Capital gains on transfer of development rights upheld where valuable immovable-property rights were conveyed and valued for computation.

Transfer of the right to construct additional floors in an existing building was treated as transfer of valuable immovable-property rights falling within "property" and therefore a capital asset. The transaction went beyond a bare licence to use the premises, because enforceable rights were extinguished by registered sale deeds. The absence of an immediately ascertainable cost of acquisition did not by itself defeat capital gains tax where the asset could be valued; capital gains were to be computed on proper valuation rather than excluded from the charging provision. The matter was remanded for determination of capital gain after valuation of the transferred rights.

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Issues: Whether the consideration received on transfer of the right to construct additional floors in an existing building was chargeable to capital gains tax and whether the absence of an ascertainable cost of acquisition prevented computation of capital gains.

Analysis: The rights transferred were held to fall within the expression "property" and therefore constituted a "capital asset". The transfer was not limited to a mere permission to use the property; it involved a transfer and extinguishment of valuable rights in immovable property by registered sale deeds on which stamp duty had been paid. The contention that no capital gains could arise because the cost of acquisition was not ascertainable was rejected on the footing that the asset and rights transferred were capable of valuation, and the matter required working out of capital gain on proper valuation rather than exclusion from the charging scheme.

Conclusion: The receipt was held to be exigible to capital gains tax, and the matter was remanded to the Assessing Officer to determine the capital gain after obtaining valuation of the transferred asset or rights. The assessee's plea against taxability failed, while the Revenue succeeded on the core issue.

Ratio Decidendi: Transfer of enforceable rights in immovable property constitutes transfer of a capital asset for the purposes of capital gains, and absence of an immediately ascertainable cost does not by itself exclude taxability where valuation can be undertaken.

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