R.Balachandar v. The Income-tax Officer, Business Ward-X(2), Chennai
[Citation -2016-LL-0916-96]

Citation 2016-LL-0916-96
Appellant Name R.Balachandar
Respondent Name The Income-tax Officer, Business Ward-X(2), Chennai
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags full value of consideration • indexed cost of acquisition • cost of construction • sale consideration • immovable property • capital asset • capital gain • sale deed
Bot Summary: The assessee has raised several grounds in its appeal the crux of the issue is as follows:- The learned Commissioner of Income Tax has erred in enhancing the assessment by not taking into consideration the loan obtained and deployed for the purpose of construction of the property as the cost of acquisition and also denied the benefit of indexation on the same. The learned Commissioner of Income Tax enhanced the capital gain of the assessee by not considering the construction cost incurred by the assessee which was sourced from the loan obtained from Mr. John Ppandian, the buyer of the immovable property by observing as under:- 6.4 The appellant said that - he purchased the land in 2007 for Rs 4,00,000 - and spent Rs 40,00,000 - for constructing the building by taking loan from Shri Johnpandian. 6.5 Section 48 of the Income Tax Act reads as under: The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- expenditure incurred wholly and exclusively in connection with such transfer; the cost of acquisition of the asset and the cost of any improvement thereto 6.6 Capital gain has to be computed taking the full value of consideration into account. The cost of the asset will include the cost of acquisition of the land and cost of construction of the building. There is no reason as to why the learned Commissioner of Income Tax has denied in treating the cost of construction of the building as the cost of acquisition. Just because the assessee has constructed the building by taking loan does not mean that the assessee has not incurred any expenditure on the construction of the building. We hereby direct the learned Assessing Officer to treat the cost of 6 ITA No.1019 Mds 2016 construction of the building and cost of the land as the cost of acquisition and also give the benefit of indexation in accordance with the Act and as per the provisions 50C of the Act while reworking the Capital Gain.It is ordered accordingly.


IN INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI, BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . I.T. A. No.1019 Mds 2016 ( Assessm ent Year: 2011-12) Mr. R.Balachandar Vs Income Tax Officer, 20, A.S.Colony Main Road, Business Ward-X(2), Royapuram, Chennai-6. Chennai-600 013. PAN: AIRPR8914K ( Appellant) ( Respondent) Appellant by : Mr. K.G.Raghunath, Advocate Respondent by : Mr. A.V.Sreekanth,JCIT Da t e of h e ar in g : 16th September, 2016 D at e of Pr on oun c em ent : 16th September, 2016 ORDER Per A. Mohan Alankamony, AM:- This appeal is filed by assessee aggrieved by order of learned Commissioner of Income Tax (Appeals)- 5, Chennai dated 09.03.2016 in ITA No.90 CIT(A)-5 13-14 passed under section 143(3) r.w.s. 250(6) of Act. 2. assessee has raised several grounds in its appeal, however, crux of issue is as follows:- learned Commissioner of Income Tax (Appeals) has erred in enhancing assessment by not taking into consideration loan obtained and deployed for purpose of construction of property as cost of acquisition and also denied benefit of indexation on same. 2 ITA No.1019 Mds 2016 3. Brief facts of case are that assessee is individual engaged in business filed his return of income for assessment year 2011-12 on 14.11.2011. case was taken up for scrutiny and thereafter assessment was completed under section 143(3) of Act on 29.11.2013. assessee had purchased land on 05.02.2007 for sale consideration of Rs.4.00 lakhs. During year 2007, assessee constructed building of 15250 sq.ft., by investing Rs.40.00 lakhs which was obtained as loan from Shri John Pandian. During relevant assessment year assessee sold land and building to Mr. John Pandian for total sale consideration of Rs.51,75,000 vide sale deed dated 18.10.2010 since he was not able to return loan received from Mr. John Pandian. purchaser Mr. John Pandian had withheld Rs.31,71,000 - out of sale consideration to recover his loan and settled balance amount of Rs.12,04,000 - to assessee. On this transaction learned Assessing Officer had computed capital gain as follows:- Sale consideration Rs.12,04,000 3 ITA No.1019 Mds 2016 (apportioned value for land) Less: Indexed cost of acquisition: Land cost : 4,00,000 Add:Registration charges: 36,201 Indexed cost of acquisition : Rs.5,97,570 Long Term Capital Gain : Rs.6,06,430 - 4. However, learned Commissioner of Income Tax (Appeals) enhanced capital gain of assessee by not considering construction cost incurred by assessee which was sourced from loan obtained from Mr. John Ppandian, buyer of immovable property by observing as under:- 6.4 appellant said that - he purchased land in 2007 for Rs 4,00,000 - and spent Rs 40,00,000 - for constructing building by taking loan from Shri Johnpandian. appellant admitted that - he sold both land and building together to Shri Johnpandian for total consideration of Rs. 51,75,000 - by sale deed dated 18th Oct 2010. He apportioned sale consideration between land and building as - Rs. 12,04,000 - for land and Rs. 39,17,000 - for building and stated that purchaser withheld sum of Rs. 39,17,000 - out of sale consideration towards loan repayable by assessee. Based on above facts appellant contested 4 ITA No.1019 Mds 2016 that - on above transaction, capital gain will arise only on sale of land. 6.5 Section 48 of Income Tax Act reads as under: income chargeable under head "Capital gains" shall be computed, by deducting from full value of consideration received or accruing as result of transfer of capital asset following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) cost of acquisition of asset and cost of any improvement thereto 6.6 Capital gain has to be computed taking full value of consideration into account. Loan repaid or yet to be repaid cannot be reduced from full value of consideration for purpose of computing capital gain. 6.7 Hence Assessing Officer is directed to compute Capital gains on entire sale value of building including land (Rs.51,75,000 - taking into account value as per 50C of I.T. Act if applicable. 5. Before us, learned Authorized Representative submitted that entire cost of building should be taken into consideration for arriving at capital gain which was sourced from loan obtained from Mr. John Pandian. Further, he pleaded that assessee should be given benefit of indexation as per provisions of Act. 5 ITA No.1019 Mds 2016 6. learned Departmental Representative on other hand, relied in decision of Revenue and argued in support of same. 7. We have heard rival submissions and carefully considered materials on record. We do not find any merit in order of learned Commissioner of Income Tax (Appeals) on this issue. cost of asset will include cost of acquisition of land and cost of construction of building. There is no reason as to why learned Commissioner of Income Tax (Appeals) has denied in treating cost of construction of building as cost of acquisition. Just because assessee has constructed building by taking loan does not mean that assessee has not incurred any expenditure on construction of building. Further, provisions of Act do not bar assessee from benefit of indexation just because he has constructed building by taking loan. Therefore, we hereby direct learned Assessing Officer to treat cost of 6 ITA No.1019 Mds 2016 construction of building and cost of land as cost of acquisition and also give benefit of indexation in accordance with Act and as per provisions 50C of Act while reworking Capital Gain.It is ordered accordingly. 8. In result, appeal of assessee is allowed as indicated herein above. Order pronounced in open court on 16th September, 2016 Sd - Sd - ( Duvvuru RL Reddy ) ( A. Mohan Alankamony ) Judicial Member Accountant Member Chennai, Dated 16th September, 2016 Somu Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. GF R.Balachandar v. Income-tax Officer, Business Ward-X(2), Chennai
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