2017 (6) TMI 338 - AT - Income Tax

Consideration received on transfer of development right - whether is not assessable to capital gain? - Held that - It is well settled proposition of law that there is estoppel against the provisions of law and hence acceptance of the assessee before the Assessing Officer for assessing long term capital gains on the amount received by way of sale of development rights would not bound upon the assessee. In the cases relied upon by learned AR, the Coordinate Benches are held that the development rights is acquired by the assessee under the Development Control Regulations and hence sale of development rights is not exigible for capital gain computation. Consistent with the view taken by the Coordinate Benches, we hold that the consideration received by the assessee on sale of development right which was acquired under Development Control Regulations is not assessable for capital gain tax. - Decided in favour of assessee. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of claim that consideration received on transfer of development right is not assessable to capital gain.

Analysis:
The appeal was filed against the order of the learned CIT(A) rejecting the claim that the consideration received on the transfer of development rights was not assessable to capital gain. The assessee sold the development right of ground floor FSI and received ?35 lakhs. The Assessing Officer initially enhanced the long term capital gains, but the assessee agreed for recomputation. The learned CIT(A) dismissed the appeal based on the agreed basis of the Assessing Officer.

The assessee argued that the ?35 lakhs received on the sale of development rights should not be taxable as it was self-generated and not acquired. The counsel for the assessee referred to previous cases where it was held that rights acquired under Development Control Regulations were not subject to capital gain tax. The Coordinate Benches had consistently ruled in favor of the assessee in similar cases.

The Tribunal found merit in the submissions made by the assessee's counsel. It was established that there is no estoppel against the provisions of law, and the acceptance of capital gain assessment before the Assessing Officer did not bind the assessee. Relying on previous judgments, the Tribunal held that the consideration received on the sale of development rights acquired under Development Control Regulations was not taxable for capital gains. Consequently, the order of the learned CIT(A) was set aside, and the Assessing Officer was directed to delete the assessed capital gain amount.

In conclusion, the appeal filed by the assessee was allowed, and the Tribunal pronounced the order in favor of the assessee on 26.5.2017.