L.K. Trust Vs DCIT (ITAT Bangalore)
Summary: The Bangalore ITAT adjudicated cross appeals filed by L.K. Trust and the Revenue against the order of CIT(A)-11, Bengaluru dated 21 March 2024 for AY 2018-19. The principal dispute concerned the tax treatment of consideration arising from a Joint Development Agreement (JDA) with Prestige Estate Projects Ltd. The assessee had acquired 1,07,511 sq. ft. of land in 1989 for ₹1.5 crore and converted it into stock-in-trade on 2 April 2009 at ₹75,25,76,000. Under the JDA dated 21 July 2010, as subsequently amended, the assessee was entitled to 55% of the project’s built-up area, while 45% was allocated to the developer. The assessee received 2,74,332 sq. ft. of built-up area in FY 2017-18 and had credited ₹48.43 crore as consideration, besides computing long-term capital gain of ₹32,02,99,200 on the land transferred.
The Assessing Officer instead adopted the developer’s construction cost as the value of consideration and ultimately computed the assessee’s share of construction cost at ₹215,43,29,196, resulting in additional business income of ₹167,00,29,196. The CIT(A) held that construction cost could constitute the full value of consideration but excluded statutory approval costs, administrative costs, finance costs and TDR costs from construction cost, thereby partly allowing the assessee’s appeal.
