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TMI Blog2017 (8) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... nceived. Thus, the Hon ble Bombay High Court held that since the cost of acquisition of the rights being transferred cannot be determined, the amount is not liable to capital gains tax. We respectfully following Hon ble Bombay High Court in the case of Sambhaji Nagar Co-op. Hsg. Society Ltd (supra) hold that consideration received for permitting the developer to use TDR/FSI rights on the land belonging to the assessee is not taxable as capital gains. Accordingly, we allowed the issue of assessee appeals in both the years. However, in the given facts and circumstances, we are of the view that assessibility of these receipts falls in AY 2004-05 and not in AY 2002-03. Accordingly, both the appeals of the assessee are allowed. - ITA No. 3000/Mum/2011, ITA No. 3001/Mum/2011 - - - Dated:- 4-8-2017 - SRI MAHAVIR SINGH, JM AND SRI G. MANJUNATHA, AM, AM For the Appellant : Shri Amar Gahlot S. Sriram, ARs For the Respondent : Shri Rajesh Kumar Yadav, DR ORDER PER MAHAVIR SINGH, JM: These two appeals by the Assessee are arising out of the different order of CIT(A)-30, Mumbai, in appeal No. CIT(A)-30/ACIT-19(3)/IT-708 736/09-10 even date 24-01-2011. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to permission granted for the use of TDR related FSI [₹ 1,32,00,000/-] as taxable. The learned CIT(A) ought to have appreciated that considering its nature, the same is capital receipt having no cost and does not give rise to any taxable capital gain and the same cannot considered for taxation. 4.2 For the above purpose, the learned CIT(A) further erred in recording erroneous finding that in the case of the appellant there is a definite cost of acquisition o TDR without appreciating the fact that the consideration is question is not for transfer of any TDR and the appellant was neither holding any TDR nor the appellant has transferred any TDR. 3. In ITA No. 3000/Mum/2011 for the AY 2002-03, the assessee has challenged the assessibility in this year by following ground No. 2 to 3 : - 2. Long Term Capital Gain, Taxability and Year of Taxability ₹ 84,76,234/- 2.1 The learned CIT(A) erred in taking a view that transfer of relevant capital asset under Sec.2(47)(v) has taken place during the financial year 2001-02 and not during the Financial Year 2003-04 as claimed by the appellant and accordingly, the amount of Long Term Capital Gain is chargeable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unconstructed FSI of 12,00 sq. ft. In response to which the assessee was free to construct in the said plot of land. Further, the assessee was entitled to construct more floors on the existing building to the extent of 8,000 sq. ft. by purchasing TDR from persons who has been granted TDR by the Government. The assessee entered into development agreement with West Coast International on 18-08-2000 i.e. entered in Memorandum of Understanding for granting permission to the developer to use the unutilized FSI of 1,200 sq. ft. owned by the assessee and purchase of TDR and FSI from the open market of 8,000 sq. ft. and use it on the existing building owned by the assessee. Based on the MoU dated 18-08-2008, the AO issued NOC (No Objection Certificate). The assessee thereafter, entered into formerly agreement with West Coast on 28-09-2001 to transfer the original FSI and permitting the assessee for receiving other TDR and FSI on this plot. In view of the above development agreement, the developer has to use original FSI and after receiving TDR and FSI from outside, additional floors to be constructed over the floors that were already in occupation of the assessee and his tenants. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the details are as under: - Date of Payment Amount Cumulative Amount Percentage of Total consideration received Remarks/ Payment Schedule 18.08.2000 10,00,000 10,00,000 6.17 Payment at the time of MOU 21.09.2001 10,00,000 20,00,000 12.35 Payment made before entering into the Development Agreement 25.09.2001 10,00,000 30,00,000 18.52 11.03.2002 5,00,000 35,00,000 21.6 ₹ 9,00,000 were to be paid by 31st Marc 2002 19.03.2002 4,00,000 39,00,000 24.07 05.11.2002 5,00,000 44,00,000 27.16 ₹ 10,00,000 were to be paid by 15th November 2002 05.11.2002 5,00,000 48,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000 134,00,000 92.72 03.12.2003 5,00,000 139,00,000 85.8 ₹ 10,00,000 were to be paid by 30th Nov 2003. Later, ₹ 8,00,000 were to be paid by 31st Dec 2003. Subsequently, the remaining ₹ 10,00,000/- were to be paid by 30th Apr 2004. 03.12.2003 5,00,000 144,00,000 88.89 01.01.2004 4,00,000 148,00,000 91.36 01.01.2004 4,00,000 152,00,000 93.83 From the above, it is seen that the condition of payment of 70% of the consideration by the developer was compiled during AY 2004-05 and accordingly, the assessee ceded possessory rights over the building to the developer during AY 2004-05. The assessee during the AY 2004-05 relevant to FY 2003-04 offered capital gains after indexing the cost of acquisition at ₹ 84,76,234/-. The assessee adopted the cost of acquisition based on fair market value as on 01-04-1981 at ₹ 77,23, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appreciate in the right perspective the decision given by the Hon ble Court. 7. Similarly, the AO reopened the assessment for the AY 2002-03 and same addition was repeated in AY 2002-03 what was made in AY 2004-05. Aggrieved, assessee preferred the appeal before CIT(A) who also confirmed the action of the AO by observing in Para 1.7 of his appellate order as under: - 1.7 I have carefully gone through the assessment order, submissions made on behalf of the appellant and the facts of the case. In this case the date of agreement between the assessee and West Cost International is 28.9.2001 which falls in A.Y.2002-03. Purchase of TDR by West Cost International from Romell Real Estate Pvt. Ltd is 8.10.2001. issue of development rights certificate is 4.6 2001, utilization from Mumbai Corporation of Greater Mumbai is 19.9.2001. Further it is also seen from the agreement that majority of the amount i.e. has been received before 31.3.2002 and only ₹ 44,00000/- has been received by the appellant after 31.3.2002 but before 15.11.2002. All these events clearly show that the transactions have taken place in the financial year relevant to A.Y.2002-03. The AO in his exhaustive a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion, t am of the considered view that the AO is quite justified in taxing the sale of TDR of ₹ 1,32,00,000/- as capital gain. Therefore, the action of the A.O. in this regard is accordingly confirmed. The additional ground of appeal is dismissed. Aggrieved, now assessee is in appeal before Tribunal. 8. Before us, the learned Counsel for the assessee argued that the transfer of the right to develop utilised TDR and FSI does not given rise to capital gains as there is no cost of acquisition rights. According to him, during the year under consideration i.e. FY 2003-04 relevant to AY 2004-05, the year under consideration the assessee transferred all its right to development and utilizing TDR and FSI to West Coat International and through such transfer to developer has been allowed to carry out construction on top of the existing constructing of building by utilize of TDR which the developers purchase at own cost from other party. The assessee has received the total consideration for transfer amounting to ₹ 1.32 crores 9. Whether in the given facts and circumstances of the case, such right is taxable as capital gains or not? The assessee before us brought the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to levy and assess the gains derived as capital gains. Thus, the Hon ble Bombay High Court held that since the cost of acquisition of the rights being transferred cannot be determined, the amount is not liable to capital gains tax. 11. We also find that identical issue in the case before the ITAT Mumbai, the facts were identical to the present case. was in Jethalal D. Mehta Vs. DCIT (2005) 2 SOT 422 (Mumbai), held as under: the right assigned to the developer were the rights to receive and apply the transferable development rights, and those rig/its arose to the assessee by virtue of the introduction of DCR. Until the point of time those development regulations conic into existence, the assessee did not have right to receive and apply the transferable development rights. It was those rights on the assignment of which the assessee had received the impugned amount. The person getting TDRs from the Government had to surrender the reserved plot but the person oil plot such TORs could be used, i.e., the assessee, did not do anything more than owning the 'receiving plot'. The cost incurred by a third party for acquiring the TDR had nothing to do with the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not applicable since such right is no: covered by any of the assets specified in section 55(2) (a) of the Act. Therefore, applying the decision of Apex Court in the case of B. C. Shrinivasa Shelly 'supra.) as ice/I as the decision of the co-ordinate Bench in the case of Jethalal D. Mebta (supra), the issue is decided in favour of the assessee. The order of the CIT('A) is, therefore, set aside and consequently, the Assessing Officer is directed to delete the addition of ₹ 42 lakhs from the total income. 13. In view of the above facts and circumstances and precedence cited supra, we respectfully following Hon ble Bombay High Court in the case of Sambhaji Nagar Co-op. Hsg. Society Ltd (supra) hold that consideration received for permitting the developer to use TDR/FSI rights on the land belonging to the assessee is not taxable as capital gains. Accordingly, we allowed the issue of assessee appeals in both the years. However, in the given facts and circumstances, we are of the view that assessibility of these receipts falls in AY 2004-05 and not in AY 2002-03. Accordingly, both the appeals of the assessee are allowed. 14. In the result, the appeals of assessee ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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