TMI Blog2011 (2) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... .2,51,000/-. The sum so received was for merely granting consent to consume TDR purchased by the Developer from a 3rd party. The Society continues to be the owner of the land and no change in ownership of land had taken place. Mere grant of consent will not amount to transfer of land/or any rights therein. - Not liable to tax - Decided in favor of assessee. - ITA NO.674/MUM/2004 - - - Dated:- 25-2-2011 - SHRI N.V.VASUDEVAN, SHRI J.SUDHAKAR REDDY,JJ. Appellant by : Shri S.N.Inamdar Respondent by : Shri Ajit Kumar Sinha ORDER PER N.V.VASUDEVAN, J.M, This is an appeal by the assessee against the order dated 24/4/2003 of CIT(A) 25, Mumbai relating to assessment year 1997-98. The grounds of appeal raised by assessee read as follows: 1. The learned Commissioner of Income Tax (Appeals) erred both on facts and in law in sustaining the addition in respect of amounts paid by the builders to the members under an independent contract as income of the appellant, without even indicating the head under which it fall; 2. Having held that the developers paid amounts to members to avoid further complications and with a view to smooth execution of the Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction of a new multi-storey building behind the raj Ratan Palace building, by means of T.D.R from elsewhere and by the consumption of available F.S.I of the said property, after demolishing the existing bungalow in occupation of Kum. Vasanten Hiralal Shah as tenant of the society, at the cost of the builders or developers. In pursuance of the above, M/s. New India Construction Co. submitted tender for development of the society s said property and at the Special General body meeting held on December 19, 1995, the said offer was accepted by the Society and a Sub-Committee was formed and appointed and authorized for the purpose of completing negotiations with and to enter into agreement with the developers M/s. New India Construction co. for re-development of and construction on the Society s said property. 3. In pursuance of the above, the Society agreed to grant to the Developers herein permission leave and licence to enter upon the Society s and said property and with the right to demolish the said bungalow and construct a new multi-storey R.C.C. building, on the terms and conditions mutually agreed upon by and on behalf of the society and the developers. 4. The terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther not in dispute that some of the members had offered the money received from the developer to tax in the individual return of income filed by them. The assessee has field before us a chart showing the amount received by the society and 51 of its members from the developer and as to how the members have offered the same to tax. This is available in compilation No.3 pages 1 to 3. 6. The assessee filed its return of income for A.Y 1997-98. The assessee did not offer any sum to tax in respect of the agreement dated 18/5/1996. The assessee was called upon by the Assessing Officer to show cause as to why the sum of Rs. 3,02,16,828/- should not be brought to tax in the hands of the assessee. A summons under section 131 of the Act had also been issued to the development M/s. New India Construction Company. The developer had confirmed that the monies were paid to the individual members of the society and individual agreements were entered into with them. They also confirmed that except Rs. 2,51,000/- no amount was paid to the assessee. 7. Before the Assessing Officer the assessee submitted that no income can be brought to tax in its hands by virtue of the agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers. The society was the owner of the surplus land for which an agreement dated 18/05/1996 was entered into by the society and the members together to allow the said developer to develop the property. As per clause 12 and 13 of the said agreement the society alongwith members received a consideration of Rs.3,02,16,828/-. Admittedly the society is the owner of the land. The society is a legal entity and capable of entering into legal documents with the developers. Without the consent of the society, the individual members have not say in the matter. It is the society who invited the bids for allotment of contract for development of the property. It is therefore noticed that the said society is involved at every step in this transaction. The role played by the society is as per the law. The developer i.e. M/s. New India Construction Co. as a abundant precaution has also made separate agreements with each of the members of the society so as to avoid any future complications in the matter and with a view to smooth execution of the project which the said developer has taken into hand. The separate payment to each members of the society made by the developer was with the consent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Lucknow Bench in the case of Jyoti Patra vs. ITO 92 ITD 423, wherein it was held that where the capital asset which subject matter of transfer does not have cost of acquisition no capital gain can be computed. It was his contention that the right to use TDR, even assuming was a capital asset, did not have any cost of acquisition. 11. We have considered the rival submissions. In our view the entire approach adopted by the revenue authorities was erroneous. We have already seen that under the agreement dated 18/5/1996 the society gave permission to the developer to construct on the society s land. No part of the land was ever transferred by the society. The society merely gave permission to the developer to carry out development in the rear side of the existing building Raj Ratan Palace after demolishing a small bungalow which was in existence. Clause 12 13 of the agreement dated 18/5/96 clearly mentions that the developer will pay compensation at Rs. 1431/- to the society and members. The sum was quantified at Rs. 2,00,16,828/-. Out of this only a sum of Rs. 2,51,000 was paid to the society. Admittedly the remaining sum and the additional sum payable under clause 13 of the ..... 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