Allowing the appeal the Tribunal held that capital gains liability would arise at the time of entering into a joint development agreement. For computing capital gains, it is necessary to determine the sale consideration, which is found by the fair market value of the constructed area that the assessee will receive including any other consideration in terms of the joint development agreement. This fair market value shall become the cost of the constructed area. When the constructed area in the form of flats is sold subsequently, the indexed cost of acquisition of flats is required to be deducted in order to arrive at the capital gains, which shall be the fair market value. The Assessing Officer did not allow deduction of the cost of acquisition of flats solely on the ground that the assessee did not declare the capital gains in the year of entering into the joint development agreement. Capital gains arising thereon was assessable only in the year in which the joint development agreement was entered into. If the assessee failed to declare capital gains in the appropriate year, the Assessing Officer may take appropriate action to tax them in accordance with law, but such failure would not disentitle the assessee to claim the cost of acquisition. The Assessing Officer was not right in rejecting the claim of the assessee. The issue of computation of capital gains, particularly the claim for deduction of cost of acquisition of flats, required to be examined afresh by the Assessing Officer. Matter remanded. (AY.2014-15)