TaxTMI 
TaxTMI 
2026 (7) TMI 877
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.... facts - the two assessee's being co-owners, along with another family member, of one and the same property - these appeals were heard together and are disposed of by this common order. For the sake of convenience, ITA No.2757/Chny/2025 in the case of Shri Ramakrishnan Tiruponithura Narayanan is taken up as the lead case. 2. The grounds of appeal raised by the assessee in the lead case (ITA No.2757/Chny/2025) read as under: 1. The order of the CIT (A), Chennai - 18 dated 29.09.2025 vide DIN & Order No. ITBA/APL/S/250/2025-26/1081308798(1) for the above-mentioned Assessment Year is contrary to law, fact and in circumstances of the case. 2. VALIDITY OF ASSESSMENT OF CAPITAL GAINS 2.1 The CIT (A), Chennai - 18 erred in sustaining assessment of Rs. 3,09,25,786/- being the sums received on account of sale of Transferable Development Rights (TDR) as Long Term Capital Gains as against the claim of such sum as exempt in Schedule - EI forming part of the return of income for the assessment year under consideration without assigning proper reasons and justification. 2.2 The CIT (A), Chennai - 18 failed to appreciate that the disputed transaction sought ....
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....CATION OF CAPITAL GAINS 4.1 The CIT (A), Chennai - 18 failed to appreciate that, in any event, the fair market value of the land as on 31.08.2010 ought to have been reckoned as the cost of acquisition in the event of linking the acquisition of land to receipt of TDRs and further ought to have appreciated that the revised / alternate Capital Gains working furnished during the appellate proceedings as well as the remand proceedings was not considered in proper perspective, thereby vitiating the impugned order in its entirety. 4.2 The CIT (A), Chennai - 18 failed to appreciate that the provisions of Section 55(2)(b)(ii) of the Act had no application to the facts of the present case and further ought to have appreciated that the Fair Market Value as on 01.04.2001 would arise only in the context of sale / transfer of land and not in the context of sale / transfer of TDRs, thereby vitiating the directions issued at para 7.5.3 of the impugned order. 4.3 The CIT (A), Chennai - 18 failed to appreciate that, having linked the acquisition of land with the receipt of TDRs, the Fair Market Value of the land as on 31.08.2010 / date of acquisition should be construed as....
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.... Rights (TDR) / Development Right Certificate (DRC) in lieu of compensation, holding that the assessee's were entitled to exercise the option to receive TDR/DRC. Pursuant thereto, the CMDA issued DRC No.027/2015 dated 08.07.2015, computing the Floor Space Index (FSI) credit by the formula "2.25 x V x 809.36 sq. m.", where V is a multiplying factor obtained by dividing the guideline value of the land surrendered by the guideline value of the land at which the DRC is proposed to be utilised. During the previous year relevant to the assessment year under consideration, the assessee's sold/transferred FSI credit aggregating 559.63 sq. m. (i.e., 69.14% of the total of 809.36 sq. m.) to M/s.Sumanth and Co. and M/s Baashyam Constructions (P) Ltd. on various dates, for a total consideration of Rs. 3,09,35,786/- (referred to in the grounds as Rs. 3,09,25,786/-), which sum was claimed by the assessee as exempt income in Schedule EI of the return of income. 4. In the case of the lead assessee, the return of income for the assessment year 2016-17 was filed on 14.10.2016 declaring a total income of Rs. 58,70,060/- by declaring the sale consideration of TDR as exempt income in the schedule of....
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.... It is against this order that the assessee's are in appeal. 6. The ld.AR for the assessee's, Shri S.Sridhar, reiterated the contentions raised in the common written submissions filed before us and submitted, in substance, that: (a) the TDR/DRC is not a capital asset capable of being acquired in the open market, being a statutory entitlement granted by the CMDA by operation of law and pursuant to the directions of the Hon'ble High Court; (b) the cost of acquisition of the TDR is incapable of being ascertained, and Section 55 of the Act, as it stood for the A.Y.2016-17, contained no provision by which the cost of acquisition of such a right could be ascertained or deemed; (c) the machinery provision of Section 48 therefore fails, and on the authority of CIT v. B.C.Srinivasa Setty (1981) 128 ITR 294 (SC), the charge u/s. 45 of the Act itself does not arise; (d) the subsequent insertion of the expression "any other right" in Section 55(2)(a) by the Finance Act, 2023, with effect from the A.Y.2024-25, is prospective and is itself a legislative acknowledgment that no such cost could be ascertained or deemed prior thereto; and (e) without p....
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....ts and rights, clause (a) thereof deems the cost of acquisition to be nil. As clause (a) of Section 55(2) stood during the A.Y.2016-17, the deeming operated only in respect of an enumerated and exhaustive class of assets/rights, namely the goodwill of a business, a trade mark or brand name associated with a business, a right to manufacture, produce or process any article or thing, a right to carry on any business, tenancy rights, stage carriage permits and loom hours. A development right (TDR/DRC) finds no place in that enumeration; and no other clause of Section 55(2) furnishes any basis for ascertaining or deeming the cost of acquisition of such a right. 11. On the facts, the TDR/DRC in the hands of the assessee's was not, and in the very nature of things could not have been, acquired on the expenditure of any money. It is a statutory entitlement, granted by the CMDA by operation of the applicable Development Regulations, and that too pursuant to the directions of the Hon'ble Madras High Court. The certificate attaches no monetary value to the FSI credit; indeed, by the very formula prescribed (2.25 x V x area, where V is itself a ratio of guideline values of the area in which....
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.... amendment is, by the express terms of the Finance Act, 2023, prospective; it is neither declaratory nor clarificatory in character. A deeming fiction which fastens a charge to tax cannot, in the absence of clear words to that effect, be given retrospective operation, and certainly cannot be pressed into service to tax a transfer effected in the A.Y.2016-17, several years before the fiction was brought into existence. To apply the amended provision to the year under consideration would be to give it a retroactive effect that Parliament never intended which is impermissible, the more so in a taxing statute, which falls to be construed strictly. 14. It therefore follows that, for the A.Y.2016-17, there existed no statutory mechanism by which the cost of acquisition of the TDR/DRC transferred by the assessee's could be ascertained or deemed. The computation provisions of Section 48 thus break down, and on the authority of B.C.Srinivasa Setty (supra), the charge u/s. 45 does not arise. The consideration of Rs. 3,09,35,786/- received on transfer of the TDR/DRC is, accordingly, not chargeable to tax under the head 'Capital Gains' for the year under consideration. 15. The reasoning ....