Decision cited :

The case of ITO v. Shri Hemant R. Tandel bearing ITA no. 1934/Mum/2012, order dt. 22/04/2015 held that the cost of acquisition of 12.5% land was the lease premium paid to CIDCO. 

In the case of Atul G. Puranik vs. ITO [2011] 132 ITD 499 (Mum), the hon’ble Mumbai ITAT held that the full value of the consideration received is the market value of 12.5% land given to the assessee against such acquisition. The said fair market value becomes the cost of acquisition of 12.5% land when it is sold. It held that once a particular amount is considered as full value of consideration at the time of its purchase, the same shall automatically become the cost of acquisition at the time when such capital asset is subsequently transferred.

Facts of the case :

The assessee own land at village in Nagaon which was acquired by CIDCO vide order dated 24.08.1979. The Government awarded compensation in lieu of acquisition of this land being agricultural land but the assessee along with other farmers were not satisfied with the compensation, they approached the higher courts for claiming higher compensation. Subsequently, the Government of Maharashtra vide notification No. LQN/1985/1910CR27/NAVI-10 dated 06.03.1990 and CID/1094/287/NAVI-10 dated 18.10.1994 declared that the land owners whose land was acquired by CIDCO will get 12.5% of the area of the land acquired in the form of plots.

In lieu of this notification, a plot was allotted to the assessee vide ‘sodat’ No. 4 dated 17.08.2007. Thereafter, CIDCO entered into lease with the assessee dated 14.07.2010 and assessee was allotted Plot No. 67-A, Village Dronagiri under 12.5% scheme of CIDCO. The assessee sold this plot to one Shri Shraddha Enterprises vide sale agreement dated 24.07.2010 for ₹52.25 lakhs.

The AO computed the capital gains on sale of this plot :

(i)       adopted the stamp duty valuation of ₹69,38,500/- under section 50C of the Act instead of value of sale consideration declared by assessee at ₹52.25 lakhs ; and

(ii)     by taking the cost of acquisition being lease premium of ₹ 7845/-.

CIT(A)’s verdict :

The CIT(A) after going through the judgement of ITAT Mumbai in the case of Shri Hemant R. Tandel (supra) directed the AO to adopt the value of sale consideration as recorded in the registered sale deed.

Questions before ITAT :

(i)    What will be the date of acquisition of plot allotted by CIDCO under 12.5% scheme?

(ii)  What will be the cost of acquisition of the plot allotted by CIDCO under 12.5% scheme?

ITAT’s verdict :

The plot of land is allotted in lieu of agricultural land. The land owners whose land was acquired by CIDCO will get 12.5% of the area of the land acquired in the form of plots. The fact that this plot was allotted to assessee vide lease agreement dated 14.07.2010 as entered into between CIDCO and the assessee, the date of acquisition of plot should be adopted as 14.07.2010.

The cost of acquisition of this plot in term of section 48 of the Act i.e. full value of consideration as received or accrue as a result of acquisition by the Government is the amount given as consideration for such acquisition or in the alternative the market value of another capital asset given to the assessee against such acquisition. In this case, the cost of acquisition will be the fair market value on 14.07.2010 between the date when CIDCO entered into lease with the assessee. The gain will be short term capital gain.