Tanvi Pilane
Published on: March 10, 2022 at 13:06 IST
It was held by the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) that Capital Gains under the Income Tax Act, 1961 are to be computed according to the respective Share of the Parties in the Residential Property and not according to any Internal Family arrangement.
The Bench of the Income Tax Appellate Tribunal (ITAT) consisted of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member).
The Assessee had executed a Joint Development Agreement (JDA) for the Development of a Property that he owned along with his wife and father. In lieu of the Share of Land sold, the Assessee along with the other joint owners had received Non-Refundable deposits and two flats.
The Long-Term Capital Gains received by the Assessee were recomputed by the Assessing Officer (AO) by taking into account the total cost of construction incurred by the Developer and the Non-Refundable deposits received by the Assessee’s father.
The Assessee filed an appeal against this order before the Commissioner of Income Tax (Appeals) (CIT (A)), who upheld the order of the Assessing Officer (AO). Following this, the Assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT).
It was submitted by the Assessee that the recomputation of the long-term capital gains by the Assessing Officer (AO), in order to compute the total sale consideration by the addition of the cost of construction and the non-refundable deposits received by the Assessee’s father was wrong.
The Income Tax Appellate Tribunal (ITAT) held that the full value of the consideration received by the owners should be considered according to the share of each Owner in the Property as there are three co-owners with a specified share in the Property.
It was also held that the receipt of the entire Non-Refundable deposit by the Assessee’s father and of one flat each by the Assessee’s wife and himself was an internal arrangement and did not affect the computation of Capital Gains under the Law.
The Tribunal ruled that as per law, the consideration received as a result of the Transfer of a Property should be taken into account according to the share of the Parties in the Property and not as per the internal arrangement between the Parties.
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