCONNECTED WITH EACH OTHER IN BOTH THE YEARS. IN THIS GROUND OF APPEAL, ASSESSEE HAS DISPU TED COMPUTATION OF SHORT TERM CAPITAL GAIN AND DENIAL O F EXEMPTION U/S 54EC OF THE I.T. ACT. THE FACTS AND CIRCUMSTACN ES FOR THIS GROUND ARE COMMON IN BOTH THE YEARS, THEREFORE, WE TAKE THESE GROUNDS TOGETHER. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN HUF CONSISTED OF SHRI S.R. MADHAVAN, AS KARTHA, SMT. CH ITRA MADHAVAN, WIFE OF THE KARTA AND MEMBER OF THE JOINT FAMILY, KUM. MEERA MADHAVAN, MINOR DAUGHTER OF THE KARTA AS THE OTHER MEMBERS THEREOF. THE ASSESSEE HUF CAME INTO EXISTEN CE ON 09.05.2002 PURSUANT TO THE PARTITION OF THE LARGER HUF ON 09.05.2002. THE LARGER HUF WAS CONSISTED OF SRI S. R. MADHAVAN AND SRI S. RANGACHARI, THE KARTA AND FATHER OF SRI S.R. MADHAVAN AND SMT. KANAKA RANGACHARI, MOTHER, SMT. M ALIN I ANANTACHARI, SISTER AND SRI SRIDHARAN, BROTHER. A BUILDING ON A PLOT OF LAND COMPRISED IN SURVEY NO.56, 1 ST MAIN ROAD, RAJA ANNAMALAIPURAM, CHENNAI BELONGED TO SRI S. RANGACHA RI WHO PURCHASED IT ON 11.7.1968. THE ASSESSEE HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT (JDA) WITH M/S SUMANTH & CO. CHENNAI ON 08.04.2004 FOR JOINTLY DEVELOPING THE SAID PROPE RTY BY DEMOLISHING THE EXISTING BUILDING AND STRUCTURE THE REON. AS PER CLAUSE (IV)B OF THE JOINT DEVELOPMENT AGREEMENT, TH E ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 3 OF 12 CONSIDERATION FOR THE OWNERS IS ENTITLEMENT OF 7763 SFT OF THE SUPER BUILT UP AREA. THE ESTIMATED COST OF THE CONS TRUCTION WAS RS.70.00 LAKHS. AS PER THIS AGREEMENT, THE PROPERTY WAS REDEVELOPED AND EACH STAKEHOLDER IN THE JOINT DEVEL OPMENT AGREEMENT GOT THEIR SHARES. 6. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 29.10.2005 DECLARING A TOTAL INCOME OF RS.2317/-. IT HAS DECLARED LONG TERM CAPITAL GAIN ( LTCG) OF RS.38,33,570/- ON SALE OF HOUSE PROPERTY IN THE ALL EGED JDA AND CLAIMED EXEMPTION U/S 54 AND 54EC OF RS.28,41,770/- AND RS.27.00 LAKHS RESPECTIVELY. THE ASSESSEE HAS SUBMI TTED THE FOLLOWING COMPUTATION: SALE CONSIDERATION RECEIVED: ASSESSEE PER JOINT VENTURE RS.70,00,000 AGREEMENT BY WAY OF CHEQUES RS.27,37,800 RS.97,37,800 ASSESSEES SHARE AS PER PARTITION AGREEMENT 65% OF RS.97,37,800 = RS .62,29,570 LESS: COST OF ACQUISITION: 1981 VALUE: 8,00,000 INDEXED COST 8,00,000 X 480 RS. 38,40,000 LONG TERM CAPITAL GAIN RS.38,33,570 LESS: EXEMPTION U/S 54: INVESTMENT IN FLAT 28,41,770 EXEMPTION U/S 54EC: INVESTMENT 27,00,000 IN REC BONDS 55,41,770 RESTRICTED TO CAPITAL GAINS RS.38,33,570 TAXABLE CAPITAL GAIN NIL AS AGAINST THE ABOVE, A.O TOOK ONLY RS.70.00 LAKHS AS SALES CONSIDERATION RECEIVED INSTEAD OF RS.97,37,800/- TA KEN BY THE ASSESSEE AND PROCEEDED TO COMPUT THE LTCG AS UNDER: TOTAL SALE CONSIDERATION RECEIVED : RS.70,00,000 ASSESSEES SHARE IN IT (65%) : RS.45,00,000 ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 4 OF 12 LESS: INDEXED COST RS.10,73,200 LTCG RS.34,76,800 LESS:EXEMPTION U/S 54 RS.28,41,770 TAXABLE LTCG RS. 6,35,030 7. THE GRIEVANCE OF THE ASSESSEE IN A.Y 2005-06 IS THAT THE ASSESSING OFFICER HAS NOT GRANTED THE BENEFIT OF SE CTION 54EC QUA THE ALLEGED LTCG OF RS.6,35,030/-. IN ASSESSMENT YE AR 2006-07 IT HAS FILED ITS RETURN OF INCOME ON 24.7.2006 DECL ARING A TOTAL INCOME OF RS.1626/-. AT THIS STAGE, FOR THE PURPOSE OF APPRECIATING THE FACTS MORE SCIENTIFIC WAY, WE DEEM IT APPROPRIATE TO TAKE NOTE OF THE DETAILS SUBMITTED B Y THE ASSESSEE IN TABULAR FORM BEFORE THE LEARNED CIT (A) IN ITS W RITTEN SUBMISSIONS: STATEMENT OF COMPUTATION OF CAPITAL GAINS WITHOUT PREJUDICE BASIC DATA AS PER JD DATED 8.4.2004 AS ACHIEVED ULTIMATELY SUPER BUILT UP AREAS: TOTAL SUPERBUILT UP AREA 13,620 13,594 57% SHARE OF THE ASSESSEE, HIS BROTHER & SISTER IN THE ABOVE 7,763 7,749 65% OF THE ASSESSEE SHARE IN THE ABOVE 5,046 5,037 SUPERBUILT UP ARE ACTUALLY RECEIVED BY THE ASSESSEE 2,759 SUPERBUILT UP AREA GIVEN UP IN FAVOUR OF THE BUILDER AND HIS SISTER 2,278 COST PER SFT OF THE SUPER BUILT UP AREA: ESTIMATED COST OF THE SHARE OF SUPER BUILT UP ARA OF THE ASSESSEE, HIS BROTHER AND SISTER AS PER JD AGREEMENT 7,000,000 7,000,000 TOTAL SUPER BUILT UP AREA OF THE ASSESSEE, HIS BROTHER AND SISTER 7,763 7,749 COST OF CONSTRUCTION PER SFT 902 903 COMPUTATION: AMOUNT RECEIVED BY THE ASSESSEE, FOR FOREGOING HIS ENTITLEMENT OF SUPER BUILT UP AREA TO THE EXTENT OF 2278 SFT FROM: A) THE BUILDER ON 1.7.2005 (65% OF 2737800) 1,779,5 70 B) HIS SISTER 1,000,000 GROSS SALE CONSIDERATION AS TAKEN BY THE A.O 2,779, 570 THE ABOVE SALE CONSIDERATION REQUIRES TO BE SPLIT U P BETWEEN LTCG ON THE SALE OF UNDIVIDED INTEREST IN LAND & STCG ON SA LE OF BUILT UP AREA TO THE ABOVE PERSONS COMPUTATION OF SHORT TERM CAPITAL GAINS: SALE CONSIDERATION FOR TRANSFER OF BUILT UP SPACE I S VALUED AT THE COST OF THE BUILT UP AREA AS THE APPELLANT CANNOT SELL THE SAME BELOW COST AND 2,057,543 ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 5 OF 12 THERE WILL BE NO APPRECIATION FOR THE TRANSFER OF T HE SAME TO THE BUILDER AND SISTER (2278 SFT X RS.903 PER SFT) LESS: COST OF ACQUISITION OF THE SUPER BUILT UP ARE A AS FOLLOWS: SUPER BUILT UP AREA TRANSFERRED BY ASSESSEE TO HIS ISTER & BUILDER: 2,278 ESTIMATED COST OF CONSTRUCTION PER SFT OF SUPERBUIL TUP AREA 903 2,057,543 TAXABLE SHORT TERM CAPITAL GAIN COMPUTATION OF LONG TERM CAPITAL GAINS: SALE CONSIDERATION FOR TRANSFER OF UDI IN LAND, WHI CH IS PROPORTIONATE TO THE 2278 SFT OF SUPER BUILT UP AREA TRANSFERRED AND THE SAME IS THE BALANACE (RS.27,79,570 LES RS.20,57,543) 722,027 LESS: EXEMPTION U/S 54EC RS.27,00,000/- RESTRICTE D TO 722,027 TAXABLE LONG TERM CAPITAL GAIN 0 8. WITH THE ASSISTANCE OF THE REPRESENTATIVES, WE H AVE GONE THROUGH THE RECORD CAREFULLY. ON AN ANALYSIS OF THE ABOVE DETAILS, IT WOULD REVEAL THAT AS PER THE AGREEMENT DATED 8.4 .2004 THE ASSESSEE, HIS BROTHER AND SISTER WOULD GET 57% OF T HE SAHRES IN BUILT UP AREA. TOWARDS THE COST OF THESE SHARES, TH EY HAVE TO FOREGO THEIR RIGHTS IN THE UNDIVIDED PLOT OF LAND T O THE EXTENT OF 43% OF THE TOTAL LAND, MEANING THEREBY THE MOVEMENT THEY HAVE RELINQUISHED THEIR RIGHTS IN THE LAND, FOR A CONSID ERATION OF 7763 SFT BUILT UP AREA, THEY HAD EARNED LTCG. THIS LTCG IS TAXABLE IN ASSESSMENT YEAR 2005-06. TO THIS EXTENT, THERE IS N O DISPUTE BETWEEN THE PARTIES. THE DISPUTE RELATES TO COMPUTA TION OF STCG IN ASSESSMENT YEAR 2006-07. AS PER THE AGREEMENT, T HE ASSESSEE WAS TO RECEIVE 65% SHARES OF 57% SHARES WHICH FALLE N TO THE THREE MEMBERS OF HUF I.E. THE TOTAL AREA MEANT FOR THE ASSESSEE, HIS BROTHER AND SISTER WAS 7763 SFT. THE SHARE OF T HE ASSESSEE WAS 5046 SFT. THE ASSESSEE COULD RECEIVE 2759 SFT. REST OF THE SHARES I.E. 2278 SFT WAS GIVEN UP BY THE ASSESSEE I N FAVOUR OF THE BUILDER AS WELL AS HIS SISTER. IN LIEU OF THIS, THE ASSESSEE GOT RS.27,79,570/-. THE DISPUTE REMAINS TAXABILITY OF T HIS AMOUNT AS A STCG. ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 6 OF 12 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT FROM HIS SISTER HE HAS RECEIVED RS.10.00 LAKHS ONLY, WHE REAS FROM THE BUILDER, HE RECEIVED RS.17,79,570. HE COULD NOT HAV E EARNED ANY AMOUNT FROM HIS SISTER, IT WAS SOLD AT THE COST. AS FAR AS THE MONEY RECEIVED FROM THE BUILDER IS CONCERNED, THE V ALUE OF UNDIVIDED SHARE IN THE LAND IS ALSO EMBEDDED. THERE FORE, THE COMPUTATION MADE BY THE ASSESSEE SUBMITED BEFORE TH E CIT (A) OUGHT TO HAVE BEEN ACCEPTED. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE LEARNED FIRST APPELLATE AUTHORIT Y HAS CONSIDERED ALL THESE ASPECTS AND THEREAFTER WORKED OUT THE STCG OF RS.9,10,249/- INSTEAD OF RS.27,79,570/- WORKED O UT BY THE ASSESSING OFFICER. HE RELIED UPON THE ORDER OF THE CIT (A). 10. ON PERUSAL OF THE ORDER OF THE CIT (A) WE FIND THAT THE CIT (A) HAS MADE A LUCID ENUNCIATION OF THE FACTS AND O F LAW ON THE ISSUE IN DISPUTE. IT IS WORTH TO TAKE NOTE OF HER F INDING: 2.3.3.. HOWEVER, THE ASSESSING OFFICER HELD THAT THE SURRE NDER OF THE CONSTRUCTED AREA IS A SEPARATE TRANSACTION WHIC H IS LIABLE TO BE TAXED UNDER THE HEAD SHORT TERM CAPITA L GAINS FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER WAS CORRECT IN ARRIVING AT A CONCLUSION THAT THE AMUNT RECEIVED AGAINST THE SURRENDER OF THE CONSTRUCTED AREA IS AS SESSABLE AS SHORT TERM CAPITAL GAINS CONSIDERING THE FACT TH AT THE FIRST TRANSACTION OF THE CAPITAL GAINS ENDED ON THE DATE OF HANDING OVER THE POSSESSION OF THE PROPERTY FOR DEV ELOPMENT DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASSES SMENT YEAR 2005-06 AND THEREFORE, THE COMPUTATION OF THE LONG TERM CAPITAL GAINS CONSIDERING THE SALE CONSIDERATI ON TO THE EXTENT OF RS.70.00 LAKHS IN RESPECT OF TRANSFER OF 43% OF UNDIVIDED INTEREST IN THE LAND WAS ACCORDING TO THE PROVISIONS OF THE ACT. ONCE THE TRANSACTION OF TRAN SFER OF THE PROPERTY WAS OVER IN THAT YEAR AND IN THE SUBSEQUEN T YEAR THE APPELLANT SURRENDERED PART OF THE SUPER BUILT U P AREA, ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 7 OF 12 EITHER TO THE DEVELOPER OR HIS SISTER, THE SAME HAS TO BE ASSESSED UNDER SHORT TERM CAPITAL GAINS ACCORDING T O THE APPELLANT HIMSELF, HIS SHARE IN THE CONSTRUCTED ARE A WAS 5037 SFT BUILT UP AREA AGAINST WHICH HE RETAINED ON LY 2759 SFT AND SURRENDERED 2278 SFT ON WHICH ACCORDING TO CLAUSE 4(B) OF THE AGREEMENT, HE WAS ENTITLED TO RECEIVE CONSIDERATION FOR SUCH SURRENDER @ 2500/- PER SFT W HICH INCLUDES THE CONSIDERATION FOR TRANSFER OF UNDIVIDE D INTEREST IN THE LAND OF SUCH SURRENDER AREA ALSO. AS PER THE PROVISIONS OF SECTION 48 OF THE INCOME TAX ACT, TH E INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF CONSIDERATION R ECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF THE CAPITAL ASS ET THE FOLLOWING AMOUNTS NAMELY:- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER. (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F ANY IMPROVEMENT THERETO. IN THE CASE OF THE APPELLANT FULL VALUE OF CONSIDE RATION ACCRUED WORKS OUT TO RS.56,95,000/- ON THE BASIS O F RS.2,500/- PER SFT FOR THE SURENDERED CONSTRUCTED A REA OF 2278 SFT, INCLUDING UNDIVIDED INTEREST IN THE LAND, WHICH MAKES IT CLEAR THAT THE WORKING SUBMTITED BY THE AP PELLANT DURING THE APPELLATE PROCEEDINGS IN WHICH THE GROSS CONSIDERATION SHOWN AT RS.27,79,570/- IS NOT CORREC T. THE ASSESSING OFFICER ALSO COMMITTED A MISTAKE IN CONSI DERING THE ABOVE AMOUNT AS FULL VALUE OF CONSIDERATION INS TEAD OF RS.56,95,000/-. HOWEVER, FULL VALUE OF CONSIDERATIO N OF RS.56,95,000/- ON THE SURRENDER OF CONSTRUCTED AREA INCLUDES THE TWO ELEMENTS I.E. THE CONSIDERATION FO R THE CONSTRUCTED AREA SURRENDERED AND ALSO THE CONSIDERA TION FOR THE UNDIVIDED INTEREST IN THE LAND RELATED TO THE S URRENDERED BUILT UP AREA, WHICH IS ALSO EVIDENT FROM THE FACT THAT THE LONG TERM CAPITAL GAIN WORKED OUT BY THE ASSESSING OFFICER FOR THE PRECEDING ASSESSMENT YEAR WAS IN REGARD TO THE TRANSFER OF 43% INTEREST IN THE LAND IN RESPECT OF 3 CO- OWNERS, 65% OF WHICH WAS OWNED BY THE APPELLANT. TH ERE WAS NO TRANSFER OF THE RIGHT IN THE UNDIVIDED INTER EST IN THE LAND IN RESPECT OF THE REMAINING 57% WHICH IS UNDIV IDED INTEREST IN THE LAND IN RESPECT OF THE CONSTRUCTED AREA TO BE ALLOTTED TO THE 3 CO-OWNERS AND THERERORE, IN VIEW OF THE ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 8 OF 12 JUDICIAL PRONOUNCEMENTS ON WHICH THE RELIANCE HAS B EEN PLACED BY THE APPELLANT, THE CAPITAL GAINS FOR THE UNDIVIDED INTEREST IN THE LAND HAS TO BE COMPUTED SEPARATELY AND FOR THE TRANSFER OF THE CONSTRUCTED AREA EXCLUDING THE LAND HAS TO BE COMPUTED SEPARATELY. FOR COMPUTING THE SHORT TERM CAPITAL GAIN, THE COST OF THE ACQUISITION OF THE CONSTRUCTED AREA HAS TO BE TAKEN AT RS.20,57,543/- @ RS.903/- PER SFT AS WORKED OUT BY THE APPELLANT. SIMILARLY, ON THE CONSIDERATION OF RS.56 ,95,000 INCLUDES THE CONSDIERATION FOR TRANSFER OF UNDIVIDE D INTEREST IN THE LAND, THE SAME ENEDS TO BE REDUCED FOR ARRIV ING AT FULL VALUE OF CONSIDERATION IN RESPECT OF THE SURRENDERE D CONSTRUCTED AREA. THE SALE CONSIDERATION FOR THE UN DIVIDED INTEREST IN THE LAND WORKS OUT AS UNDER: I. THE SALE CONSIDERATION FOR 43% OF THE LAND IS ADMIT TEDLY RS.70,00,000 ON THE RATIO OF WHICH THE SALE CONSIDE RATION FOR 57% OF THE REMAINING LAND BELONGS TO 3 OWNERS W ORKS OUT TO RS.92,79,069/-. II. OUT OF THE REMAINING LAND OF 57% THE APPELLANT IS E NTITLED 65%, THE CONIDERATION FOR WHICH WORKS OUT RS.60,31,394/-. III. OUT OF THE 65% THE APPELLANT WAS ENTITLED FOR SUPER BUILT UP ARA OF 5037 SFT BUT RECEIVED 2759 SFT AND SURREN DERED 2278 SFT THE PERCENTAGE OF THE SURRENDERED AAREA OF 2278 TO THE ENTITLED ARE OF 5037 WORKS OUT 45%. IV. THE GROSS CONSIDERATION OF UNDIVIDED INTEREST IN TH E LAN D SURRENDERED THUS WORKS OUT TO RS.27,27,717 I.E. 45% OF RS.60,31,394/-.. ON THE BASIS OF THE ABOVE SHORT TERM CAPUITAL GAINS , FOR THE CONSTRUCTED SURRENDERED WORKS OUT AS UNDER: FULL VALUE OF CONSIDERATION @ 2500 PER SFT 56,95,0 00 IN RESPECT OF 2278 SFT (INCLUDING LAND) LESS:CONSIDERATION FOR UNDIVIDED IN THE LAND 27, 27,717 FULL VALUE OF CONSIDERATION FOR CONSTRCUTED 29,67, 283 AREA SURENDERED LESS: COST OF ACQUISITION @ RS.903 PER 20,57,034 SFT IN RESPECT OF 2278 SFT. ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 9 OF 12 SHORT TERM CAPITAL GAINS 9,10,249 IN VIEW OF THE ABOVE THE ASSESSING OFFICER IS DIREC TED TO ASSESS THE SHORT TERM CAPITAL GAINS AT RS.9,10,249 INSTEAD OF RS.27,79,570/-.. 11. ON AN ANALYSIS OF THE RECORD, WE FIND THAT AS F AR AS THE SALE OF A PROPERTY TO M/S. SUMANTH & CO. UNDER THE AGREE MENT DATED 8.4.2004 IS CONCERNED, IT WAS COMPLETED IN THE ACCO UNTING YEAR RELEVANT TO ASSESSMENT YEAR 2004-05, BECAUSE THE AS SESSEE HAS SURRENDERED ALL ITS RIGHTS AND ENTITLEMENTS IN THE UNDIVIDED SHARE OF LAND TO THE EXTENT OF 43% IN FAVOUR OF THE BUILDER. THE CONSIDERATION WAS IN TERMS OF KIND I.E. 57% SHARE O F THE BUILT UP AREA. THE CONSIDERATION WAS ESTIMATED AT RS.70.00 L AKHS. THIS TRANSACTION WAS COMPLETE IN THE ACCOUNTING YEAR REL EVANT TO ASSESSMENT YEAR 2005-06. NEITHER PARTY HAS DISPUTED IT. ONCE A RIGHT TO RECEIVE BUILT UP AREA ACCRUED TO THE ASSES SEE AND IT WAS SURRENDERED IN A SUBSEQUENT PERIOD FOR A CONSIDERAT ION, IT IS A SEPARATE TRANSACTION. ON THIS TRANSACTION THE INVES TMENT WAS LESS THEN 3 YEARS AND THEREFORE, STCG WOULD ARISE. THE DISPUTE REMAINS BETWEEN THE PARTIES REGARDING COMPUTATION O F STCG. THE CIT (A) HAS OBSERVED THAT AS PER CLAUSE IV(B) O F THE AGREEMENT, IT WAS AGREED BETWEEN THE PARTIES THAT O N SURRENDER OF ANY BUILT UP AREA, THE OWNER WOULD RECEIVE A SUM OF RS.2500/PER SFT. THUS ACCORDING TO THE LEARNED COMM ISSIONER, THE FULL VALUE OF THE CONSIDERATION ACCRUED TO THE ASSESSEE ON THE BASIS OF RS.2500/PER SFT RATE IS RS.56,95,000/-. IN THIS CONSIDERATION, VALUE OF UNDIVIDED INTEREST IN THE L AND IS ALSO EMBEDDED. THE LEARNED COMMISSIONER HAD WORKED OUT T HE VALUE OF SUCH UNDIVIDED SHARE IN THE LAND AT RS.27, 27,77 0/-. THIS WORKING HAS BEEN MADE ON THE BASIS, THAT 43% SHARE OF THE LAND ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 10 OF 12 IS OF RS.70.00 LAKHS. REMAINING 57% LAND BELONGS TO 3 PERSONS NAMELY, THE ASSESSEE, HIS BROTHER AND SISTER WHICH WORKED OUT TO RS.92,79,069/- AND THE ASSESSEE HAD A SHARE OF 65% OUT OF THIS 57%. THUS THE LAND VALUE IN ASSESSEES SHARE WOULD COME TO RS.60,31,394/-. THIS VALUE WAS MEANT FOR BUILT UP A REA OF 5037 SFT. HE WORKED OUT THE LAND VALUE OF PER SFT AND TH EN MULTIPLIED WITH SURRENDERED AREA OF 2278 SFT. THE CIT (A) THER EAFTER OBSERVED THAT THE FULL VALUE OF CONSIDERATION @ RS. 2500/- PER SFT IN RESPECT OF 2278 SFT (INCLUDING LAND) IS RS.56,95 ,000/- AFTER DEBITING THE VALUE OF LAND AT RS.27,27,717/-, THE S ALE CONSIDERATION ACCRUED TO THE ASSESSEE IS RS.29,67,2 83/-. HE DEBITED THE COST OF ACQUISITION OF THE LAND FROM TH IS AMOUNT @ RS.903/- SFT WHICH WAS VALUED AS COST OF CONSTRUCTI ON AND IN THIS WAY WORKED TO RS.9,10,249/- IS THE STCG. THE WORKI NG MADE BY THE LEARNED FIRST APPELLATE AUTHORITY IS SCIENTIFIC AND BASED ON LOGIC. THE RATE ADOPTED IS THE RATE ACCRUED BETWEEN THE BUILDER AND THE ASSESSEE FOR SURRENDER OF THE CONSTRUCTED A REA. THEREFORE, THE ASSESSEE CANNOT DISPUTE THAT HE HAS NOT RECEIVED THE AMOUNT AS WORKED OUT BY THE CIT (A). THE ONLY D ISPUTE IN ASSESSMENT YEAR 2006-07 IS THAT THE LEARNED CIT (A) HAS ERRED IN COMPUTING THE STCG OF RS.9,10,249/-. IN OUR OPINION , IN VIEW OF THE ABOVE DISCUSSION, THERE IS NO ERROR IN THE ORDE R OF THE CIT (A) IN COMPUTING THE STCG. THEREFORE, WE DO NOT FIND AN Y MERIT IN GROUND NO.3 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006- 07. 12. AS FAR AS ASSESSMENT YEAR 2005-06 IS CONCERNED, THE GRIEVANCE OF THE ASSESSEE IS THAT THE ASSESSING OFF ICER HAS ERRED IN WORKING OUT THE LTCG OF RS.6,35,030/-. THE LEARN ED COUNSEL ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 11 OF 12 FOR THE ASSESSEE, HOWEVER, DID NOT ADVANCE DETAILED ARGUMENTS ON THIS ISSUE. HE ONLY SUBMITTED THAT THE TRANSACTI ONS FOR SALE OF LAND AS WELL AS THE SALE OF SUPER BUILT UP AREA IS TO BE CONSIDERED AS ONE TRANSACTION. THE ASSESSEE HAD MADE INVESTMEN T ELIGIBLE FOR DEDUCTION U/S 54EC. THIS INVESTMENT WAS MADE, T HOUGH IN A PERIOD RELATED TO ASSESSMENT YEAR 2006-07 AND NOT W ITHIN SIX MONTHS FROM THE HANDING OVER OF THE POSSESSION TO T HE DEVELOPER BY VIRTUE OF JOINT DEVELOPMENT AGREEMENT. BU IF IT IS CONSIDERED A SINGLE TRANSACTION, THEN THE ASSESSEE HAD MADE INVE STMENT ON 27.7.2005 IN REC BOARD AND IT IS ENTITLED FOR THE D EDUCTION. 13. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDER OF THE LEARNED CIT (A). 14. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND PERUSED THE RECORD CAREFULLY. AS OBSERVED EARLIER, THE TRAN SACTIONS FOR SALE OF LAND WAS COMPLETED IN THE ACCOUNTING YEAR RELEVA NT TO ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS HANDED OV ER THE POSSESSION TO THE BUILDER ON 15.06.2004. THE ASSES SEE ITSELF HAS DISCLOSED THE LTCG IN ASSESSMENT YEAR 2005-06. THE INVESTMENT IN REC BOARD WAS NOT MADE IN SIX MONTHS. IT WAS MAD E ONLY ON 27.7.2005 I.E. BEYOND THE PERIOD OF SIX MONTHS. THE REFORE, THE LEARNED CIT (A) HAS RIGHTLY OBSERVED THAT THE ASSES SEE IS NOT ELIGIBLE FOR DEDUCTION U/S 54EC. 15. THE NEXT GROUND RELATES TO CHARGING OF INTEREST , WHICH IS CONSEQUENTIAL IN NATURE. ITA NOS.4 AND 820 OF 2011 SR MADHAVAN (HUF) BANGALO RE PAGE 12 OF 12 16. IN VIEW OF THE ABOVE DISCUSSIONS, BOTH THE APPE ALS FILED BY THE ASSESSEE ARE DEVOID OF MERIT. 17. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH SEPTEMBER, 2014. SD/- SD/- (ABRAHAM P. GEORGE) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 5 TH SEPTEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE