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TMI Blog2012 (6) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... from the said sale of TDR was not declared in the return of income originally field on 2210-2007, assessment was reopened by the Assessing Officer by issuing notice under section 148 on 14-10-09 after recording the reasons. In response to the said notice, a letter dated 23-11-09 was filed by the assessee stating therein that the return originally filed on 22-10-2007 may be treated as return filed in response to the notice under section 148. During the course of re-assessment proceedings, the facts that came to the light were that there was an area known as "Sambhaji Nagar" comprising of old buildings and falling under SEZ category. The said area was earlier owned by one Shri Sambhaji Kanga and others and the same was occupied by about 200 tenants and 17 shop keepers. A cooperative society of the said occupants was formed in the year 1988 and the ownership of Sambhaji Nagar area was acquired by the said society. In the year 1994, the society decided to redevelop the Sambhaji Nagar area and accordingly old buildings were demolished and total 5 new buildings were constructed utilizing the FSI available. Accordingly, a construction of 7217 sq. mt. was done on the plot area of 3649 sq. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e execution of conveyance deed in favour of it), all rights present and future embedded in it are also acquired. iii. the society has transferred its TDR entitlement to Mr. Kamat. Consideration received by the society and the members in this regard under consent terms which are nothing but agreement towards transfer of the TDR entitlement of the society. iv. Therefore, the benefit in the form of TDR arising out of the existing land is an immovable property, the transfer of which tantamount to transfer of a long term capital asset and hence liable to be taxed as income under the head 'capital gain'. v. Hence, the total consideration of Rs. 2,23,25,157/- received by the society in this regard is chargeable to tax as income under the head 'long term capital gain' in the hands of the assessee society in the A.Y. 2007-2008. vi. In response to this office letter dated assessee furnished copy of agreement dated 18.03.1986 between Shri Sambhaji Shankar Changla, Nagesh Shaxilcar Ghangla, Umesh Shankar Changla and Sint Ramabai Shankar Gangla and The assessee society and also furnished documents relating to payment of stamp Duty and registered charges in which it is menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipal limits the capital gain arising from transfer of land will be taxable. It cannot be said that appreciation in value of asset is unascertainable and not to be taxed. (3) If the disputed land along with extra FSI is transferred together, the capital gains would have been taxable. Hence, when they are sold separately, it cannot be said that TDR is not taxable. (4) The decision of B.C. Srinivas Shetty is not applicable to the facts of the case. In the case under consideration there is land, which has a definite cost of acquisition. It is not that the capital asset does not have a cost. That would be true of goodwill and not of land. (5) The decision of Hon'ble ITAT in the case of New Shaileja Co.op Hsg. Soc. Ltd. 36 SOT 19 (Born) has not referred to the decision of ITAT in the case of Shakti Insulted Wires 87 ITD 56 where income from sale of TDR was held to be taxable. (6) In case of extra FSI or TDR it cannot be said that no cost is involved. There will be secretariat expenses incurred by the society, however nominal, to apply and get the necessary certificate in tangible form which can be sold or assigned. That will be the cost met by the appellant to bring the asset in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital in nature and outside the purview of capital gains. 3.1. Appellant craves leave to add, alter, omit or modify any of the grounds of appeal as the occasion may arise or demand." 7. We have heard the arguments on both the sides and also carefully perused the relevant material on record. As regards ground No.1 challenging the validity of assessment made by the Assessing Officer under section 143 (3) read with section 147 on the ground that the initiation of the said proceedings itself was bad in law, it is observed that a survey under section 133A was carried out in the case of the assessee which revealed that a sum of Rs. 2,23,25,157/- was received by the assessee during the year under consideration on account of sale of TDR. Since profit arising from the sale of said TDR was not declared by the assessee in its return of income, the Assessing Officer came to a prima facie conclusion that such profit representing income of the assessee chargeable to tax under the head "Capital Gains" has escaped the assessment and after recording the reasons, he reopened the assessment by issuing notice under section 148 on 14-10-2009. In support of this action of the Assessing Officer, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Urban Land (Ceiling & Regulation) Act, 1976 in the year 1963. After acquisition, it obtained exemption under section 20 of the said Act to use excess vacant land for the purpose of its business and converted certain part of that exempted land into stock-in-trade as on 1-4-1994. In pursuance of new Government policy the assessee sold development rights of the said land to Mr. Uttam Kamant as on 29-3-1996 and declared the sale consideration as its business income. The said business income was set off by the assessee against carried forward business loss which was disallowed by the Assessing Officer. According to the Assessing Officer, the development rights sold by the assessee were capital asset and conversion of land into stock-in-trade amounted to transfer. He, therefore, computed capital gain under section 45 (2) using backward interpolation as on the date of the transfer which was upheld by the learned CIT(A). The Tribunal upheld the Order of the learned CIT(A) on this issue holding that development rights were part and parcel of land and the same being valuable property rights inherited in ownership land constituted valuable capital assets within the meaning of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1972 along with building thereon constructed by use of floor space index of approximately 11000 sq. feet. By virtue of the enactment of the Development Control Regulation Act, 1991, the assessee became entitled to an additional FSI. The assessee sold such entitlement right to the builders for Rs. 48.96 lakhs. The Assessing Officer brought the income on sale of transfer of Development Rights (TDR) to capital gain tax which again was upheld by the learned CIT(A). Before the Tribunal, the assessee contended that since the TDR transferred by it did not have any cost of acquisition, no capital gain could be computed. The Tribunal accepted this contention of the assessee by holding as under : "The concept of TDR (Transfer Development Right), was introduced in Mumbai in the Development Control Rules, 1991 of the Bombay Municipal Corporation. These rights are given in the form of a Development Right Certificate (CRC) which is issued by the Municipal Corporation. TOR means the development potential. The FSI of a plot of land is separated from the plot and is allowed to be transferred. TDR can be used by the person/owner/lessee in whose favour it is granted on his land in the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains would be done accordingly. Them is a difference in the situation when cost of acquisition is at Rs. nil and where the cost of acquisition cannot be ascertained or no cost of acquisition has been incurred. The items of capital assets specified in section 55(2) are those for which the cost of acquisition shall be taken at Rs. nil for computing capital gains. However, if the assessee has not incurred any cost of acquisition on a capital asset and such capital asset does not fall in the category of the capital assets specified in section 55(2), then the judgment of the Supreme Court in B.C.Srinivasa Setty's case (supra) shall apply and no capital gains would be charged. Coming back to the facts of the instant case, it was abundantly clear that the assessee had not incurred any cost of acquisition in respect of the right which emanated from the 1991 Rules making the assessee eligible to additional PSI. The land and building earlier In the possession of the assessee continued to remain with it, as such, even after the transfer of the right to additional FSI for Rs. 48.96 lakhs. The revenue could not point out any particular asset as specified in sub-section (2) of section 55, which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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