Prashanth Prakash, Bangalore V. Addl.C.I,.T., Bangalore

ITA 573/BANG/2014

• Counselvise Citation: 57321114 RSA 2014
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: H N KHINCHA
• Keywords: Capital asset; Question of law; Cost of acquisition
• Section: 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 573/BANG/2014 ASSESSMENT YEAR : 2009-10 SHRI PRASHANTH PRAKASH, NO.113, LALBAGH ROAD CROSS, KRISHNAPPA LAYOUT, BANGALORE 560 027. PAN: AHMPP 8079P VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 8, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA, C.A. RESPONDENT BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 05.03.2015 DATE OF PRONOUNCEMENT : 20.03.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 28.3.2014 OF THE CIT(APPEALS), LTU, BANGALORE RELATING TO ASSESS MENT YEAR 2009-10. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO, WHETHER THE CIT(A) WAS JUSTIFIED IN COMING TO THE C ONCLUSION THAT SALE OF LAND AND BUILDING BY THE ASSESSEE GAVE RISE TO SHOR T TERM CAPITAL GAIN AS AGAINST THE CLAIM OF THE ASSESSEE THAT SALE OF LAND AND BUILDING HAS TO BE BIFURCATED INASMUCH AS SALE OF LAND HAS TO BE CONSI DERED AS GIVING RISE TO ITA NOS. 578 & 653/BANG/2012 PAGE 2 OF 12 LONG TERM CAPITAL GAIN AND SALE OF BUILDING AS GIVI NG RISE TO SHORT TERM CAPITAL GAIN. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE AFOR ESAID ISSUE ARISES FOR CONSIDERATION ARE AS FOLLOWS. 4. ONE, M/S. CONCORDE HOUSING CORPORATION (HEREINAF TER REFERRED TO AS CONCORDE HOUSING), A DEVELOPER OF RESIDENTIAL LAY OUT OF SITES AS WELL AS BUILDER, DEVELOPED HOUSING SITES KNOWN AS SILICON V ALLEY IN SY. NOS. 85, 164, 165 & 166 OF DODDATHOGUR VILLAGE, BEGUR HOBLI, BANGALORE SOUTH TALUK. THE ASSESSEE PURCHASED A HOUSE SITE BEARING NO.197. CONCORDE HOUSING ALSO AGREED TO CONVEY THE LAND AND CONSTRUC T A VILLA FOR THE ASSESSEE. ONE OF ITS SISTER CONCERNS, CONCORDE SHE LTERS PVT. LTD. (HEREINAFTER REFERRED TO CONCORDE SHELTERS) AGREE D TO CONSTRUCT A VILLA ON THE SITE SOLD BY CONCORDE HOUSING TO THE ASSESSEE. BY A REGISTERED SALE DEED DATED 21.10.2004, THE SITE WAS CONVEYED TO THE ASSESSEE FOR A SALE CONSIDERATION OF RS.9 LAKHS. THE COST OF CONSTRUCT ION OF VILLA WAS RS.24,39,526. THE ASSESSEE HAD TO PAY THE COST OF CONSTRUCTION OF VILLA IN INSTALMENTS AS SET OUT IN THE AGREEMENT DATED 4.10. 2004 BETWEEN THE ASSESSEE AND CONCORDE SHELTERS. ULTIMATELY CONSTRU CTION OF VILLA GOT COMPLETED IN THE YEAR 2008 ONLY. THE ASSESSEE AGRE ED TO SELL THE LAND AS WELL AS VILLA UNDER AN AGREEMENT FOR SALE DATED 5.5 .2008 TO ONE SHAKTI MOHAN FOR A CONSIDERATION OF RS.58,96,006. THE LAN D AS WELL AS VILLA WAS ULTIMATELY SOLD TO SHAKTI MOHAN UNDER A REGISTERED SALE DEED DATED ITA NOS. 578 & 653/BANG/2012 PAGE 3 OF 12 10.10.2008. THE SALE CONSIDERATION MENTIONED IN TH IS SALE DEED IS A SUM OF RS.21 LAKHS. THE REVENUE HAS NOT CHOSEN TO TAKE COGNIZANCE OF THE SALE CONSIDERATION AS REFLECTED IN THE SALE DEED, B UT HAS PROCEEDED ONLY ON THE BASIS OF SALE CONSIDERATION AS SET OUT IN THE A GREEMENT DATED 5.5.2008. 5. IT IS NOT IN DISPUTE THAT THE AGREEMENT FOR SALE DATED 5.5.2008 BY WHICH THE LAND AS WELL AS VILLA WAS AGREED TO BE SO LD BY THE ASSESSEE TO SHAKTI MOHAN WAS A TRANSFER AND CAPITAL GAIN ON SUC H TRANSFER WAS CHARGEABLE TO TAX IN THE A.Y. 2009-10. THE ASSESSE E COMPUTED CAPITAL GAIN BY BIFURCATING THE CAPITAL GAIN ON SALE OF LAN D AND CAPITAL GAIN ON SALE OF VILLA. ACCORDING TO ASSESSEE, THE LAND WAS PURC HASED UNDER SALE DEED DATED 21.10.2004 AND WAS SOLD AFTER CONSTRUCTION OF VILLA THEREON ON 5.5.2008. THE LAND, ACCORDING TO ASSESSEE, WAS HEL D FOR A PERIOD OF MORE THAN 36 MONTHS AND THEREFORE TRANSFER OF LAND WOULD GIVE RISE TO LONG TERM CAPITAL GAIN. 6. AS FAR AS VILLA IS CONCERNED, CONSTRUCTION OF VI LLA WAS COMPLETED IN 2008 AND SAME WAS SOLD ON 5.5.2008 WITHIN A SHORT P ERIOD AND THEREFORE SALE OF VILLA WOULD GIVE RISE TO SHORT TERM CAPITAL GAIN. THE COMPUTATION OF LONG TERM AND SHORT TERM CAPITAL GAINS MADE BY THE ASSESSEE WAS AS FOLLOWS:- ITA NOS. 578 & 653/BANG/2012 PAGE 4 OF 12 LAND RS. . SALE CONSIDERATION FROM CONCORDE PROPERTY LAND 36, 81,926 LESS: INDEXED COST OF ACQUISITION 9,90,920 = RS.12,01,491 480X 582 INTEREST PAID ON BORROWING: RS. 7,82,394 19,83,885 16,98,042 BUILDING CONCORDE PROPERTY BUILDING 22,14,080 LESS: COST OF CONSTRUCTION 22,14,080 7. THE ASSESSING OFFICER ACCEPTED THE AFORESAID CLA IM OF THE ASSESSEE. THE ONLY OBJECTION OF THE AO WAS WITH REGARD TO CLA IM OF ASSESSEE FOR DEDUCTION OF A SUM OF RS.7,82,394 WHICH WAS INTERES T PAID ON BORROWING, WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF LAND. ACCORDING TO AO, SECTION 48 PROVIDES THE MODE OF COMPUTATION FOR CHARGING CAPITAL GAIN TO TAX. INCO ME CHARGEABLE UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCTING FR OM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVE LY IN CONNECTION WITH SUCH TRANSFER, AND (II) COST OF ACQUISITION OF ASSE T AND THE COST OF ANY IMPROVEMENT THERETO. IN VIEW OF THE ABOVE PROVISIO N, HE WAS OF THE VIEW THAT THE SUM OF RS.7,82,394 CLAIMED AS DEDUCTION CA NNOT BE ALLOWED AS IT IS NEITHER COST OF ACQUISITION OR IMPROVEMENT TO THE L AND NOR IS IT WHOLLY AND ITA NOS. 578 & 653/BANG/2012 PAGE 5 OF 12 EXCLUSIVELY INCURRED IN CONNECTION WITH THE TRANSFE R. THE AO THEREFORE ADDED THE SAID AMOUNT TO CAPITAL GAINS AND BROUGHT TO TAX. 8. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(APPEALS). 9. THE CIT(APPEALS) HAD TO ADDRESS THE QUESTION AS TO WHETHER THE INTEREST PAID ON LOANS BORROWED FOR ACQUIRING THE P ROPERTY WHICH WAS NOT ALLOWED AS A DEDUCTION WHILE COMPUTING CAPITAL GAIN , CAN BE ALLOWED AS A DEDUCTION? THE CIT(A) WITHOUT GOING INTO THIS QUE STION, WENT INTO THE QUESTION OF CORRECTNESS OF THE ASSESSEE HAVING BIFU RCATED THE CAPITAL GAIN ON SALE OF LAND AND VILLA INTO LONG TERM AND SHORT TERM CAPITAL GAINS. ACCORDING TO CIT(A), THE TRANSACTION FOR PURCHASE O F LAND AND BUILDING WAS A SINGLE INTEGRATED TRANSACTION AND THEREFORE AO OU GHT NOT TO HAVE ACCEPTED THE BIFURCATION OF CAPITAL GAIN ON SALE OF LAND AND BUILDING INTO LONG TERM AND SHORT TERM CAPITAL GAINS. THE CIT(A) WAS OF THE VIEW THAT CONSEQUENT BENEFIT AND INDEXATION WHILE COMPUTING L ONG TERM CAPITAL GAIN OUGHT NOT TO HAVE BEEN ALLOWED TO THE ASSESSEE. TH E CIT(A) IN THIS REGARD REFERRED TO AGREEMENT DATED 4.10.2004 TO CONSTRUCT THE VILLA ON THE LAND PROPOSED TO BE PURCHASED BY THE ASSESSEE FROM CONCO RDE HOUSING AND CAME TO THE CONCLUSION THAT SALE OF LAND AND CONSTR UCTION OF VILLA WAS A SINGLE TRANSACTION. WHEN THE FACTUM OF LAND HAVING ALREADY BEEN REGISTERED IN THE NAME OF ASSESSEE CONSEQUENT TO SA LE DEED DATED 21.10.2004 AND THE RECITAL IN THE SALE DEED THAT AS SESSEE WAS GIVEN ITA NOS. 578 & 653/BANG/2012 PAGE 6 OF 12 POSSESSION OF THE PROPERTY BY CONCORDE HOUSING WAS BROUGHT TO THE NOTICE OF THE CIT(A), HE OBSERVED THAT SUCH POSSESSION WAS ONLY A PAPER TRANSFER. THE CIT(A) ALSO REFERRED TO THE FACT THAT THE ASSES SEE WAS MAKING COMPOSITE PAYMENTS FOR THE LAND & VILLA AND THEREFO RE THE TRANSACTION WITH CONCORDE HOUSING AND CONCORDE SHELTERS HAD TO BE TR EATED BY THE ASSESSEE AS ONE HOLISTIC TRANSACTION ROUTED THROUGH A COMMON LEDGER. 10. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN CGT V. ETHIRAJALU, 93 ITR 366 AND THE JURISDICTIONAL ITAT DECISION IN T.S. KRISHNAMURTHY V. DCIT, ITA NO.569/BANG/2012 DA TED 14.2.14 , WHEREIN THE CONCEPT OF POSSESSION AND THE EXPRE SSION HELD WERE HELD TO BE WORDS NOT HAVING THE SAME MEANING. 11. THE CIT(A), HOWEVER, REJECTED THE AFORESAID CON TENTION AND HELD AS FOLLOWS:- 8.3 FOR PURPOSES OF CONSIDERING ASSESSIBILITY UN DER THE HEAD OF CAPITAL GAINS, THE INTERPRETATION OF THE WORD HE LD IS MUCH WIDER THAN NOTIONS OF OWNERSHIP AND THE HONBLE S UPREME COURT IN THE CASE OF CIT VS PODAR CEMENT PVT LTD. ( 1997) 226 ITR 625 HELD THAT THE OWNER IS THE ONE WHO EFFECTIV ELY CONTROLS THE PROPERTY AND NOT MERELY THE ONE WHO HOLDS TITLE TO THE SAME (EMPHASIS ADDED). IN THE APPELLANTS CASE, IN SPITE OF THE APPEARANCE OF THE SALE DEED HAVING BEEN REGISTERED IN RESPECT OF LAND THE EFFECTIVE POSSESSION AND CONTROL OF THIS CAPITAL ASSET REMAINED WITH THE CONCORDE GROUP, AND ITS POSSESSIO N ALONG WITH THE CONSTRUCTED VILLA, WAS HANDED OVER TO THE APPEL LANT IN FY 2008-09 SHORTLY BEFORE THE ENTIRE PROPERTY WAS SOLD TO SAKTHI MOHAN. THE ISSUE IN DISPUTE HERE IS NOT WHETHER THE SALE CONSIDERATION RECEIVED FROM SAKTHI MOHAN COULD HAVE BEEN BIFURCATED INTO CONSIDERATION FOR LAND AND BUILD ING WITH SEPARATE TREATMENT OF EACH. THE ISSUE, ESSENTIALLY, IS THE PERIOD OF ITA NOS. 578 & 653/BANG/2012 PAGE 7 OF 12 HOLDING IN RESPECT OF THE COMPONENT OF LAND COMPR ISED IN THE PROPERTY SOLD TO SAKTHI MOHAN. SINCE THE PERIOD OF HOLDING OF BOTH THE LAND AND THE CONSTRUCTED VILLA THEREON WAS LESS THAN 36 MONTHS AS DISCUSSED ABOVE, THE PROCEEDS OF THE TRAN SFER ARE TO BE CONSIDERED FOR COMPUTATION OF SHORT TERMS CAPITAL G AINS ONLY. 12. THE CIT(APPEALS) ULTIMATELY DIRECTED THE AO TO ASSESS THE ENTIRE GAIN AS SHORT TERM CAPITAL GAIN BY ADOPTING THE FUL L VALUE OF CONSIDERATION ON TRANSFER AT RS.58,96,006. 13. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASS ESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS AS WERE MADE BEFORE THE AO/CIT(A). THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. FROM A PERUSAL OF AGREEMENT DATED 4.10.2004 BETWEEN THE ASSESSEE AND CONCORDE SHELTERS, IT IS CLEAR THAT CONCORDE SHELT ERS AGREED TO CONSTRUCT A VILLA ON THE PLOT SOLD BY CONCORDE HOUSING. CLAUSE 5 OF THE SAID AGREEMENT IS VERY MATERIAL AND IT READS AS FOLLOWS: - 5. THE FIRST PARTY HEREBY IRREVOCABLY PERMITS AND AUTHORIZES THE SECOND PARTY TO HOLD THE SCHEDULE PROPERTY TO D EVELOP THE SAME BY CONSTRUCTING A RESIDENTIAL VILLA FOR HIM BY OBTAINING THE SANCTIONED PLAN. THE FIRST PARTY SHALL NOT REVOKE T HE PERMISSION SO GRANTED, TILL COMPLETION OF THE ENTIRE VILLA WITH T HE PLAN AND THE SPECIFICATIONS AGREED TO IN ANNEXURE-I AND II AS TH E AGENCY CREATED HEREIN IS ONE COUPLED WITH INTEREST IN SO F AR AS THE SECOND PARTY CONSTRUCTING A RESIDENTIAL VILLA IN THE SCHED ULE PROPERTY. ITA NOS. 578 & 653/BANG/2012 PAGE 8 OF 12 16. THE LAND WAS SOLD BY CONCORDE HOUSING TO THE AS SESSEE BY A REGISTERED SALE DEED DATED 21.10.2004. IN THE SAID SALE DEED, CONCORDE HOSING HAS AFFIRMED THAT POSSESSION OF THE SITE SOL D TO THE ASSESSEE HAS BEEN DELIVERED AND THAT THE ASSESSEE WILL BE IN LEG AL POSSESSION OF THE PROPERTY FROM THE DATE OF SALE DEED. IT IS THUS CL EAR THAT THE ASSESSEE ACQUIRED TITLE TO THE LAND AS EARLY AS ON 21.10.200 4. THE POSSESSION OF CONCORDE SHELTERS UNDER AGREEMENT DATED 4.10.2004, WAS ONLY A LICENSE TO CARRY OUT CONSTRUCTION WHICH CANNOT BE EQUATED T O POSSESSION AS UNDERSTOOD IN LEGAL PARLANCE. THE ASSESSEE HAVING ACQUIRED TITLE TO THE LAND AS EARLY AS ON 21.10.2004 AND HAVING SOLD THE LAND TOGETHER WITH VILLA UNDER AN AGREEMENT DATED 5.5.2008, IT IS TO BE HELD THAT THE TRANSACTION OF SALE HAS TO BE BIFURCATED AS ONE RELATING TO LAND A ND THE OTHER RELATING TO BUILDING. AS FAR AS THE TRANSACTION OF SALE OF LAN D IS CONCERNED, THE GAIN ON SUCH SALE SHOULD BE CONSTRUED AS LONG TERM CAPITAL GAIN BECAUSE THE ASSESSEE HELD THE LAND FOR A PERIOD OF MORE THAN 36 MONTHS. THE CONCLUSIONS OF THE CIT(APPEALS) THAT THE EXPRESSION HELD AS USED IN THE DEFINITION OF LONG TERM CAPITAL ASSET IN THE ACT ME ANS PHYSICAL POSSESSION, IN OUR VIEW, IS ERRONEOUS AND IS NOT CONTEMPLATED B Y THE PROVISIONS OF SECTION 2(42A) OF THE ACT. THE LAW IS WELL SETTLED THAT WHEN THERE IS A TRANSFER OF CAPITAL ASSET BEING LAND TOGETHER WITH BUILDING AND WHERE THE LAND IS HELD FOR A PERIOD OF MORE THAN 36 MONTHS AN D THE BUILDING HELD FOR LESS THAN 36 MONTHS, THE CAPITAL GAIN ON LAND AND B UILDING HAS TO BE ITA NOS. 578 & 653/BANG/2012 PAGE 9 OF 12 BIFURCATED AS ONE RELATING TO LAND AND THE OTHER RE LATING TO BUILDING. IF THE LAND IS HELD FOR MORE THAN 36 MONTHS, THEN CAPITAL GAIN ON SALE OF LAND HAS TO BE TREATED AS LONG TERM CAPITAL GAIN. THE HONB LE MADRAS HIGH COURT IN THE CASE OF CIT VS. RAMACHANDRA RAO, 236 ITR 51 (MAD) HAD AN OCCASION TO DEAL WITH IDENTICAL CASE. THE HONBLE COURT HELD AS FOLLOWS:- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS OF BOTH PARTIES. THE EXPRESSION 'CAPITAL ASSET' IS DEFINED IN S. 2(14) OF THE ACT AS UNDER : 'CAPITAL ASSET MEANS PROPERTY OF ANY KIND HELD BY A N ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFE SSION, BUT DOES NOT INCLUDE - (I) ANY STOCK-IN-TRADE, CONSUMABLE STORES OR RAW MA TERIALS HELD FOR THE PURPOSES OF HIS BUSINESS OR PROFESSIONS, .. ........ (III) AGRICULTURAL LAND IN INDIA, ETC. THE KEY WORD S OF THE DEFINITIONS OF CAPITAL ASSET FOUND IN S. 2(14) ARE THE PROPERTY OF ANY KIND AND THE TERM COMPREHENDS AND INCLUDES WITH IN ITSELF ANY INTEREST IN THE PROPERTY. IT MAY BE MOVABLE OR IMMO VABLE PROPERTY OR ANY INTEREST THEREON. THE TERM 'SHORT-T ERM CAPITAL ASSET' IS DEFINED IN S. 2(42A) OF THE ACT AS UNDER : 'SHORT-TERM CAPITAL ASSET' MEANS A CAPITAL ASSET HE LD BY AN ASSESSEE FOR NOT MORE THAN SIXTY MONTHS IMMEDIATELY PRECEDING THE DATE OF TRANSFER'. DURING THE RELEVANT PERIOD, S. 2(42A) OF THE ACT PR ESCRIBED THE PERIOD OF THIRTY SIX MONTHS. THE EMPHASIS THAT IS G IVEN IN S. 2(42A) IS THAT THE CAPITAL ASSETS SHOULD BE HELD BY AN ASSESSEE FOR A PERIOD NOT MORE THAN 36 MONTHS IMMEDIATELY PRECED ING THE DATE FOR THE ASSET TO BE TERMED AS A SHORT-TERM CAPITAL ASSETS. HERE ALSO, THE EMPHASIS IS GIVEN ON THE EXPRESSION HELD BY AN ASSESSEE. THE MODE OF COMPUTATION OF THE CAPITAL GAIN IS PROVIDED UNDER S. 48 OF THE ACT WHICH READS AS UNDER : 'THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAIN S' SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION ITA NOS. 578 & 653/BANG/2012 PAGE 10 OF 12 RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY :- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE CAPITAL ASSET A ND THE COST OF ANY IMPROVEMENT THERETO'. SEC. 80T OF THE ACT GRANTS DEDUCTION IN RESPECT OF THE LONG-TERM CAPITAL GAINS IN THE CASE OF AN ASSESSEE OTHER THAN COMPANIES WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE NOT BEI NG A COMPANY INCLUDES ANY INCOME CHARGEABLE UNDER THE HEAD 'CAPI TAL GAINS' RELATING TO CAPITAL ASSETS OTHER THAN SHORT-TERM CA PITAL ASSETS. IN THE CASE OF BUILDINGS OR LAND, SEPARATE DEDUCTION I S PROVIDED UNDER S. 80J(B) OF THE ACT. IT IS RELEVANT TO NOTE WHEN S. 80T GRANTS DEDUCTION, IT USES THE EXPRESSION BOTH THE B UILDINGS OR LAND OR ANY RIGHTS IN BUILDING OR LANDS. THE QUESTION TH AT ARISES FOR CONSIDERATION IS WHETHER IT IS POSSIBLE TO BIFURCAT E THE CAPITAL GAINS THAT ARISES ON THE SALE OF THE LAND AND BUILD ING, WHEN IT IS SOLD AS ONE UNIT. THE DECISION OF THIS COURT IN PAR K VIEW ENTERPRISES (CITED SUPRA) MAKES IT CLEAR THAT THE I NDIAN LAW RECOGNISES DUAL OWNERSHIP OF THE LAND AND BUILDING. THE PRIVY COUNCIL IN NARAYAN DAS VS. JATINDRANATH AIR 1923 PC 135 HAS ALSO TAKEN THE VIEW THAT HAVING REGARD TO THE LAW I N INDIA IT IS POSSIBLE TO HAVE SEPARATION OF OWNERSHIP OF THE BUI LDING FROM THE OWNERSHIP OF THE LAND. THIS VIEW OF THE PRIVY COUNC IL WAS APPROVED BY THE SUPREME COURT IN BISHAN DAS VS. STATE OF PUNJAB . IN SO FAR AS THE DEFINITION OF CAPITAL ASSET IS CONCERNED, AS ALREADY SEEN, THE DEFINITION OF CAPITAL ASSET IN CLUDES PROPERTY OF ANY KIND AND THE LAND HELD BY THE ASSESSEE IS A CAP ITAL ASSET AND THE BUILDING HELD BY THE ASSESSEE IS ALSO A CAPITAL ASSET AND IT IS POSSIBLE TO BIFURCATE THE CAPITAL GAIN ARISING WITH REFERENCE TO THE SALE OF THE LAND AND BUILDING EVEN IF THEY ARE SOLD AS ONE UNIT, IF THE LANDS ARE HELD BY THE ASSESSEE FOR A PERIOD MOR E THAN THAT PRESCRIBED UNDER S. 2(42A) OF THE ACT. IT IS NOT PO SSIBLE TO SAY THAT BY CONSTRUCTION OF THE BUILDING, THAT THE LAND WHIC H WAS A LONG- TERM CAPITAL ASSET, HAS CEASED TO BE A LONG-TERM CA PITAL ASSET. THE LAND IS AN INDEPENDENT AND AN IDENTIFIABLE CAPITAL ASSET, AND IT CONTINUES TO REMAIN AS AN IDENTIFIABLE CAPITAL ASSE T EVEN AFTER CONSTRUCTION OF BUILDING AND AT THE TIME OF THE SAL E OF THE HOUSE. SINCE THE LAND WAS HELD BY THE ASSESSEE FOR A PERIO D EXCEEDING 36 MONTHS, THE LAND CANNOT BE REGARDED AS A SHORT-TERM CAPITAL ASSET ITA NOS. 578 & 653/BANG/2012 PAGE 11 OF 12 ONLY BY VIRTUE OF THE CONSTRUCTION OF BUILDING THER EON. HENCE WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF LEARNED COU NSEL FOR THE REVENUE THAT IT IS NOT POSSIBLE TO BIFURCATE THE CA PITAL ASSET INTO TWO. WE ARE OF THE OPINION THAT THE TRIBUNAL HAS CO ME TO A CORRECT CONCLUSION THAT IT IS POSSIBLE TO WORK OUT CAPITAL GAIN WITH REFERENCE TO SALE OF BUILDING AND LAND SEPARATELY. THE DECISION OF THE SUPREME COURT IN STATE OF KERALA VS. P. P. HASSAN KOYA (SUPRA) RELIED ON BY THE LEARNED COUNSEL FOR THE R EVENUE HAS NO APPLICATION TO THE FACTS OF THIS CASE AS IT DEALS WITH THE CASE WHERE COMPENSATION WAS PAYABLE IN RESPECT OF LAND A ND BUILDING AND IN THAT SITUATION, THE SUPREME COURT HAS HELD T HAT BOTH THE LAND AND BUILDING SHOULD BE VALUED AS ONE UNIT AND HENCE, THE DECISION RENDERED BY THE SUPREME COURT WITH REFEREN CE TO DETERMINATION OF COMPENSATION UNDER THE LAND ACQUIS ITION ACT HAS NO APPLICATION, PARTICULARLY IN THE LIGHT OF S. 80T OF THE ACT. IT IS IMPERMISSIBLE FOR THE LEARNED COUNSEL TO RELY ON A DECISION FOR A POINT WHICH WAS NOT DECIDED IN THAT CASE. IN CIT VS. VIMAL CHAND GOLECHA (SUPRA), THE RAJASTHAN HIGH COURT HEL D THAT EVEN IF THE LAND AND BUILDING ARE SOLD AS ONE UNIT FOR A CONSOLIDATED PRICE, THE ASSESSEE IS ENTITLED TO BIFURCATE THE SA ME AND THE CAPITAL GAIN ARISING FROM THE SALE OF THE LAND HAD TO BE TR EATED AS LONG- TERM CAPITAL GAINS. WE ARE IN AGREEMENT WITH THE VI EW EXPRESSED BY THE RAJASTHAN HIGH COURT IN THE ABOVE CASE. WE A RE OF THE VIEW THAT THE LAND CAN BE REGARDED AS CAPITAL ASSET AS PER S. 2(14) OF THE ACT AND IN ACCORDANCE WITH THE SCHEME OF THE ACT, LAND WOULD BE CONSIDERED AS A SEPARATE CAPITAL ASSET, EV EN IF A BUILDING IS CONSTRUCTED THEREON. WE ARE ALSO OF THE OPINION THAT WHERE THE LAND HAVING BEEN HELD FOR MORE THAN A PRESCRIBED PE RIOD, THE GAINS ARISING FROM THE SALE OF THE LAND COULD BE CO NSIDERED AS A LONG-TERM CAPITAL GAINS, THOUGH THE BUILDING THEREO N WAS A NEW CONSTRUCTION HELD FOR A PERIOD LESS THAN 36 MONTHS. SINCE THE TRIBUNAL HAS COME TO THE CORRECT CONCLUSION BY APPL YING THE WELL SETTLED PRINCIPLES OF LAW, WE ARE OF THE OPINION TH AT NO REFERABLE QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIB UNAL. THEREFORE, WE REJECT THE TAX CASE PETITION. NO COSTS. 17. WE ARE THEREFORE OF THE VIEW THAT BIFURCATION O F CAPITAL GAIN AS MADE BY THE ASSESSEE SHOULD BE ACCEPTED. WE, HOWEVER, D ESIST FROM MAKING ITA NOS. 578 & 653/BANG/2012 PAGE 12 OF 12 ANY OBSERVATIONS WITH REGARD TO CLAIM OF ASSESSEE F OR DEDUCTION OF INTEREST PAID ON BORROWINGS WHILE COMPUTING LONG TERM CAPITA L GAIN ON SALE OF LAND, AS THE SAME IS NOT SUBJECT MATTER OF APPEAL BEFORE US. WITH THESE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS ALLOWED . 18. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 20 TH MARCH , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.