TMI Blog2011 (2) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was not justified in confirming the order of the Assessing Officer in adopting the market value as per the stamp duty authorities is bad in law and ought to be quashed. 4.Without Prejudice, The appellant submits that the CIT (Appeals) and the Assessing Officer have grossly erred in not granting credit for the FSI of the flats received back by the appellant and that the entire working is incorrect and faulty and that the same ought to have been taken as a part of the sale consideration as well. 5.On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) has not justified in confirming the order of the Assessing Officer in adopting the sale consideration of the appellant share in the property at Rs. 99,57,750 based on the market value as determined by the Stamp Duty authorities for the purpose of registration and stamp duty. 6.On the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was not justified in confirming the order of the Assessing Officer in not allowing a deduction of the fair marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 5. Facts, which revealed from the record are as under. The assessee and her sons together having one-half (50 per cent) share in the property, which is known as 'Lily Rodrigues House' at Waroda Road, Bandra (West) Mumbai -50. The assessee inherited the said property from her late husband Mr. Dannison Rodrigues on his death on 14-7-1997. The assessee along with her son and sister-in-law has entered into a development agreement of the said property with M/s. Calvin Construction Company (in short the Developer) on 31-12-2005. It is claimed by the assessee that the development rights were transferred to the developer to the extent of 4171.48 sq.ft. out of the total area of 9931.48 sq.ft. (932 sq. mtrs.). It is further claimed that as per the agreement with the Developer, the construction of the four flats having the total carpet area of 4800 sq.ft. was given on contract and the assessee and other co-owners agreed to pay a construction cost of Rs. 35 lakhs to the Developer. In respect of the development rights given to the developer to the extent of 4171.48 sq.ft. area in terms of FSI the Developer paid Rs. 1.5 crores. The assessee, therefore, claimed that the capital gain shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce FSI of 5,760 sq.ft. (carpet area 4800 sq fts.) was retained by the assessee co-owners of the said property and the same was to be utilized for construction of the four flats for them and cost of construction of the said four flats was determined at Rs. 35 lakhs and same was paid to the Developer. The assessee having 25 per cent share in the said property and hence, she could get only one flat and paid the cost of construction for the said flat at Rs. 8,75,000. The assessee also contended that as only right for development of 4171.48 sq.ft. was actually transferred to the developer, hence the proportionate value of the said right is to be taken at Rs. 1,62,30,057 as per the valuation adopted by the Registration authority and assessee's share at 25 per cent to be taken at Rs. 41,81,514. Alternatively, it was pleaded that the Assessing Officer should have made the reference to the District Valuation Officer (DVO), as provided in section 50C(2) of the Act. The assessee also demonstrated what was the fair market value of the said property as per 'Ready Reckoner' used by the registration authorities for determining stamp duty payable on the conveyance and considering the area of 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated towards relinquishment of the rights in the property to the developer. Now, the assessee has challenged the impugned order of the ld. CIT(A). 9. We have heard the rival submission of the properties and perused the records. Now we summarise the argument of the ld. Counsel as under ( i )The first limb of argument of the ld. Counsel is that section 50C of the Act is only applicable when there is a 'transfer' of the land or building or both. Referring to the copy of the Development Agreement placed in the compilation, he further argues that as per the terms of the document only restrictive right to develop FSI to the extent of 4141 Sq.ft. is given to the Developer and even the possession of the property was also not given. It is argued that the applicability of section 50C in case where only restrictive development rights are transferred is not contemplated. It is argued that, the Assessing Officer should have referred the matter to the DVO as per section 50(2) as the valuation was exorbitant and unrealistic. He further submits that on many occasions for avoiding delay in litigation the parties surrendered to the registration authority and accept the value determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers herein in respect of said Property subject to their reserving and retaining for themselves an area of 4800 sq. feet carpet area for their residence (which will be utilized in the construction of 4 flats of 1200 sq. feet carpet area each on the 2nd/3rd/4th, 5th Floors of the new building to be constructed on the said Property as hereinafter set out) and for the consideration and on the terms and conditions hereinafter appearing." 12. The clause (3) of the Agreement is also relevant, which reads as under:-- "3. Accordingly, the developers shall be entitled to develop the said Property at their own costs to the maximum extent permissible and the Development Control Regulations of the Municipal Corporation of Greater Mumbai at present in force or as may hereafter be in force from time to time (which will include the FSI retained by the Owners as aforesaid). The Development shall, as part of the proposed new building, construct for and as Contractor of the Owners the said 4 flats of 1200 sq. feet carpet area each (from the said FSI of 4800 sq. feet carpet area retained by the Owners) at or for lump sum, construction cost of Rs. 35,00,000 (Rupees Thirty Five Lakhs only) (calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consideration attributable the area given to the developer i.e. 4171.48 sq.ft. only is to be considered. 15. The next contention of the assessee is that the provisions of section 50C of the Act are not applicable to the development agreement and hence valuation adopted for the payment of the stamp duty cannot be treated as a consideration for the purpose of computing the capital gain. Section 50C reads as under: "50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where ( a )the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der any law ; or ( iv )in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ; or ( iva ) the maturity or redemption of a zero coupon bond; or ( v )any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or ( vi )any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation. -For the purposes of sub-clauses ( v ) and ( vi ), "immovable property" shall have the same meaning as in clause ( d ) of section 269UA." 17. The definition of the transfer given in section 2(47) is a inclusive one. The concept of the ownership is based on the basic jurisprudence that it is a bundle of rights like right to possess, use and enjoy t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause ( b ), ( i )in relation to the original financial asset, on the basis of which the assessee becomes entitled to any additional financial asset, means the amount actually paid for acquiring the original financial asset ; ( ii )in relation to any right to renounce the said entitlement to subscribe to the financial asset, when such right is renounced by the assessee in favour of any person, shall be taken to be nil in the case of such assessee ; iii. in relation to the financial asset, to which the assessee has subscribed on the basis of the said entitlement, means the amount actually paid by him for acquiring such asset ; ( iiia ) in relation to the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil in the case of such assessee, and ( iv )in relation to any financial asset purchased by any person in whose favour the right to subscribe to such asset has been renounced, means the aggregate of the amount of the purchase price paid by him to the person renouncing such right and the amount paid by him to the company or institution, as the case may be, for acquirin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of acquisition of the shares or stock from which such asset is derived" 19. As per the clause ( a ) to section 55(2,) in respect of certain capital assets, the mode of determination of cost of acquisition has been specified and the assessee's case is not covered in clause ( a ). The assessee has transferred her development rights to the developer and in that process transfer is very important right in ownership i.e. commercial exploitation of the property and it cannot be said that merely because right to develop of the property is transferred it is only independent right and not attached to ownership of the property and hence, there is no cost of acquisition. In our opinion, the contention of the assessee is not based on any sound legal jurisprudence. 20. The assessee has also relied on the plethora of the decisions in support of the contention that the assessee has only allowed the builder to exploit the FSI and hence as there is no cost of acquisition to the FSI hence no capital gain is brought to tax. On the perusal of the decisions relied on by the ld. Counsel, we find that those decisions are in respect of the exploiting the TDR i.e. transferable developm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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