2019 (4) TMI 1121 - HC - Income Tax

Computation of capital gain - TDR/FSI value inclusion - assessee had merely transfered reversionary right in the lease land - acquisition of which no cost at all can be conceived - HELD THAT - This issue is covered by a decision of this Court in COMMISSIONER OF INCOME TAX-18 VERSUS SAMBHAJI NAGAR CO-OP- HSG. SOCIETY LTD. 2014 (12) TMI 1069 - BOMBAY HIGH COURT FSI/TDR was generated by the plot itself. There was no cost of acquisition, which has been determined and on the basis of which the Assessing Officer could have proceeded to levy and assess the gains derived as capital gains. Assessee had not incurred any cost of acquisition in respect of the right which emanated from 1991 Rules, making the Assessee eligible to additional FSI. The land and building earlier in the possession of the Assessee continued to remain with it. Even after the transfer of the right or the additional FSI, the position did not undergo any change. The Revenue could not point out any particular asset as specified in sub section (2) of section 55. - Decided against revenue.

Summary

Issues:
1. Inclusion of TDR/FSI value in the computation of capital gain.

Analysis:
The High Court of Bombay heard an appeal filed by the Revenue challenging the decision of the Income Tax Appellate Tribunal regarding the inclusion of TDR/FSI value in the calculation of capital gain. The main question before the court was whether the ITAT was correct in including the TDR/FSI value in the computation of capital gain when the assessee had only transferred reversionary right in the lease land. The court referred to a previous decision dated 11th December, 2014, where it was held that an asset capable of acquisition at a cost falls under the provisions of "Capital gains." In this case, the FSI/TDR was generated by the plot itself without any determined cost of acquisition, leading to the conclusion that the gains derived should not be assessed as capital gains. The court emphasized the necessity of a specific insertion to ascertain the cost for computing capital gains in such cases. The Tribunal's decision was supported by its analysis in other cases, where it was established that the additional FSI/TDR was not a sale of development rights already embedded in the land owned by the assessee. The court highlighted that the assessee did not incur any cost of acquisition regarding the additional FSI, and the legal position as per section 55(2) and the Supreme Court's judgment supported the Tribunal's conclusion. Consequently, the court dismissed the appeal, affirming the Tribunal's decision.