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TMI Blog2019 (8) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... iling of appeal. Nature of assets sold - computation of Period of holding - Transferable Development Rights (TDR) issue in lieu of acquisition of immovable property by the Municipal Corporation of Pune - as per assessee right in TDRs is a capital asset as defined u/s 2(14) - assesse has sold right in TDR by virtue of a MOU dated 17/08/1996 which was cancelled by way of cancellation deed dated 14/06/2004, the same right in TDR sold to third party vide agreement dated 14/06/2006 - HELD THAT:- In this case, there is no doubt, with regard to the fact that the assessee has derived right in TDR by virtue of acquisition of immovable property by the municipal authorities in the year 1986 and such right is conferred on the assessee from the date of acquisition of the property. The subsequent cancellation and sale of TDR to third party cannot be considered as purchase of TDR from a third party. Therefore, we are of the considered view that, for the purpose of determination of period of holding, the period of holding of the asset from the date of acquisition of property by the municipal authorities has to be considered, but not from the date, when MOU was cancelled in the year 2004. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the memorandum of understanding dated 17.8.1996. d. The amount received by the appellant under the 'deed of transfer' of TDR rights was in the nature of capital receipt not liable to income Tax. e. The capital asset transferred did not have any cost of acquisition and accordingly the gain arising on transfer of TDR was not assessable U/S. 45 of the Act. WITHOUT PREJUDICE TO THE ABOVE 2. The learned Commissioner of income Tax (Appeals) erred in riot assessing the income arising on receipt of consideration under the 'Deed of Transfer' dated 14.6.2004 as income under the head 'Long Term Capital Gains' 3. The learned Commissioner of income Tax (Appeals) erred in not granting deduction u/s. 54EC of the Act for the consideration Invested by the appellant In NABARD Capital gains Bonds 4. The learned Commissioner of Income Tax (Appeals) erred In charging Interest u/s. 234A, 234B, 234C and 2340 of the Act and having regard to the facts and circumstances of the case and In law the appellant denies his liability for payment of interest under the aforesaid section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d view that there is a merit in condonation petition filed by the assessee and accordingly, condoned, the delay in filing in appeal and admit the appeal for hearing. This view expressed by us is fortified by the decision of Hon ble Supreme Court in the case of Ummer Vs. Pottengal Subida and others (supra), where in paragraph 17, the Hon ble Supreme Court categorically held that the Hon ble High Court should have taken liberal view in the matter and held the cause shown by the appellant as sufficient cause within the meaning of section 5 of the Limitation Act, and accordingly should be condoned, the delay in filing of the appeal. Therefore, considering facts and circumstances of this case and also taken support from the decision of Hon ble Supreme Court in the case discussed hereinabove, we condoned delay in filing appeal and admit appeal for hearing. 5. The brief facts of the case are that the assessee is a individual, filed his return of income for AY 2005-06 on 20/07/2005 declaring total income at ₹ 1,04,510/-. The case was selected for scrutiny and during the course of assessment proceedings, the AO noticed that during the year under consideration, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the transactions is in the nature of speculative transactions as defined u/s 43(5) and accordingly, assessed surplus generated from sale of TDRs as speculative business profit. Similarly, in respect of exemption u/s 54EC of the I.T.Act, 1961, the Ld. CIT(A) held that when consideration received from sale of TDR does not fall under the head capital gains, the question of giving benefit u/s 54EC of the I.T.Act,1961, for the said amount does not arise. The relevant findings of the Ld. CIT(A) are as under:- 2.3 I have considered the submissions of the Appellant and the asstt. order. It is an undisputed fact that the Transferable Development Rights (TDR) was not inexistence when the MOU dt 17.8*96 was made and also on the date when the subsequent transfer was made on 14.6.04. As such there was no capital asset on the date of the said MOU and the subsequent transfer made. The purported TDR which were transacted upon were never allotted by concerned Authorities. The Appellant had also not filed any materials to evidence that it had made a claim for allotment of TDR or that Its proposal is under active consideration of the concerned the paper book filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the non-existing TDRs cannot be held as a transfer of capital asset. The transactions are nothing but a speculative business activity out by the Appellant and the profits made thereof are in the nature of speculative income. The Assessing Officer is directed to treat the gains of ₹ 25 lacs as speculative business Income of the Appellant. Accordingly, the ground nos. 1 2 are dismissed. 3. The ground no.3 is that the Assessing Officer erred in not granting deduction u/s 54EC for the consideration invested by the Appellant in NABARD Bonds. 3.1 As I have held that the consideration received amounting to ₹ 25 lacs hits not falling under the head Capita! Gains, the question of granting deduction u/s 54EC for the said amount does not arise. Accordingly, this ground of appeal is rejected. 7. The Ld. AR for the assessee, at the time of hearing, submitted that the Ld. CIT(A) was erred in assessing surplus generated from sale of TDR as speculative profit without appreciating the fact that, when the asset was sold on 1996, the department has assessed surplus under the head capital gains. The Ld. AR, further submitted that ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed surplus from sale of right in TDR under the head Short Term Capital Gain, for the reason that the period of holding of the asset is less than 36 months, because the assesse has sold right in TDR in the year 1996 and bought back, the same during the financial year 2004-05, therefore, he opined that the period of holding of the asset is less than 36 months and hence, the same is assessable under the head Short Term Capital Gain. The Ld. CIT(A) has altogether taken a different view and assessed surplus under the head speculative profits by taking note of provisions of section 43(5), for the reasons that the assessee is involved in repetitive transactions of buying and selling of TDR. Except this, the lower authorities had never disputed the fact that the assessee has transferred right in TDR to third party. In this factual back ground, if you examine, whether right in TDR is a capital asset and surplus from sale of such capital assets is assessable under the head capital gain, there is no doubt of whatsoever, with regard to the fact that TDR is a capital asset, because it is inextricably linked with immovable property and also flows from transfer of immovable property. When, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the date of acquisition of property by the municipal authorities has to be considered, but not from the date, when MOU was cancelled in the year 2004. If you take, the original date of acquisition of property, then the period of holding of the asset is more than 36 months and hence, surplus from transfer of asset is rightly assessable under the head long term capital gains. 11. Coming to exemption claimed u/s 54EC of the I.T.Act, 1961. The AO never discussed, the issue of exemption claimed u/s 54EC of the I.T.Act, 1961 for purchase of NABARD Bonds in his assessment order, although surplus generated from transfer of right in TDR has been assessed under the head income from capital gains. Although, the Ld. CIT(A) has admitted fact that the assessee has claimed benefit of exemption u/s 54EC of the I.T.Act, 1961, but exemption claimed was denied, because income from transfer of TDR has been assessed under the head speculative business profit. The assessee has filed copies of capital gain bonds issued by NABARD for amounting to ₹ 25 Lacs. However, the facts with regard to purchase of NABARD capital gain bonds within prescribed li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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