Case Law Details
Smt. V. Kalpagam Vs ITO (ITAT Chennai)
ITAT Chennai held that the incidence of tax for joint development agreement (JDA) is different and incidence of tax for subsequent sale of flats is different. Therefore, long term capital gains/ short term capital gains should be declared for the year in which the joint development agreement pertains and subsequent sale of flats pertains.
Facts- The case of the assessee was selected for scrutiny and during the course of assessment proceedings, AO noticed that the assessee entered into a joint development agreement for developing the land. AO, further noted that the assessee computed long term capital gains arising from development of the property and declared nil capital gains after availing exemption u/s. 54F of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). Therefore, AO computed LTCG by rejecting deduction claimed u/s. 54F of the Act.
CIT(A) rejected the appeal. Being aggrieved, the present appeal is filed.
Conclusion- In our considered view, the incidence of tax for joint development agreement is different and incidence of tax for subsequent sale of flats is different. Therefore, the assessee should declared long term capital gains/ short term capital gains as the case may be for the year in which the joint development agreement pertains and subsequent sale of flats pertains. In this case, although the assessee supposed to compute long term capital gains separately for joint development agreement and subsequent sale of flats, she had computed long term capital gains when flats has been sold in the assessment year 2013-14. The Assessing Officer had also made a fundamental mistake in computing capital gains for assessment year 2013-14 based on date of sale of flats, even though the date of joint development agreement and supplementary agreement falls under assessment year 2011-12 & 2012-13. Therefore, we are of the considered view that the Assessing Officer needs to reexamine the claim of the assessee in light of date of joint development agreement, supplementary agreement and date of sale of flats by the assessee and compute capital gains separately for joint development agreement and subsequent sale of flats. The Assessing Officer is directed to compute the capital gains by considering cost of acquisition and other deductions claimed by the assessee as per law. Therefore, we set aside the order of the ld. CIT(A) and restore the issue back to the file of the Assessing Officer and direct the Assessing Officer to recompute capital gains arising out of joint development agreement and subsequent sale of flats denovo in accordance with law after providing opportunity of hearing to the assessee.
Please become a Premium member. If you are already a Premium member, login here to access the full content.