TMI Blog2013 (9) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the Government policy and there was no cost of acquisition involved. Therefore, it has been argued that no capital gain can be charged in such a case in view of the judgment of Maheshwar Prakash-2 Co-operative Housing Society Ltd. Versus Income-tax Officer, Ward 19(2)(4) [2008 (5) TMI 455 - ITAT MUMBAI] Held that:- The argument of assessee is supported by the decision of Mumbai bench of Tribunal in case of Jetha Lal D Mehta (2005 (1) TMI 595 - ITAT MUMBAI) and ACIT Vs. Geeta Devi Pasari (2006 (6) TMI 138 - ITAT BOMBAY-F) - the assessee retained full control over the existing building as well as the additional FSI available which had not been parted with. The assessee had received only a sum of Rs. 1.10 lakh from the developer which is stated to be reimbursement of expenses incurred by the assessee. In these circumstances we are of the view that no transfer had taken place in the year under consideration and, therefore, no capital gain can be charged in this year. The additional FSI became available to the assessee due to operation of development control regulation which did not involve any cost. - no capital gain could be charged on the ground that no cost of acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty after obtaining the necessary TDR certificates, DRA required the developer to pay a sum of Rs. 3.05 crore as corpus fund to the society, additional sum of Rs. 1.50 crore in lieu of additional FSI and Rs. 30 lakh as additional benefit on account of reduction in area for the reason of road widening, nallah etc. Thus, the society was to receive the total of 4.85 crore from the builder in terms of the agreement. 2.2 The agreement further provided that in case the developer is not in a position to obtain Intimation of Disapproval (IOD) and commencing certificate (CC) within the six month of the agreement, the agreement shall be terminated without any further notice. It also provided that even if IOD and CC had been obtained in time but the developer is not in a position to complete the work of construction of the new building within a period of 36 months on account of his deliberate acts and omissions the society would be entitled to terminate the agreement by giving one month notice to the developer. As the developer could not obtained the IOD and CC within the prescribed time limit the society as per the resolution dated 26.9.2010 passed in the AGM decided to cancel the DRA, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee had filed petition challenging the constitutional validity of section 50 C. AO further noted that assessee had filed the writ petition consequent to the advice given by the tax consultant Shri Praful L. Vora, in which Shri Vora opined that since the DRA had been registered at the stamp duty value of Rs. 15,50,00,000/-, there will be long term capital gain of Rs. 8,64,44,000/- by virtue of the provisions of section 50C. The said capital gain had been computed based on the cost of land and building as on 1.4.1981 at Rs. 1,18,20,000/- and the indexed at Rs. 6,85,56,000/-. 2.4. AO observed that the society was absolute owner of the land on which the building had been constructed. The society had a separate identity different from the members and it had entered into agreement with builder as a society. The society, therefore, itself was responsible for any tax responsibility arising out of development rights agreement. The society had received advanced of Rs. 1.10 lakh from the developer which was duly declared in the balance sheet as on 31.3.2009. He referred to the provisions of section 2 (47) (v) as per which any transaction involving the allowing of the possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also required to be distributed to the members only. The rent for temporary rented accommodation was also required to be given by the developer to the members along with reimbursement of shifting expenses etc. Therefore consideration received or receivable in terms of the DRA cannot be taxed in the hand of the society. It was also pointed out even if the capital gain is considered in the hands of society, no transfer had taken place during the year which was necessary for charging of capital gain. Assessee had only received a sum of Rs. 1.10 lakh by way of earnest money. Assessee society had not given possession of the premises occupied by the members for re-development no possession has been given even till date. Assessee referred to the decision of Tribunal in case of ACIT Vs. Geeta Devi Pasari (44 SOT 64) in which it was held that transfer was not complete under section 2(47)(v) without handing over the possession. The same view had been taken by the Tribunal in case of Magji Mangal das Vs. JCIT (75 ITD 523). Thus even if capital gain could be charged, the same could not be done in this year as there were no transfer. Assessee also pointed out that writ petition filed by assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety in February 1969. It was further submitted that in the year 1991 the development control regulations (DCR) were relaxed as per which the society became entitled for additional FSI on which further construction could be done after obtaining TDRs. The assessee society had therefore, entered into the development rights agreement with the developer for transfer of this additional FSI to the builder in lieu of the reconstruction of the old building and further consideration of Rs. 4.85 crore had to be received from the builder. It was pointed out that additional FSI had been received by assessee in view of the Government regulations and there was no cost incurred by assessee and since there was no cost of acquisition involved, no capital could be charged in view of the judgment of Hon'ble Supreme Court in case of B.C. Shrinivas Shetty (128 ITR 294). Reliance was also placed on the decision of Tribunal in case of Jetha Lal D Mehta (2 SOT 422) and another decision of Mumbai bench of Tribunal in case of Maheshwari Housing Property Ltd (118 ITD 223) in which following the judgment of Hon'ble Supreme Court in case of B.C. Srinivas Shetty (Supra), the capital has been found not leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court of Bombay in case of Chaturbhuj Dwarka Das Kapadia Vs. CIT (260 ITR 491). As regards the cost acquisition of FSI it was submitted that same could not be considered as nil, as the entitlement to above FSI was because of the land on this ground it could not be argued that no capital gain could be taxed. Reliance was placed on the decision of Tribunal in case of Chiranjiv Lal Khanna Vs. Income Tax Officer (132 ITD 474). 6. In reply, learned AR for assessee submitted that the judgment of Hon'ble High Court of Bombay in case of Chaturbhuj Dwarka Das Kapadia (Supra) had been considered by the Tribunal in case of Geeta Devi Pasari (104 TTJ 375) and also by the Hon'ble High Court in the said case. It was pointed out even the Hon'ble High Court in case of Chaturbhuj Dwarka Das Kapadia (Supra) had held that there could be transfer only on parting of the substantial control over the property. In this case the society during the year retained the full control over the building and, therefore, there was no question of transfer in that year. 7. We have perused the records and considered the rival contentions carefully. The dispute is regarding taxability of capital gain on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 will constitute transfer. Since the DRA was registered on 12.2.2009 and assessee had received a sum of Rs. 1.10 lakh from the developer the authorities below have concluded that there was transfer during the assessment year 2009- 10 in view of the provisions of section 2 (47)(v) mentioned above. Assessee has however argued that assessee retaining the complete control over the property and having not handed over the possession, there could not be any transfer u/s 2 (47) (v). We find substance in the argument advanced by the learned Authorized Representative for the assessee. The assessee in this case has not transferred the land and the building. The assessee has only transferred its entitlement to additional FSI to the developer for reconstruction of building. The developer is required to demolish and reconstruct the old building with an additional 28% carpet area and hand over the same to the existing members. The transfer is only of additional FSI available to assessee in respect to the existing land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d grant an irreversible license to the builder to enter the property. By march 1996, the builder had paid almost the entire consideration except a sum of Rs. 9,98,000/-. The department took the view that the capital gain was chargeable in the assessment year 1996-97. Hon'ble High Court noted from the order of the Tribunal that the builder came into possession of property on the date next to 31.3.1996 i.e. 1.4.1996. Therefore the possession was given only in assessment year 1997-98. The High Court observed that the date of agreement i.e. 18.8.1994 on which the assessee had agreed to execute power of attorney to the builder was relevant date for determining the date of transfer. Further the High Court also noted that the power of attorney had been executed only on 12.3.1999. The High Court, therefore, held that in either case the capital gain could not be chargeable in assessment year 1996-97. The judgment in case of Chaturbhuj Dwarka Das Kapadia Vs. CIT (Supra) had also came up for consideration before the Hon'ble High Court of Bombay in case of CIT Vs. Geeta Devi Pasari (17 DTR 280). The Hon'ble High Court following the said judgment had held that capital gain could be taxable only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional FSI was available only because of ownership of the land and, therefore the cost of land had to be spread over the original FSI and additional FSI as is done in the case of bonus share and thus the additional FSI did have cost attached to it. The Tribunal however did not accept the contentions raised. It was observed that the concept of acquisition of bonus shares could not be imported as bonus shares were issued to the detriment of original shares but in this case there was no detriment to the cost of land rather the same had increased. No contrary decision of any High Court or Apex Court has been brought to our notice. Therefore, following the decision of Tribunal mentioned above no capital gain could be charged on the ground that no cost of acquisition was involved in the additional FSI. 10. In view of the foregoing discussion and for the reasons given earlier, we are of the view that charge of capital gain by the authorities below in the relevant year was not justified. The order of CIT (A) upholding the order of AO is, therefore, set aside. As we have set aside the order of CIT (A) on the legal grounds, it is not necessary for us to go into the dispute relating to compu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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