Cost of acquisition in construction of roof rights in property – ITAT remands case

Cost of acquisition in construction of roof rights in property – ITAT remands case for consideration of report of valuer.

ABCAUS Case Law Citation:
ABCAUS 3726 (2023) (05) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining the addition on account of Long Term Capital Gain on sale of House Property by rejecting the cost of acquisition.

The assessee filed his return of income disclosing income from LTCG from sale of house property. The case was selected for limited scrutiny. 

During the course of assessment proceedings, the Assessing Officer noticed that the assessee during the year under consideration had sold 3^rd floor of an immovable property.

However, the Assessing Officer (AO) noted that previously, the assessee had purchased the roof of the first floor up to sky in the said property

Therefore, the Assessing Officer computed long term capital gain by only allowing cost of roof of the first floor.

Against this, the assessee preferred appeal before the CIT(Appeals), who held that assessee had constructed two more floors, therefore, the average value towards cost of acquisition has to be divided into three, whereas the assessee had divided it into two. 

Aggrieved against this the assessee was in appeal before the Tribunal.

The assessee submitted that the authorities below failed to appreciate the fact in right perspective and submitted that the Assessing Officer failed to give set off of cost of acquisition and the CIT(Appeals) grossly erred in directing division into three. However, both the authorities have admitted the fact that there was construction of two floors and out of two floors one floor was sold. 

The assessee placed reliance on record a technical report i.e.  valuation of the cost of construction of the property in question. He submitted that the authorities be directed to set off the cost of acquisition as claimed by the assessee.

The Tribunal observed that the CIT(A) had doubted the nature of valuation report and qualification of the architect.

However, the Tribunal observed that it was an admitted fact that that the assessee had sold a floor which was constructed based on construction of the roof rights in property. The Tribunal opined that the authorities below ought to have given the benefit of cost of acquisition to’ the assessee. Also, the assessee had also filed a technical report by the approved valuer.

The Tribunal considering the totality of the facts and to sub-serve the  substantive justice, set aside the impugned order and restored the issue to the assessing authority to decide it afresh after considering the submissions of the assessee.

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