The assessee entered into a joint development agreement with contractors for development of 84 cents of land. Under the joint development agreement dated October 21, 2010, the assessee was entitled to 30 per cent. of the total saleable super built up area. In the supplementary joint development agreement dated May 26, 2011 the sharing ratio was revised to 26.89 per cent. and 73.11 per cent. between the assessee and the developer. For the assessment year under 2011-12 the Assessing Officer brought to tax Rs. 5,68,19,443 as capital gains by adopting the cost of construction as sale consideration based on the joint development agreement between the assessee and the contractors. The assessee preferred an appeal before the Commissioner (Appeals) which was allowed directing the Assessing Officer to adopt the fair market value based on the Government records as deemed consideration for the purpose of calculation of capital gains. The Revenue preferred an appeal before the Tribunal. The Tribunal, upholding the order of the Commissioner (Appeals), held that the variation of the capital gains should be appropriate to the adopt fair market value as deemed consideration, but not the cost of construction. On appeal to the High Court dismissing the appeal, the court held  that the entire issue was revenue neutral. The Tribunal  observed that even if any capital gains accrued in favour of the assessee after receiving possession of the property, that would also be subject to capital gains tax. It was thus clear that in the event the assessee were to dispose of the built up area, or any part thereof, after receipt thereof from the developer, it would have to necessarily pay tax on the capital gains in the year of such sale and the cost of such built up area was to be reckoned for the purpose of indexation which would be proportionate to the fair market value of land.

The Court also held that  the Assessing Officer had adopted the rate of Rs. 1600 per square feet merely based on the letter given by the developer which was not supported by any particulars. Determination of the full value of consideration by the Assessing Officer based on the letter of the developer was not be appropriate. Section 50D was inserted by the Finance Act, 2012, with effect from April 1, 2013. Though section 50D had come into effect from April 1, 2013, it threw some light on the mode of computation under section 48. In the circumstances the guidance value of the land or the guidance value of the building would the appropriate mode to determine the full value of consideration. Referred CIT v. George Henderson and Co Ltd (1967) 66 ITR 622 (SC).  (AY.2011-12)