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TMI Blog2022 (2) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... quence to execution of a deed of assignment on 20/10/1973 by assignor Mrs. Lilavati R SHelat in favour of the assessee and other coowner for the value specified therein, therefore the above cost of acquisition was derived by the assessee. However, that does not change the stand of the assessee that there is no cost of acquisition incurred by the assessee in respect of the asset transferred. In view of the above facts, we do not find any infirmity in the order of the learned CIT A in holding that receipts against the sale of TDR are not chargeable to capital gain tax. - ITA No. 2339/Mum/2017 - - - Dated:- 14-2-2022 - Sri Prashant Maharishi, AM And Sri Pavan Kumar Gadale, JM For the Assessee : Shri Rashmikant Choksey, AR For the Department : Shri K.K. Mishra, CIT DR ORDER PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the learned Income Tax Officer- 25(2)(5), Mumbai, against the order passed by the learned CIT(A)-37, Mumbai dated 05.01.2017. 02. Earlier, the learned assessing officer has raised several grounds of appeal however later on concise grounds were placed as Under:- i. on the facts and in the circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idual resident who filed his return of income for Assessment Year 2007-08 declaring total income of ₹1,67,420/- on 24.12.2007. Assessee was assessed under section 143(3) of the Act on 21.12.2009. 04. Facts shows that assessee is having 50% share in one bungalow known as Ram Niwas. This was constructed in year 1973 on leasehold plot of land Under lease from Vallabhnagar co-operative housing society Ltd. The assessee along with his brother entered into development agreement on 1 December 2016 permitting the developers to load the transferable development right (permissible Under the DC rules 1991) and construct a new building by utilizing part of the plot s primary floor space index of one (after retaining Major portion of primary FSI for self use) and 100 % of transferable development right as may be sanctioned Under DC rules 1991 retaining the lease on the rights of the plot. Assessee claims that there is no cost of acquisition of the TDRs; hence, amount received is a capital receipt. The total consideration by this agreement was ₹ 35,000,000/ out of which the 50% were consideration received by the assessee of ₹ 1,75,00,000/- . Assessee also received compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer holding the above sum as income from other sources is not correct accordingly, he allowed the appeal of the assessee. 07. Subsequently the learned assessing officer preferred a rectification application before the learned CIT A that in case of the brother of the assessee Shri Bharat Patel, who has also received the balance 50% share of the same receipt, the learned CIT A has passed an order dated 31/3/2010 holding that the gain arising has to be taxed as a capital gain. The AO stated that two different treatments have been given for a single nature of the transaction and therefore there is a mistake apparent from the record. 08. Based on the same the learned CIT A noted that order in case of Mr. Bharat Patel was made just before passing the order in case of the assessee and when the taxability of capital receipt in the case of gain arising out of the sale of the same property is already decided in the case of the co- owner brother, therefore there is a mistake apparent from the record. He further held that two different decisions were never meant to be given in the case of two co-owner brothers and it would be absolutely illegal to treat the two coowners differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng both the parties submitted before the coordinate bench that in view of the subsequent developments where the issue has been reopened in case of the assessee by issue of notice u/s 148 of the income tax act, the appeal of the learned assessing officer as well as the law appeal of the assessee may be treated as withdrawn. Accordingly, the coordinate bench passed an order on 26/6/2013 dismissing both the appeals but giving permission to both the parties to get revival of the same depending on the final outcome of the appeal against the reassessment if the same is in anyway prejudicial din any form to either of the parties. 014. Meanwhile another order in ITA no 6717/M/2020 came to be passed by ITAT on 10th/2/2016 holding that that as on the issue conceivably two opinions could have been about the taxability of the sum and the learned CIT A has adopted one of the two possible opinions and therefore it cannot be said that the order of the learned CIT A was suffering from a mistake apparent from record. It was further held that the learned CIT A has ignored the principle and basic scope of rectification of the order and hence the order passed by the learned CIT A on 20/7/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther assessee was to get two flats also, the learned AO considered that flat number 801 and 901 admeasuring 1911 ft each having the value of ₹ 2,30,00,000/- and ₹ 22,500,000/- per agreement dated 12/3/2008 and 13/2/2008, therefore the value of the flats was considered towards the sale consideration received by the assessee to the extent of ₹ 4,20,42,000. Thus the total sale consideration was determined at ₹ 66,303,000/ . For the purpose of the cost of acquisition of the above said property , originally sad that it does not have any cost of acquisition, assessee has submitted the valuation report dated 13/3/1989 valuing the asset as on 1/4/1986 at ₹ 666,000/ which was used for deriving the fair market value of the asset as on 1/4/1981 by applying the proportionately reverse cost inflation index. Accordingly as on 1/4/1981 the value was worked out at ₹ 500,752/ and 50% of that was considered as cost of acquisition in the hands of the assessee amounting to ₹ 250,376/ . The claim of the assessee of ₹ 40 lakhs u/s 54 of the income tax act was denied by the assessing officer for the reason that assessee could not substantiate the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndas Kanakia in ITA No. 3053/Mum/2010. Therefore, he deleted the addition on account of capital gains by passing an order dated 05.01.2017. Before the learned CIT(A), decision in the case of assessee s brother Mr. Bharat Patel who was also 50% co-owner wherein the above receipt was held to be chargeable to tax was available. Despite that learned CIT A held otherwise. Therefore learned Assessing Officer aggrieved with the same has preferred this appeal before us. 020. The learned Departmental Representative vehemently submitted that the issue is squarely covered in favour of Revenue by the decision of co-ordinate Bench in the case of other co-owner of the same property Shri Bharat Raojibhai Patel vide in ITA No. 5058/Mum/2010 dated 31.05.2016. He referred to the paragraph No. 12 of the decision and stated that the transfer of development right was held to be chargeable to tax under the head capital gain. Therefore, the learned CIT(A) has not decided the issue correctly. It was further stated that as on the date of order of the learned CIT(A) i.e. on 05.01.2017, decision of the co-ordinate Bench in the case of brother of assessee dated 31.05.2006 was already there, which was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax as capital gain holds water. 025. He further referred to paragraph No. 6.8 of the order of the learned CIT(A) stating that there were divergent claims in the case of assessee as well as his brother. It was stated that in case of brother, it was never contended that the amount received on sale of TDR is not chargeable to capital gains. The brother of the assessee always pleaded that it is chargeable to capital gain tax. In the case of the assessee, it was always claimed that the same receipt on sale of TDR is a capital receipt and it is not chargeable to capital gain. 026. He submitted that the case of the assessee is supported by the decision of the Hon'ble Bombay High Court and co-ordinate Benches. Thus, the decision of the co-ordinate Bench in the case of brother does not apply. He specifically referred to the decision of Hon'ble Bombay High Court in the case of Sambhaji Nagar Co-op. Hsg. Society Ltd. (370 ITR 325), decision of the coordinate bench in case of Batliboi Limited V deputy Commissioner of income tax ITA number 6228/M/2017 dated 21/05/2021, ITO versus Deepak T Shah ITA number 4838/M/2017 dated 25/6/2019, ACIT versus Dilip R Shringarpure ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number 5038/M/2010 for assessment year 2007 08 dated 31/05/2016. In that case, the issue was whether the consideration received as a result of transfer of land and building in terms of development agreement constitutes long-term capital gain or income from other sources. The coordinate bench held that that the sale of development right is to be taxable as long-term capital gain and not as income from other sources as held by the learned assessing officer. 029. At the time of the hearing the learned departmental representative submitted that ground number 1 and 5 of the appeal are not pressed. Therefore we dismiss the same. 030. Therefore, we first proceed to decide ground number 2 of the appeal. We would first examine the issue whether the issue is squarely covered by the decision of the coordinate bench against the assessee by the order of the brother of the assessee in ITA number 5038/M/2010 for assessment year 2007 08 dated 31/5/2016. 031. The fact of the case of the brother of the assessee Mr. Bharat Patel shows that he has offered the receipt from sale of TDR as chargeable to tax under the head capital gains. The learned assessing officer treated the same as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only consumed 2 FSI out of its eligible FSI and not additional FSI. It is only a sale of unconsumed FSI. This is not a case that extra FSI had accrued because of change in law. The TDR has been granted as per law existed at the time of reconstruction of the Assessee's building/property. The letter dated 17th September, 2003 was relied upon. That is how the sale consideration of TDR was taxable as long term capital gains in the hands of the Assessee. 8. The Tribunal noted this aspect and concluded that while it is true that the Assessing Officer invoked section 50C and computed these gains, but the coordinate Bench decision in the case of New Shailaja Co-operative Housing Society Ltd, involved similar controversy and the Tribunal concluded that the sale of TDR does not give rise to any capital gains chargeable to tax. The Tribunal's conclusion is that the situation and factually in both cases is identical. While it is true that the Revenue has not pursued the matter in the case of New Shailaja Co-operative Housing Society Ltd. because the report of the Registry indicates that an Appeal was brought to challenge that order but came to be dismissed for non compliance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessed, if it were referred to such authority for the purpose of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. S. 55 (2) For the purposes of sections 48 and 49, cost of acquisition , - (a) in relation to a capital asset, being goodwill of a business or a trade mark or brand name associated with a business or a right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carriage permits or loom hours - (i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price; and (ii) in any other case not being a case falling under sub-clauses (I) to (iv) of sub-section (1) of section 49, shall be taken to be nil; (aa) in a case where, by virtue of holding a capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, at the option of the assessee; (ii) where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of section 49, and the capital asset became the property of the previous owner before the 1st day of April, 1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee; (iii) where the capital asset became the property of the assessee on the distribution of the capital asset of a company on its liquidation and the assessee has been assessed to income tax under the head Capital gains in respect of that asset under section 46, means the fair market value of the asset on the date of distribution; (iv)** ** ** (v) where the capital asset, being a share or a stock of a company, became the property of the assessee on - (a) the consolidation and division of all or any of the share capital of the company into shares of larger amount** ** ** 9. A bare reading thereof would indicate how the legislature contemplates that income chargeable under head capital gains has to be computed. The mode of computation is laid down by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be computed as envisaged in section 48 of the Income Tax Act, therefore, capital gains earned by the assessee, if any, was not exigible to tax. The Department's Appeal to the High Court was dismissed and that is how it approached the Hon'ble Supreme Court. In dealing with the rival contentions, the Hon'ble Supreme Court held as under: '(8) In 1981 this court in CIT v. B.C. Srinivasa Shetty (1981) 128 ITR 294; (1981) 2 SCC 460 held that all transactions encompassed by section 45 must fall within the computation provisions of section 48. If the computation as provided under section 48 could not be applied to a particular transaction, it must be regarded as never intended by section 45 to be the subject of the charge . In that case, the court was considering whether a firm was liable to pay capital gains on the sale of its goodwill to another firm. The court found that the consideration received for the sale of goodwill could not be subjected to capital gains because the cost of its acquisition was inherently incapable of being determined. Pathak J. as his Lordship then was, speaking for the court said (page 300) what is contemplated is an asset in the acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of such capital asset would not attract capital gains. The appellant now says that CIT v. B.C. Srinivasa Saetty's case [1981] 128 ITR 294 (SC) would have no application because a tenancy right cannot be equated with goodwill. As far as goodwill is concerned, it is impossible to specify a date on which the acquisition may be said to have taken place. It is built up over a period of time. Diverse factors which cannot be quantified in monetary terms may go into the building of the goodwill, some tangible some intangible. It is contended that a tenancy right is not a capital asset of such a nature that the actual cost on acquisition could not be ascertained as a natural legal corollary. (12) We agree. A tenancy right is acquired with reference to a particular date. It is also possible that it may be acquired at a cost. It is ultimately a question of fact. In A. R. Krishnamurthy v. CIT (1989) 176 ITR 417 this court held that it cannot be said conceptually that there is no cost of acquisition of grant of the lease. It held that the cost of acquisition of leasehold rights can be determined. In the present case, however, the Department's stand before the High Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that a tenancy right is a capital asset the surrender of which would attract section 45 so that the value received would be a capital receipt and assessable if at all only under item E of section 14. That being so, it cannot be treated as a casual or non-recurring receipt under section 10(3) and be subjected to tax under section 56. The argument of the appellant that even if the income cannot be chargeable under section 45, because of the inapplicability of the computation provided under section 48, it could still impose tax under the residuary head is thus unacceptable. If the income cannot be taxed under section 45, it cannot be taxed at all. [See S.G. Mercantile Corporation P. Ltd. v. CIT (1972) 83 ITR 700 (SC)] (17) Furthermore, it would be illogical and against the language of section 56 to hold that everything that is exempted from capital gains by the statute could be taxed as a casual or non-recurring receipt under section 10(3) read with section 56. We are fortified in our view by a similar argument being rejected in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, CIT [1966] 61 ITR 428 (SC).' 11. Thus, the conclusion of the Hon'ble Supreme Court is that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The conclusion of the Tribunal is imminently possible and in the given facts. That is also possible in the light of the legal position as noted by language of section 55(2) and the Judgment of the Hon'ble Supreme Court, which is in the field. 12. We have made a reference to all these materials only because Mr. Malhotra tried to persuade us to conclude that this aspect is also specified in sub-section (2) of section 55 and that is how the Tribunal's view is vitiated by error of law apparent on the face of the record. We are not persuaded to hold so in the light of the above discussion. In such circumstances, the Tribunal's order cannot be termed as perverse either. The Appeal does not raise any substantial question of law. It is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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