Owner eligible to Deduct Cost of Construction from Sale Consideration of Flats received under JDA: ITAT [Read Order]

Cost of Construction - Sale Consideration - Flats - JDA - ITAT - taxscan

In an assessee-friendly ruling, the Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee, an owner under the Joint development Agreement, shall be entitled to adjust the cost of construction from the sale consideration of flats received from the developer under the agreement.

The assessee, an individual received seven flats under a Joint Development Agreement and sold the same. The Assessing Officer rejected the return filed by him and denied the cost of construction incurred on 7 flats while computing the capital gain on the reason that assessee has not incurred this expenditure but it was incurred by developer.

The assessee relied on the judicial rulings, contended before the Tribunal that he is entitled for the deduction towards the cost of construction of 7 flats sold.

The Tribunal noted that the assessee has considered cost of these 7 flats as a consideration while computing the capital gain on entering into JDA.

The division bench including Judicial Member Beena Pillai and Accountant Member Chandra Poojari held that “Once the assessee includes the cost of these 7 flats as sale consideration while determining capital gain on entering into JDA, the corresponding benefit shall be given on sale of these 7 flats. Now the issue is only with regard to the sale consideration adopted by assessee towards these 7 flats while offering the capital gain. The A.O. cannot overlook the computation of capital gain offered by assessee on entering into the JDA. Once the assessee adopted the cost of these 7 flats for the purpose of offering the capital gain, same to be considered as cost of construction on sale of these 7 flats.”

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