TaxTMI 
TaxTMI 
2022 (2) TMI 646
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....iating the fact that capital asset u/s 2 (14) of the act includes not only physical property but also rights, title or interest attached to it and the consideration received for transfer of such capital asset gives rise to capital gains that is chargeable to tax u/s 45 of the income tax act - 1961. iii. On the facts and in the circumstances of the case and in law, the learned CIT - A) has erred in not considering the fact that honourable ITAT while deciding the case of assessee's brother Mr Bharat raojibhai Patel, who is co-owner in the subject property and who received 50% share in the subject transaction, vide ITA number 5038/10/2010 order dated 31/05/2016, held that the sale of development right is to be taxed as a long-term capital gain. The learned CIT (A) has erred in concluding that the TDR/FSI rights are not chargeable to capital gains tax and decided the case in favour of assessee without appreciating the fact that two different treatments have been given to an identical transaction. iv. On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in giving a finding that Section 50 C is applicable only in case of transfer of land and bui....
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....lf share in the property, he offered it under the head capital gains and subsequently claimed indexation and deduction u/s 54 and 54 EC to compute the long-term capital gain at Rs Nil. 05. The learned assessing officer was of the view that assessee has entered into a development agreement dated 1/12/2006 only provides the developer of permission to facilitate to load additional transferable development rights on plot of land owned by the assessee and to sell the same to purchasers without relinquishing any of the rights in the plot of the assessee at Vallabhnagar CHS Ltd. Thus the payment received by the assessee was treated by the learned AO as a compensation for permitting to load additional transferable development rights in the plot hence the above transaction according to him does not amount to transfer within the provisions of Section 45 of the income tax act hence, he proposed to tax the above sum being the compensation value of Rs. 35,000,000 being the market value of the flat received and the payment made by the development for alternative residential accommodation as income from other sources. At the time of making of the assessment, the learned assessing officer noted t....
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.... u/s 154 of the act on 20/7/2010. 09. Based on this order the learned assessing officer passed an order giving effect to the order of the learned CIT - A on 6/9/2010 working out the chargeability of the capital gain tax where the sale consideration of Rs. 1,86,20,000 was reduced by the indexed cost of acquisition of Rs. 7,555,170 373 resulting into a long-term capital gain of Rs. 1,30,64,827 and as assessee has made investment in various bonds deduction u/s 54 EC of the income tax act was granted to the extent of Rs. 1, 30,64,827 and computed the chargeable to tax capital gain at rupees nil. 010. Assessee challenged the order of the learned CIT - A passed u/s 154 of the income tax act before the coordinate bench in ITA number 6717/MU M/2010 challenging that the order passed by the learned CIT - A is beyond the scope of the provisions of Section 154 of the act. 011. The coordinate bench passed an order on 10th/2/2016 holding that that as on the issue conceivably two opinions could have been about the taxability of the sum and the learned CIT - A has adopted one of the two possible opinions and therefore it cannot be said that the order of the learned CIT - A was suffering from a ....
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....d on 27.03.2012 served on assessee on 28.03.2012. The assessee filed its return of income in response to that notice on 31.04.2012 at the originally filed income. The assessee requested for the reasons recorded which were supplied on 10.05.2012. Assessee filed objections, which were disposed off on 08.02.2013. 017. The learned assessing officer has held that undoubtedly the assessee is one of the co owners of the plot having 50% share. When assessee purchased the land originally all rights present and future was embedded into, it was also acquired. As the assessee as one of the co-owners have transferred its transferable development right entitlement to the developers, consideration received by the co-owners in this regard and the consent terms are nothing but an agreement towards transfer of the transferable development rights. Therefore, benefit in the form of transferable development right arising out of the existing land is an immovable property, the transfer of which amounts to transfer of a long-term capital asset and hence liable to be taxed as income Under the head capital gains. For computation of the capital gain the learned AO considered the agreement value of Rs. 3.50 ....
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.... respect to one flat valued at Rs. 21,021,000 as deduction u/s 54 of the act. Accordingly the computation of capital gain was made as Under:- Sr No Particulars Amount 1 Sale consideration 6,63,03,000 2 Cost of acquisition of the plot fair market value as on 1/4/1980 one is Rs. 250,003 and 76/- which is indexed for the relevant assessment year 2,50,367*519/100 12,99,450 3 Cost of improvement Nil 4 deduction u/s 54 EC with respect to the investment in RECs capital bond 95,00,000 5 Deduction u/s 54 with respect to only one flat 2,10,21,000 6 Total deduction 3,18,20,450 7 Taxable long-term capital gains 3,44,82,550 018. Thus, the long-term capital gain was computed at Rs.3,44,82,550/-. The order under section 147 read with section 143(3) of the Act was passed on 28.03.2013 determining the total income of assessee at Rs.3,46,49,917/-. 019. Assessee preferred appeal before the learned CIT(A) challenging the reopening of the assessment as well as the addition on merits. On the issue of chargeability of capital gain the learned CIT(A) held that assessee has sold Transferable Development Rights (TDR), which is not chargeable to capital gain tax. The learned CIT(A) ....
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....med by the assessee himself that it was chargeable to tax under the head capital gain, it was upheld. Thus, the same 50% of the receipt was claimed by the assessee in his hands as capital gain receipt not chargeable to tax, whereas, balance 50% offered by the brother of the assessee was considered to be transfer of capital asset chargeable to capital gain tax. Therefore according to him there is a basic difference between the decision of in the case of the brother of the assessee and the same cannot be applied in the case of the assessee. 024. He further referred paragraph number 6.6 of the order of the learned CIT - A. He submitted that the order of the learned CIT - A was rectified by him u/s 154 of the act at the behest of the learned assessing officer as the order passed by the learned CIT in the case of the assessee was aggrieved with the order passed by the learned CIT appeal in case of the brother of the assessee. Originally, the appeal of the assessee against that order of the learned CIT - A passed u/s 154 of the act was withdrawn, however, later on, as per order dated 10/2/2016 the order of the learned CIT - A was held to be not sustainable, as the rectification was not ....
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....st the same and the Assessing Officer passed an order dated 08.02.2013 disposing of the above appeal. He also referred to letter dated 15.03.2013, explaining the cost of construction as well as the claim of deduction under section 54C, 54EC of the Act. He further referred to the agreement stating that assessee is entitled to two flats and therefore, the deduction is allowable under section 54F of the Act. In view of this, he submitted that there is no infirmity in the order of the learned Commissioner of Income Tax (Appeals). 028. We have carefully considered the rival submissions on perusal of various orders passed by the learned assessing officer in original assessment proceedings as well as reassessment proceedings, orders of the learned CIT - A in the original appellate proceedings as well as in appeal against the reassessment order, the order of the coordinate bench in case of the assessee where appeal of the assessee as well as the learned assessing officer were dismissed as withdrawn and further the order of the coordinate bench by which the order passed by the learned CIT - A u/s 154 of the act was held to be unsustainable. We have also carefully considered the order of th....
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....y High Court in case of CIT versus Shambhaji Nagar Coop Housing Society Ltd 370 ITR 325 wherein it has been held as Under:- "6. We have heard both sides at great length and with their assistance, we have perused the order passed by the Tribunal and that of the Commissioner and the Assessing Officer. The Assessing Officer has noted the basic facts and about which there is no dispute. What has been argued before the Assessing Officer is that with the promulgation of the Development Control Rules, 1991 (DCR), the Assessee Society acquired right of putting up additional construction through TDR. Instead of utilising this right itself, the Society decided to transfer the same to a Developer for a consideration. The Society transferred a valuable right, which is capital asset under section 2(14) of the Income Tax Act. The right created by the DCR attaches to the land owned by the Society which was acquired for a value. Its title or ownership of the plot enables the Society to consume this FSI/TDR. In such circumstances, this is a transfer of capital asset held by the Society, which is chargeable to tax. 7. The Commissioner of Income Tax, in confirming this finding of the Assessing Of....
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....essing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court; the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-section (2), (3), (4), (5) and (6) of section 16A clause (I) of sub-section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation (1) For the purposes of this section "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation (2) For the purposes of this section, the expression "assessable" means the....
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....r acquiring such asset; and (iiia) in relation to any financial asset purchased by any person in whose favour the right to subscribe to such asset has been renounced, means the aggregate of the amount of the purchase price paid by him to the person renouncing such right and the amount paid by him to the company or institution, as the case may be, for acquiring such financial asset; (ab) in relation to a capital asset, being equity share or share allotted to a shareholder of a recognised stock exchange in India under a scheme for demutualisation or corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange: Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil; (b) in relation to any other capital asset - (i) where the capital asset become the property of the assessee before the 1st da....
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....capital gains under section 45 of the Income Tax Act, 1961 was involved in that Appeal before the Hon'ble Supreme Court. There was a lease agreement entered into in the year 1959 for 50 years, under which, the annual rent was paid by the Lessee to the Lessor. The lease would have continued till 2009. However, during the relevant previous year i.e. in March, 1986, the Assessee surrendered tenancy rights prematurely and received a sum of 35 lacs. That sum was credited to the reserve and surplus account, which was disallowed by the Assessing Officer, holding that it was income from other source. The Assessee appealed to the Commissioner, who came to the conclusion that the Assessee was liable to pay tax on capital gains on the amount of Rs. 35 lacs after deducting an amount of Rs. 7 lacs as cost of acquisition. The Department and Assessee challenged the decision before the Tribunal and the Tribunal relied upon a Judgment of the Hon'ble Supreme Court in the case of CIT v. B.C. Srinivasa Shetty [1981] 128 ITR 294/5 Taxman 1 and the amendment to section 55(2) of the Income Tax Act and held that the Assessee did not incur any cost to acquire the leasehold rights and that if at all....
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....rchandisers P. Ltd. (1990) 182 ITR 107 (Ker).In all these decisions the several High Courts held that if the cost of acquisition of tenancy rights cannot be determined, the consideration received by reason of surrender of such tenancy rights could not be subjected to capital gains tax. (10) According to a circular issued by the Central Board of Direct Taxes (Circular No. 684 dated 10th June, 1994 - see (1994) 208 ITR (St.) 8 it was to meet the situation created by the decision in B.C. Srinivasa Shetty (1981) 128 ITR 294 (SC) and the subsequent decisions of the High Court that the Finance Act, 1994, amended section 55(2) to provide that the cost of acquisition of, inter alia, a tenancy right would be taken as nil. By this amendment, the judicial interpretation put on capital assets for the purposes of the provisions relating to capital gains was met. In other words the cost of acquisition would be taken as determinable but the rate would be nil. (11) The amendment took effect from 1st April, 1995 and accordingly applied in relation to the assessment year 1995-96 and subsequent years. But till that amendment in 1995, and therefore covering the assessment year in question, the law....
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....urposes of taxation in the manner provided by the appropriate section and no other. It has been further held by this court in East India Housing and Land Development Trust Ltd. v. CIT (1961) 42 ITR 49 that if the income from a source falls within a specific head, the fact that it may indirectly be covered by another head will not make the income taxable under the latter head. (See also CIT v. Chugandas and Co. (1965) 55 ITR 17 (SC). (14) Section 14 of the Income Tax Act, 1961 as it stood at the relevant time similarly provided that "all income shall for the purposes of charge of income tax and computation of total income be classified under six heads of income," namely:- (A) Salaries; (B) Interest on Securities; (C) Income from house property; (D) Profits and gains of business or profession; (E) Capital gains; (F) Income from other sources unless otherwise, provided in the Act. (15) Section 56 provides for the chargeability of income of every kind which has not to be excluded from the total income under the Act, only if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Therefore, if the income is included under any one ....
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....ed at a cost or that has to be ascertainable. In the present case, additional FSI/TDR is generated by change in the D. C. Rules. A specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains. Therefore, the Tribunal was in no error in concluding that the TDR which was generated by the plot/property/land and came to be transferred under a document in favour of the purchaser would not result in the gains being assessed to capital gains. The factual backdrop is noted by the Tribunal in para 3 and thereafter the rival contentions. The Tribunal concluded and relying upon its order passed in two other cases that what the Assessee sold was TDR received as additional FSI as per the D. C. Regulations. It was not a case of sale of development rights already embedded in the land acquired and owned by the Assessee. The Tribunal's conclusion and further to be found in para 11 is based on its view taken in the case of New Shailaja Co-operative Housing Society Ltd. The Tribunal has reproduced that conclusion. The Tribunal's conclusion arrived at in the case of New Shailaja Co-operative Housing Society Ltd., is based on the Hon'ble Suprem....