2019 (6) TMI 1459 - AT - Income Tax

Gain on sale of TDR/FSI development rights - Capital gain on sale of TDR development rights - whether assessee s rights have been extinguished by sale of said TDR/FSI and fall within the ambit of capital asset under section 2(14) - Determination of cost of acquisition incurred of TDR/FSI - HELD THAT - Perusing the material on record including the decision of the Hon ble Bombay High Court in the case of CIT vs. Sambhaji Nagar Co-op. Hsg. Society Ltd. 2014 (12) TMI 1069 - BOMBAY HIGH COURT wherein as held that in case of sale of FSI/TDR rights by the assessee to the developers which have accrued in favour of the assessee following promulgation of Development Control Rules for Greater Mumbai 1991 and the said developmental right were generated by the plot itself and there is no cost of acquisition and therefore not liable for any capital gain tax. In the present case the facts are similar to the facts in the case as discussed hereinabove wherein the Hon ble Bombay High Court has held that no capital gain tax is attracted in the case of sale of FSI/TDR we therefore respectfully following the same uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue.

Summary

Issues:
1. Deletion of addition of capital gain on sale of TDR development rights.
2. Full exemption of capital gain under section 54F.
3. Invocation of provisions of section 50C.

Issue 1: Deletion of addition of capital gain on sale of TDR development rights:
The case involved cross-appeals against the CIT(A)'s order relevant to the assessment year 2012-13. The primary issue raised was the deletion of the addition of capital gain on the sale of TDR/FSI development rights by the AO. The AO determined the market value of the TDR/FSI rights higher than the declared value, resulting in a capital gain tax assessment. However, the CIT(A) allowed the appeal, stating that the rights arose due to an amendment in DC Regulations 1991, with no cost of acquisition, thus not attracting capital gain tax. The assessee's counsel cited a Bombay High Court decision supporting this stance. The Tribunal upheld the CIT(A)'s decision, emphasizing that no capital gain tax applies to the sale of FSI/TDR rights generated by the property itself.

Issue 2: Full exemption of capital gain under section 54F:
The assessee filed a cross-objection challenging the non-granting of full exemption of capital gain under section 54F. However, since the appeal of the Revenue, disputing the deletion of capital gain from the sale of FSI/TDRs, was dismissed, the cross-objection became infructuous and was consequently dismissed.

Issue 3: Invocation of provisions of section 50C:
The invocation of provisions of section 50C was also raised in the cross-objection. The CIT(A) had earlier held that since there was no sale of land and building, section 50C was wrongly invoked by the AO. However, due to the dismissal of the Revenue's appeal regarding the capital gain tax on FSI/TDR rights, this issue became moot and was dismissed accordingly.

In conclusion, the ITAT Mumbai upheld the CIT(A)'s decision to delete the addition of capital gain on the sale of TDR development rights, citing the absence of a cost of acquisition and the specific circumstances of the case. The cross-objection related to full exemption under section 54F and the invocation of section 50C were both dismissed due to the primary appeal outcome.