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TMI Blog2010 (5) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed as capital gains. The loading of TDR has been possible on the plot of land in question only on account of the ownership right of the appellant subsisting in the piece of land. Transfer of such TDR to the developer through development agreement, therefore, clearly results in capital gains. The AO is, accordingly, directed that the gain arising on transfer of FSI/TDR rights be assessed as capital gain for which he will make the necessary calculation of sale consideration and cost of acquisition and/or improvement. He will also allow exemption u/s. 54 and 54EC to the extent of investments made, after due verification.'' Similar view has been taken in the case of Jethalal D. Mehta vs Dy. CIT [ 2005 (1) TMI 595 - ITAT MUMBAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts for more than 36 months, it was treated as Long Term Capital Gains. 3. The Assessing Officer held that the recitals of the agreement clearly and unambiguously show that the assessee had not extinguished his right, title and interest in the property in any manner and continues to hold the lease rights of the property jointly with Shri Anil Kumar Malhotra. The AO also held that the arrangement by way of this development agreement is to enable the developer to bring in marketable TDR on the plot and construct and develop the same and sell the constructed area of TDR to the outside people of his choice, being people with no right, title and interest in the plot of land. Accordingly, the AO held that it is a case of getting a compensatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully submitted that the fact that the development rights are capital assets is further substantiated from the fact that development rights are immovable property and are capable of specific performance. Recently the Bombay High Court in Chheda Hsg. Dev. Corpn. A partnership firm vs Bibijan Shaikh Farid and Ors. 2007 (3) MHLJ 402 (Bom) Dealing with the specific performance of Agreement for use of TDR i.e. development agreement held that FSI/TDR are benefit arising from the land consequently must be held as immovable property. 5. The Ld. CIT(A) held as follows: Once it has been decided that sale of FSI in the form of development rights results into capital gains, it is crystal clear that the compensation received by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Court observed that an immovable property under the General Clauses Act, 1897 u/s. 3(26) has been defined as under: Immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth . If, any benefit arises out of the land, then it is immovable property. Considering Sec. 10 of the Specific Relief Act, such a benefit can be specifically enforced unless the respondents establish that compensation in money would be an adequate relief. Can FSI/TDR be said to be a benefit arising from the land. In Sikandar and Ors. vs Bahadur and Ors. XXVII Indian Law Reporter, 462, a Division Bench of the Allahabad High Court held that right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions and perused the relevant material on record. The concept of T.D.R (Transfer Development Right) as noted by the AO on page 9 of the order was introduced in Mumbai in the Development Control Rules, 1991 of the Bombay Municipal Corporation. These rights are given in the form of a Development Right Certificate (DRC) which is issued by the Municipal Corporation. TDR means the development potential, the FSI of a plot of land is separated from the plot and is allowed to be transferred. TDR can be used by the person/owner/lessee in whose favour it is granted on his land in the receiving zone. He can use it fully or partly or sell it fully or partly at will. Adverting to the facts of the case, we find that the assessee became entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with transfer of additional FSI. In the instant case the facts are similar where the assessee has transferred 50% of the FSI they are entitled to in favour of the developer. The land continues to be with the assessee. Thus, there is no transfer of land by the assessee in favour of the developers. The assessee has received consideration only for granting right to utilize 50% of the FSI and construct building and deal with the same. Therefore, the ratio of the Tribunal decision stated supra will be equally applicable to the instant case also. In that case, it has been held that there is no cost of acquisition for the FSI transfer to the developer and hence there is no taxable capital gains. Applying the ratio of the Tribunal, there wil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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