PCIT Vs CPC Logistics Ltd. (Karnataka High Court)
The Karnataka High Court dismissed two appeals filed by the Revenue concerning the computation of capital gains arising from Joint Development Agreements (JDAs). The common issue was whether the “full value of consideration” under Section 48 of the Income-tax Act should be determined on the basis of the cost of construction of the built-up area receivable by the landowner or by adopting the guidance value of the land transferred.
In one appeal, the assessee had entered into a JDA for development of land at Attavar Village, Mangaluru, under which it was entitled to receive 26% of the constructed area. The Assessing Officer computed long-term capital gains by treating the cost of construction of the assessee’s share of the built-up area as the full value of consideration. The Commissioner (Appeals) substituted the guidance value as the basis for determining consideration, and the Tribunal affirmed that view. In the second appeal, relating to another assessee who had entered into a JDA for development of land at Kodihalli Village, the Assessing Officer similarly adopted the cost of construction as the consideration, whereas the Commissioner (Appeals) and the Tribunal held that the guidance value should be adopted.
