TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 297
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....nt. For these two issues, the revenue has raised the following two grounds: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in giving finding that Sec. 50C is applicable only in case of transfer of land and building without considering the fact that in the instant case, the development right could not be executed without transfer of land and building. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the stamp duty valuation of the development agreement of Rs. 2,31,41,000/- and Rs. 34,36,000/- while considering total sale consideration u/s. 50C of the Act." 3. Briefly stated facts are that the assessee is a co-owner with his brother of a property i.e. land and building at plot no.34, Ram Niwas, Vallabhnagar Society, N.S.Road No.3, Vile Parle (W), Mumbai - 400056. During the year under consideration, the assessee along with his brother executed an agreement of sale-cum-development of the said property dated 01.12.2006 with a builder viz. M/s. M L Builders for the following consideration: a. Two flats of 4000 sq. Ft. Carpet area each b. Car parking space c. Consideratio....
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....y the assessee is worked out at Rs. 1,86,20,000/- as per assessee's computation of long term capital gain. Besides the monetary benefit, the assessee is also receiving the flats of 3776.22 sq.ft (carpet) area i.e., the construction cost and the assessee has adopted the value at Rs. 90,62,928/-. The total benefit received by way of development agreements is worked out to Rs. 2,76,82,928/-" 4. Further, the AO also noted that as per stamp duty valuation the rates /market valuation of the property is at 4,62,82,000/- as against the value declared by the assessee at Rs. 3,50,00,000/- vide first agreement dated 1.12.2006 and further in second agreement the value adopted is Rs. 34,36,000/- as against 11,20,000/- offered by the assessee. Accordingly, the AO verified the factual details and further recomputed the total sale consideration of development rights at Rs. 3,56,39,928/- and entire consideration was treated as income from other sources. The AO also disallowed the claim of exemptions u/s. 54 and 54EC of the Act. Aggrieved, the assessee preferred appeal before the CIT(A), who following the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia 260 ITR....
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....ithin seven days from the date of sanction of the plans by the Municipal Corporation of Greater Mumbai and the IOD being granted in respect thereof and simultaneously against the Owners vacating the said property and handing over the same to the Developers for the purpose of development." 7. The learned counsel for the assessee also explained the fact that in lieu of these development agreements the assessee was to be allotted accommodation of 8000 sq.ft. carpet area (to both the co-owners) and car parking space in the stilt. As regards the increase in consideration the learned counsel for the assessee referred to clause 8 of the development agreement wherein they agreed that developer shall pay a lump sum agreed amount of Rs. 5000 per sq. ft. carpet area for any shortfall in the area to be allotted to the owners. 8. In view of these facts and circumstances, the learned counsel for the assessee argued that the development right is a property by itself which will fall in the expression "capital asset" as defined under section 2(14) of the Act. It was explained by the learned counsel that the term property as stated in the definition of capital asset u/s. 2(14) does not merely mea....
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....re particularly described in the Schedule hereunder written by demolishing the existing building and constructing thereon a new residential building at the Developers' costs by utilising thereon the entire FSI and TDR as may be presently available and strictly as per the plans that may be approved by the Municipal Corporation of Greater Mumbai (the Corporation) and the IOD which may be granted." We find that the assessee has filed final FSI calculation in respect to above property. As per the above stated agreement and calculation, the assessee has not only sold his right to load TDR on plot but also his existing FSI on the plot. By virtue of the above sated agreement the assessee has sold all his rights attached to the plot of land i.e. basic FSI and right to load TDR on the plot of land. In the given facts, now we have to ascertain whether development right includes the expression "Capital Asset" as defined u/s. 2(14) of the Act. We are of the view that development right in a property is also a property by itself and would be included in the expression "Capital Asset". The term "Property" as stated in the definition of "Capital Asset" u/s. 2(14) does not merely mean physical pr....
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....on the said plot of land by consuming FSI and the right as a receiving plot owner to load TDR over and above normal FSI, are rights which accrue to the assessee by virtue of development control regulation of the state government. These are rights over property, which are capital in nature and comes within the definition of capital asset u/s. 2(14) of the Act. The consideration received by the assessee is for transfer of rights over such capital asset for the reason that the 3rd party purchaser has no interest over the land is not relevant. The permission to load the TDR on permissible FSI allowed by the owner is by itself a transfer of right in immovable property and therefore, clearly falls within the provision of section 45 of the Act. Therefore, we are of the considered view that in the present case before us, the sale of development rights is to be taxable as long term capital gain and not as income from other sources as held by AO. The consequential deductions/exemptions u/s. 54 of the Act etc. will be allowed to the assessee. We direct the AO accordingly. This issue of Revenue's appeal is dismissed. 13. As regards to the second issue regarding adoption of market value as per....