TaxTMI 
TaxTMI 
2013 (12) TMI 235
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....being the amount received by the assessee from the society on account of transfer of floor space index held by the Assessing Officer as dividend income from the society. 3. On the facts and circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) erred in restricting disallowance to Rs. 2,540 as against Rs. 19,61,052 disallowed by the Assessing Officer 4. The appellant prays that the order of the Commissioner of Income-tax (Appeals) on the above ground be set aside and that of the Assessing Officer be restored." 2. Earlier in this case, the Income-tax Appellate Tribunal, vide its order dated October 9, 2009 had set aside the entire matter to the file of the Assessing Officer with a direction to decide the same in accordance with the decision of the hon'ble jurisdictional High Court in the case of CIT v. Anita Enterprises, passed in I. T. A. No. 183 of 2005 as the full text of the said decision was not given. Against the said order, the assessee had filed a miscellaneous application before this Tribunal submitting that the Tribunal was under the impression that the decisions submitted by the Assessing Officer were....
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....pital gains. In response, the assessee submitted that it had not transferred any building or land but a right by virtue of "Development Control Regulations, 1991, parting with which did not result into a capital gain on a transfer of asset. Moreover, there were no cost of acquisition ; hence, capital gain cannot be taxed. The Assessing Officer thereafter raised various other queries and the assessee filed its replies from time to time which have been elaborately discussed from pages 3 to 17 of the assessment order. The Assessing Officer finally did not agree with the contention of the assessee and taxed the capital gain in the following manner : Total consideration on account of transfer of TDRs Rs. 33,23,622 Less : Written down value Rs. 1,11,112 Rs. 32,12,510 and held that the net amount of Rs. 32,12,510 is chargeable to capital gains under section 50 of the Act. The conclusion of the Assessing Officer was that this is a case of exchange of old flats against new flats and surrender of right to floor space index is a "transfer" and the right in the existing flat and the transferable development rights are inseparable, hence, the consideration received from the develo....
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.... of the appellant that the society in the instant case is a mutual society. It was formed only to facilitate various operations in the society for the benefit of members. There is therefore a complete mutuality and consequently ratio of decisions of the hon'ble Supreme Court in the cases relied upon by the appellant are applicable to the receipt by the members. It is a different matter whether receipt is taxable in the hands of the society. The observation of the Assessing Officer, to my mind, is a valid observation. The Assessing Officer has rightly observed that in terms of the various documents as well as in terms of agreement with developer, the ownership of the assets, the land, the building and development rights were with the society. Consequently, when these developments rights are transferred the amount received ought to have been taxed in the hands of the society. As far as the receipt in the hands of the individual member is concerned, it is consequently covered by the concept of mutuality and cannot be taxed. Therefore, the addition made by the Assessing Officer is not justified and is deleted." 7. Shri Kanchun Kaushal, learned counsel appearing on behalf of the assess....
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....which is evident from the various clauses of the agreement entered into between the developer, society and the members, as the consideration was payable by the developers to the members for transfer of their respective entitlements. In fact, the members have paid the consideration themselves to the society. Alternatively, he pleaded that the transaction between the society and in its members cannot be brought within the ambit of taxation on the "principle of mutuality". He, thus, strongly relied upon the findings given by the Commissioner of Income-tax (Appeals). 9. On the other hand, learned Departmental representative relied upon the findings and the conclusion drawn by the Assessing Officer and took us to the various reasoning given by the Assessing Officer in the assessment order and submitted that the Assessing Officer has rightly taxed the capital gains. 10. We have carefully considered the rival submissions, perused the material placed on record and also the findings given by the Commissioner of Income-tax (Appeals) as well as the Assessing Officer. It is an undisputed fact that the assessee is a member of the society, who got its share of Rs.33,23,602 on account of transf....
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....urrenders to the Government and, therefore, the acquisition of such transferable development rights are to detriment the land surrendered by the owner/lessee, and such transferable development rights can be utilised on any plot vacant or already developed or by erection of additional storeys subject to the floor space index available in the Development Control Regulations. The contentions and reasoning of the Assessing Officer to the extent that the word 'property' not only includes tangible asset but also intangible asset and, therefore, additional floor space index available to the assessee in view of Development Control Regulations, 1991, was a right acquired by virtue of being owner of the plot is correct. Thus, such a right is definitely a 'capital asset' held by the assessee and assignment of such a right in favour of the developer amounts to transfer of capital asset. In our conclusion, transfer of transferable development rights amounts to transfer of a 'capital asset'. 16. However, it has to be seen as to whether there was any kind of cost in acquiring these rights. As stated earlier, this right was acquired aut....
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.... Mill Co. P. Ltd. v. CIT [2001] 249 ITR 265 (Bom). Suffice to say that for this reason alone the Revenue's rejection of the assessee's claim, by relying upon Cadell Wvg. Mill Co. P. Ltd.'s case (supra) is no longer sustainable in law. We need not go further into this aspect of the matter. The only other reason of rejecting the claim that the assignment of additional floor space index is that, according to the authorities below, this right has cost of acquisition which consists of cost of purchase of plot, costs of getting the designs approved and costs of constructing the building. In this context, however, what is necessary to appreciate is that the rights assigned to the developer are the rights to receive and apply the transferable development rights, and that these rights arose to the assessee by the virtue of introduction of "Development Control Regulation for Greater Mumbai 1991". Until the point of time these development regulation came into existence, the assessee did not have right to receive and apply the transferable development rights, it is these rights on the assignment of which the assessee has received the impugned amount. Therefore, the expenditure incurred on purc....
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....on the said position, that when an asset has no cost of acquisition, the gains on sale or transfer of same cannot be brought to tax. The law laid down by the hon'ble Supreme Court in the case of B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) clearly holds so. For all these reasons, we are of the considered view that the receipts on sale of assignment of rights to receive transferable development rights are not liable to tax. The authorities below erred in law and on facts in holding to the contrary.' (ii) Further, the Tribunal in Maheshwar Prakash-2 Co-operative Housing Society Ltd. [2009] 313 ITR (AT) 103 (Mumbai), after relying upon the decisions in Jethalal D. Metha [2005] 2 SOT 422 (Mum) and B. C. Srinivasa Setty [1981] 128 ITR 294 (SC), observed and held as follows (page 112 of 313 ITR (AT)): "12. This aspect of the matter has been examined by the Tribunal in the case of Jethalal D. Metha [2005] 2 SOT 422 (Mum). In that case, the assessee had acquired the leasehold rights in a plot of land in October, 1971 on which the assessee had constructed two-storeyed building containing some flats and the floor space index available on th....
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....iv) of sub-section (1) of section 49), shall be taken to be nil. Clause (aa) and clause (ab) of section 55(2) deal with the case of shares or securities and, therefore, the same are not relevant for disposal of this appeal and, therefore, the same are not reproduced here. The perusal of section 55(2)(a) reveals that cost of acquisition is to be taken at nil in those cases where the capital asset transferred is either goodwill of business or the trademark or a brand name associated with business or a right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carrier permits or loom hours. In the present case, the assessee is not carrying on any business and the right to construct additional floors is not covered by any of the assets mentioned in the aforesaid sub-section (2) of section 55. Therefore, the amended provisions of section 55(2) do not apply to the present case and the lower authorities were not justified in taking the cost of acquisition of the capital asset being right to construct the additional floors as nil. 14. We may also refer to the contention of the learned Departmental representative that right to co....
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.... by means of 1991 Rules. It is true that such right is a capital asset as per the provisions of section 2(14) but in order to compute capital gains apart from the existence of capital asset, there should be sale consideration accruing as a result of transfer of capital asset as well as the cost of acquisition of the asset along with the cost of any improvement thereto, if any. Section 48 sets out the mode of computation of income under the head capital gains by providing that the expenditure incurred wholly and exclusively in connection with the transfer of a capital asset along with the cost of acquisition and cost of any improvement, if any, shall be deducted from the full value of consideration received or accruing as a result of the transfer of capital asset. Transfer of capital asset which does not have any cost of acquisition does not result into capital gains chargeable to tax under section 45. The Legislature in its wisdom brought out certain categories of capital assets under section 55(2) as having cost of acquisition at Rs. nil, where such assets have not been purchased by the assessee for consideration. The effect of this sub-section is that when the assets so specified....