9911796707
TMI Blog2016 (6) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... nt control regulation of the state government. These are rights over property, which are capital in nature and comes within the definition of capital asset u/s. 2(14) of the Act. The consideration received by the assessee is for transfer of rights over such capital asset for the reason that the 3rd party purchaser has no interest over the land is not relevant. The permission to load the TDR on permissible FSI allowed by the owner is by itself a transfer of right in immovable property and therefore, clearly falls within the provision of section 45 of the Act. Thus in the present case before us, the sale of development rights is to be taxable as long term capital gain and not as income from other sources as held by AO. The consequential deductions/exemptions u/s. 54 of the Act etc. will be allowed to the assessee - Decided against revenue Adoption of market value as per the provisions of section 50C - Held that:- In the present case assessee received consideration in two-folds i.e. partly cash and partly in kind i.e. by way of property in the shape of flats in the re-developed property. Such transactions are thus a combination of sale and exchange.We find that as per development a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt agreement of ₹ 2,31,41,000/- and ₹ 34,36,000/- while considering total sale consideration u/s. 50C of the Act. 3. Briefly stated facts are that the assessee is a co-owner with his brother of a property i.e. land and building at plot no.34, Ram Niwas, Vallabhnagar Society, N.S.Road No.3, Vile Parle (W), Mumbai 400056. During the year under consideration, the assessee along with his brother executed an agreement of sale-cum-development of the said property dated 01.12.2006 with a builder viz. M/s. M L Builders for the following consideration: a. Two flats of 4000 sq. Ft. Carpet area each b. Car parking space c. Consideration in cash amounting to ₹ 3 crores (Rs.1.75 crores each) Another condition placed was that as per plans approved by the Municipal Corporation, the developer in case reduces the area then he has to pay further sum of ₹ 11.20 lacs to the assessee. The assessee was finally given carpet area of 3776.22 sq.ft. and also further sum of ₹ 11.20 lacs as per sub-agreement dated 19.03.2007. The assessee worked out the capital gain on transaction of sale cum development of the plot as under: Sale of Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second owner i.e., the assessee. The total monetary consideration received by the assessee is worked out at ₹ 1,86,20,000/- as per assessee s computation of long term capital gain. Besides the monetary benefit, the assessee is also receiving the flats of 3776.22 sq.ft (carpet) area i.e., the construction cost and the assessee has adopted the value at ₹ 90,62,928/-. The total benefit received by way of development agreements is worked out to ₹ 2,76,82,928/- 4. Further, the AO also noted that as per stamp duty valuation the rates /market valuation of the property is at 4,62,82,000/- as against the value declared by the assessee at ₹ 3,50,00,000/- vide first agreement dated 1.12.2006 and further in second agreement the value adopted is ₹ 34,36,000/- as against 11,20,000/- offered by the assessee. Accordingly, the AO verified the factual details and further recomputed the total sale consideration of development rights at ₹ 3,56,39,928/- and entire consideration was treated as income from other sources. The AO also disallowed the claim of exemptions u/s. 54 and 54EC of the Act. Aggrieved, the assessee preferred appeal before the CIT(A), who f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equally by the Owners b) ₹ 50,00,000/- (Rupees Fifty Lacs only) to be shared equally by the Owners, being the balance monies, within seven days from the date of sanction of the plans by the Municipal Corporation of Greater Mumbai and the IOD being granted in respect thereof and simultaneously against the Owners vacating the said property and handing over the same to the Developers for the purpose of development. 7. The learned counsel for the assessee also explained the fact that in lieu of these development agreements the assessee was to be allotted accommodation of 8000 sq.ft. carpet area (to both the co-owners) and car parking space in the stilt. As regards the increase in consideration the learned counsel for the assessee referred to clause 8 of the development agreement wherein they agreed that developer shall pay a lump sum agreed amount of ₹ 5000 per sq. ft. carpet area for any shortfall in the area to be allotted to the owners. 8. In view of these facts and circumstances, the learned counsel for the assessee argued that the development right is a property by itself which will fall in the expression capital asset as defined under section 2(14) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ban, within Greater Mumbai, in the J.V.P.D. scheme, Vile Parle west, Mumbai 400 056 in the estate of Vallabhnagar Co-operative Housing Society Ltd. And more particularly described in the Schedule hereunder written by demolishing the existing building and constructing thereon a new residential building at the Developers costs by utilising thereon the entire FSI and TDR as may be presently available and strictly as per the plans that may be approved by the Municipal Corporation of Greater Mumbai (the Corporation) and the IOD which may be granted. We find that the assessee has filed final FSI calculation in respect to above property. As per the above stated agreement and calculation, the assessee has not only sold his right to load TDR on plot but also his existing FSI on the plot. By virtue of the above sated agreement the assessee has sold all his rights attached to the plot of land i.e. basic FSI and right to load TDR on the plot of land. In the given facts, now we have to ascertain whether development right includes the expression Capital Asset as defined u/s. 2(14) of the Act. We are of the view that development right in a property is also a property by itself and would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e obtained by the developer and could be loaded on the normal FSI construction permissible as per the development control rules. The right to construct building on the said plot of land by consuming FSI and the right as a receiving plot owner to load TDR over and above normal FSI, are rights which accrue to the assessee by virtue of development control regulation of the state government. These are rights over property, which are capital in nature and comes within the definition of capital asset u/s. 2(14) of the Act. The consideration received by the assessee is for transfer of rights over such capital asset for the reason that the 3rd party purchaser has no interest over the land is not relevant. The permission to load the TDR on permissible FSI allowed by the owner is by itself a transfer of right in immovable property and therefore, clearly falls within the provision of section 45 of the Act. Therefore, we are of the considered view that in the present case before us, the sale of development rights is to be taxable as long term capital gain and not as income from other sources as held by AO. The consequential deductions/exemptions u/s. 54 of the Act etc. will be allowed to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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