TaxTMI 
TaxTMI 
2026 (7) TMI 677
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....ee, Mrs. Dorothy Lawrence Pereira, expired on 02.02.2026. An affidavit dated 27.03.2026 has been filed by Ms. Sherlyn Dias, daughter of the deceased assessee, stating therein that she is one of the legal heirs of Late Mrs. Dorothy Lawrence Pereira and that the deceased assessee had left behind two legal heirs, namely, Ms. Sherlyn Dias (daughter) and Mr. Neil Savio Pereira (son). It has further been affirmed that the other legal heir has no objection to Ms. Sherlyn Dias being brought on record and prosecuting the present appeal on behalf of all the legal heirs. Pursuant thereto, the Registry vide communication dated 16.04.2026 forwarded the affidavit and death certificate to the Assessing Officer for verification and confirmation of the legal heirship. However, no objection or adverse response has been received from the Assessing Officer within the stipulated period. Considering the affidavit placed on record, the death certificate issued by the competent authority, the no-objection of the other legal heir and in the absence of any objection from the Revenue, we are satisfied that Ms. Sherlyn Dias is a legal heir of the deceased assessee. Accordingly, Ms. Sherlyn Dias is brought on ....
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....d in REC Bonds and accordingly exemption under section 54EC had been claimed in the return of income. The assessee also contended that section 50C had no application since there was neither any sale of land or building nor any transfer attracting the said deeming provision. 5. The Assessing Officer examined the Development Agreement and accepted that the document was an "Agreement for Development" and not an "Agreement for Sale". He further observed that section 50C applies only in cases involving transfer of land or building or both and, therefore, held that the provisions of section 50C were not attracted to the facts of the present case. However, the Assessing Officer was of the view that the amount of Rs. 50,00,000/- received by the assessee ought not to be taxed under the head "Capital Gains". Accordingly, a show-cause notice dated 13.11.2018 was issued proposing to assess the receipt under the head "Income from Other Sources". 6. In response to the show-cause notice, the assessee reiterated that the amount represented monetary consideration received for surrender of development rights and therefore constituted a capital receipt chargeable, if at all, under the head "Cap....
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....0,000/- represented consideration received for surrender of development rights constituting a capital asset. It was argued that the Assessing Officer had wrongly applied the "source destroyed" principle and had ignored binding judicial precedents. Reliance was placed, inter alia, upon the decisions of the Hon'ble Supreme Court in CIT vs. D.P. Sandu Bros. Chembur (P.) Ltd. (273 ITR 1) and the Hon'ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia vs. CIT (260 ITR 491) to contend that compensation received on redevelopment and transfer of development rights is assessable under the head "Capital Gains" and not under the head "Income from Other Sources". 10. On merits, the assessee reiterated before the CIT(A) that the Development Agreement dated 02.08.2010 was entered into for redevelopment of the building "Katy Kunj" and not for sale of the property. It was submitted that the amount received represented consideration for transfer of development rights, which itself constituted a capital asset. The assessee further submitted that the entire compensation had been invested in REC Bonds and therefore exemption under section 54EC was rightly claimed. Reliance was also placed....
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....aluation of Rs. 3,45,51,000/-. According to the CIT(A), such information constituted tangible material giving rise to a prima facie belief that income chargeable to tax had escaped assessment. The CIT(A) distinguished the decision of the Hon'ble Supreme Court in Kelvinator of India Ltd. and held that since no scrutiny assessment under section 143(3) had been completed originally, the principle of change of opinion was not attracted. The validity of the reopening was accordingly upheld and the appeal was dismissed. 15. Aggrieved by the order of the learned CIT(A), the assessee is now in further appeal before us and has raised the following grounds: 1. The order dated 09-09-2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, is bad in law, illegal and unsustainable in law and facts. 2. The learned Commissioner of Income-tax (Appeals) committed a gross error of law in upholding the action of the assessing officer in bringing to tax the sum of Rs. 50,00,000/- under the head 'Income from other Sources'. 3. The learned Commissioner of Income-tax (Appeals) committed a gross error of law and fact in coming to t....
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....mitted that the developers had approached the owners with a proposal to redevelop the property by demolishing the existing structure known as "Katy Kunj" and constructing a new building thereon. The owners, in turn, agreed to permit the developers to undertake redevelopment of the property on the terms and conditions specified in the agreement. It was emphasized that the transaction was not one of sale of land or building but a grant of development rights in favour of the developer for redevelopment of the property. 18. Drawing our attention to Recital S and Clause 2 of the agreement, the learned AR submitted that the owners had specifically reserved and retained for themselves FSI required to construct an aggregate area of 6400 sq. ft. (carpet area) for their residential occupation. It was pointed out that the agreement expressly records that the owners agreed to grant development rights to the developers in respect of the property while simultaneously reserving and retaining the aforesaid FSI for construction of flats to be allotted to the owners in the redeveloped building. According to the learned AR, the very language employed in the agreement demonstrates that development ....
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.... merely an "Agreement for Development" and not an "Agreement for Sale". The Assessing Officer had accepted that section 50C of the Act was not applicable because there was no transfer of land or building and the owners had only granted development rights to the developer for redevelopment of the property. 23. The learned DR submitted that notwithstanding the inapplicability of section 50C, the Assessing Officer had correctly concluded that the amount of Rs. 50,00,000/- received by the assessee was not chargeable under the head "Capital Gains". Referring to paragraphs 8 to 15 of the assessment order, the learned DR pointed out that the Assessing Officer had specifically recorded that the assessee continued to retain ownership rights in the property and that the property was merely handed over to the developer for redevelopment. According to the Assessing Officer, the redeveloped property would ultimately revert to the owners, whereas the amount of Rs. 50,00,000/- received by the assessee was non-refundable and permanently retained by her. 24. The learned DR emphasised that the Assessing Officer had specifically recorded a finding that the assessee had merely permitted redevelo....
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....ts for the owners and allotment of car parking spaces, the developers agreed to pay lump sum monetary consideration of Rs. 2,00,00,000/- to the owners, apportioned amongst four groups of owners at Rs. 50,00,000/- each. The assessee received Rs. 50,00,000/- as her share of the said consideration. 29. Thus, the receipt of Rs. 50,00,000/- was not a casual, gratuitous or independent payment. It was a contractual payment arising directly from the Development Agreement and was paid for grant of development rights in the property. The consideration was therefore intrinsically connected with the rights parted with by the assessee and other owners in favour of the developer. Development rights in immovable property are valuable rights and form part of the bundle of rights attached to ownership of property. Such rights constitute "property" and therefore fall within the ambit of "capital asset" under section 2(14) of the Act. 30. It is also relevant to note that the Assessing Officer himself has recorded that the agreement was an "Agreement for Development" and not an "Agreement for Sale". The Assessing Officer also held that section 50C was not applicable, since there was no transfer ....
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....ter as consideration arising from transfer of a capital asset and not under the residuary head "Income from Other Sources". 33. The finding of the learned CIT(A) that the receipt is revenue in nature because the developer treated the payment as revenue expenditure in its books also cannot be sustained. The taxability of a receipt in the hands of the recipient has to be determined with reference to the nature of the right transferred by the recipient and not on the basis of the accounting treatment adopted by the payer. A payment may be capital in the hands of the recipient and may be treated differently in the books of the payer depending upon the payer's business purpose. The accounting treatment by the developer, therefore, cannot decide the head of income in the hands of the assessee. 34. We also find merit in the contention of the assessee that section 56 is a residuary provision. Income can be brought to tax under the head "Income from Other Sources" only when it is not chargeable under any of the specific heads of income. Once the receipt arises from transfer of a capital asset, the same has to be examined under the head "Capital Gains". The Revenue cannot disregard the....