TaxTMI 
TaxTMI 
2014 (2) TMI 688
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....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 of hearing". ADDITIONAL GROUNDS: 1.4 The said CIT(A) erred in confirming the view of the said AO that only proportionate cost of Rs. 45,13,035/- of TDR relating to 6887 Sq.ft. was allowable in computing Capital Gain when the consideration of Rs. 86,08,750/- related to Development Rights for construction of 6th and 7th floors and also for additional construction in the existing building, repairs to the existing building, modifications in the building to make it Earthquake Proof etc. for which the balance TDR of 2047 Sq. Ft. was used and therefore the entire cost of TDR of Rs. 58,54,430/- was allowable. 1.5 Without prejudice to the above, the said CIT(A) erred in not appreciating the fact that in computing Capital Gain the said AO had deducted only Rs. 45,13,035/- being proportionate cost of 6887 sq.ft. of TDR ignoring t....
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....ciety' (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 assignees) We refer to the discussions we had with you wherein we had informed you about our plans for the construction of the 6th and 7th floors as under: 1. ... 2. The society has the possibility of constructing two additional floors by purchase of Transfer of Development Rights (TDR) as per the Development Control Regulations in force. 3. For the said purpose the society has appointed an Architect who has vide his letter of 29 December 2000 addressed to the Executive Engineer, H-Ward, sought the permission for the purchase of Slum TDR and for the said purpose submitted the necessary plans. The Brihan Mumbai Municipal Corporation (BMC) has vide its letter dated 4th January 2001 granted the said permission and requested him to advice his clients i.e. our Society to purchase the admissible slum TDR and submit t....
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....wner 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. 27,54,320/-. 10. To support the contention that the TDR does not have any cost element, the AR placed reliance on the decision of ACIT vs IGE India Ltd, reported in 58 SOT 62, wherein, the Tribunal held, "11. Thus, in view of the consistent stand taken by the Tribunal in all the cases relied upon by the learned counsel, we hold that even though the transfer of TDR amounts to transfer of capital asset, however, the same cannot be subjected to tax under the head capital gain for the reason that there is no const of acquisition in acquiring the flat which has been transferred and computation mode given under Section 48, thus, fails in such cases. Accordingly, the finding and the view taken by the CIT(A) is upheld". 11. He also placed reliance on the decision of Sambhaji Nagar CHS vs ITO, ITA No. ....
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.... 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 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 the consideration received or accruing as a result of the transfer of capital asset. The Supreme Court in CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294/5 Taxman 1 has held that transfer of capital asset which does....
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....d 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 accordingly allowed". 12. In the light of these decisions, the AR submitted that the assessee acted only as a facilitator for the developers to buy the TDR and additional FSI, which is evident from clause 9 of the Development Agreement, as placed on record (APB 10). 13. The AR, therefore, submitted that computation of capital gains on sale of TDR as STCG was misconstrued by the revenue authorities, since no cost is involved in its acquisition to the owner. 14. The DR vehemently supported the revenue authorities and also placed reliance on the decision of Shakti Insulated Wires Ltd vs JCIT, reported in 87 ITD 56 (Mum) and pleaded that there was no infirmity in the order of the revenue authorities and hence the same should be sustained. 15. We have heard the rival contentions and have perus....
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....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 lessee). This TDR in the form of additional FSI is negotiable by the owner to the buyer/developer only for prospective development. As is clear from the extracted copy of the Appendix VII-A (Regulation 34), there is no element of cost to the owner. On the basis of this factual aspect, coming out of DRC itself, the first issue of chargeability of capital gains gets ousted, as, there is no cost involved and placing reliance on the decision of Hon'ble Supreme Court in the case of CIT vs B C Shrinivas Shetty, reported in 128 ITR 294, no capital gain is exigible. This view was adopted by the coordinate Benches in the cases of Sambhaji Nagar (supra) and IGE India Ltd. (supra). The issue was taken contrary, in the decision of Shakti Insulated Wines Ltd (supra). The decision was referred....