TMI Blog2014 (2) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... h For the Respondent : Shri K. C. P. Patnaik ORDER Per Vivek Varma, JM: The appeal arises from the order of CIT(A) -30, Mumbai, dated 01.10.2010, wherein, the assessee has raised the following grounds and additional grounds of appeal: "1. On the facts and in the circumstances of the case and in law, the ld CIT(Appeals)-30, Mumbai, has erred in confirming the taxability of surplus on sale of "Development Rights" as Short Term Capital Gain ignoring the fact that the same had no cost of acquisition and hence is non-taxable capital receipt. 1.2 Without prejudice to the above, the ld. CIT(Appeals) erred in confirming the contention of the ld. Dy. CIT - 19(2), Mumbai, of assessing the said Long Term Capital Gain as short term capital gain, ignoring the fact that the Development Rights were a part and parcel of the land which was an asset of the "society" which is more than 30 years old. 1.3 The ld. CIT (Appeals) erred in not appreciating the fact that your appellant had not sold any T.D.R. but had transferred "Development Rights" only. 2. The Appellant craves leave to add, amend, alter, modify, delete and/or change all or any of the above ground on or before the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of TDR was concerned, the assessee CHS already having a unit in existence, consisting of 5 floors intended to, exploit the TDR, entered into development rights with 5 persons to construct 6th 7th Floors. To facilitate the impending transaction the assessee entered into agreements with the developers (one agreement placed in the APB i.e. with Shri Hemant Shah) on 30.04.2001, wherein, amongst other clauses, the following clauses have been agreed upon "THIS AGREEMENT is made at Bombay this 30th day of April 2001 between Paragraph Cooperative Housing Society Ltd., a society registered under the provisions of Maharashtra Cooperative Societies Act 1960 under BOM/HMB/2918 of 1971 and having its registered office at Plot No. 52, Parijat Apartments, North Avenue, Santacruz(W), Mumbai -400 054, hereinafter called "the Society' (which expression shall unless repugnant to the context hereof will include its successors and assigns) AND Shri Hemant Shah, residing at Roop Kala, West Avenue, Santacruz (W), Mumbai - 400 054, hereinafter referred to as Developer (which expression unless repugnant to the context hereof will include his heirs, executors, administrators and permitted assigne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of T.D.R. 8. As per the preliminary estimate the Architect has informed that the construction will be completed in 15 month, from the day C.C. is obtained subject to force major conditions". 8. The AR pointed out, that the AO reproduced the submissions of the assessee, wherein it was pointed out that the purchase of the TDR was vide agreement dated 16.05.2001. It was on this factum, that the AO concluded since the assessee purchased and sold the TDR in the same financial year, the assessee was entitled to STCG and not LTCG. 9. The AR pointed out that TDR is a benefit granted by the BMC to the owner of the land and since the assessee was the owner of the land since a very long time, the TDR got embedded with the owner, on the application of DC Rules of 1991, and hence the assessee was the owner of TDR since 1991. It was also pointed out that in so far as the assessee is concerned, no cost is involved. He also submitted that along with TDR, the assessee received FSI and to make the FSI equal to the existing FSI on 1:1 ratio, it bought an extended FSI, which on the composite sale of the development rights generated certain LTCG, which has been offered for taxation at Rs. 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued 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 receiving zone. He can use it fully or partly or sell it fully or partly at will. Adverting to the facts of the instant case, the assessee became entitled to the additional FS/ of around 11,000 sq. ft. due to its land holding. It transferred this entitlement for a consideration of Rs. 48.96 lakhs to 'D'. Before the authorities it was contended on behalf of the assessee that such right transferred by the assessee did not have any cost of acquisition and, hence, no capital gains could be computed. The said consideration was only towards the transfer of the entitlement to the additional FSI. The assessee was the owner of the land and building and continued to remain the same even after transfer of the said capital asset. Thus, the cost of the land and building of the existing structure could not be attributed to the additional PSI received by means of 1991 Rules. It is true that such right is a capital asset as per the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 would Include the right to additional PSI. Hence, no capital gains could be charged on the transfer of the additional FSI by the assessee for a sale consideration of Rs. 48.96 lakhs for the reason that it had no cost of acquisition." 12. It is manifest from the above decision of the Tribunal rendered in the case of New Shailaja Cooperative Housing Society Ltd. that the issue involved in the present case as well as all the material facts relevant thereto are similar to that of the case of New Shailaja Cooperative Housing Society Ltd. and the decision rendered in the said case is squarely applicable in the present case. We, therefore, respectfully follow the decision of the Coordinate Bench of the Tribunal rendered in the case of New Shailaja Cooperative Housing Society Ltd. (supra) and delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of capital gain arising out of sale of TDR. Ground No.2 is accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where development of a reservation has not been implemented i.e. TDRs will be available only for prospective development of reservations". 4. ... 5. ... 6. ... 7. ... 8. If a holder of a DRC intends to transfer it to any other person, he will submit the DRC to the Commissioner with an appropriate application for an endorsement of the new holder's name, i.e. transferree on the said Certificate. Without such an endorsement by the Commissioner himself, the transfer shall not be valid and the Certificate will be available for use only by the earlier original holder. 9. A holder of a DRC who desires to use the FSI credit certified therein on a particular plot of land shall attach to his application for development permission valid DRCs to the extent required". 10. ... c) the assessee sold the development rights to the developers prior to the receipt of the permissions from Development Commissioner; d) the assessee charged lump sum sale amount from the developers, which included cost of TDR to the developers. 16. Taking into account these facts, it is factually clear that the TDR is embedded in the land for the purposes of additions made by the owner (or less ..... X X X X Extracts X X X X X X X X Extracts X X X X
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