TaxTMI 
TaxTMI 
2026 (8) TMI 1184
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....dition of Rs.6,01,53,500 on account of sale of transferable development rights. This addition is the matter of appeal before us. 2. The issue in this appeal is that the assessee sold transferable development rights for Rs 60153500/-, received in exchange for land surrendered by him. Therefore, the sale consideration from those rights is exempt on the ground that the TDRs had no ascertainable cost of acquisition and, consequently, the computation of capital gains fails, and the amount is not chargeable to tax. 3. The Assessee has raised the following grounds of appeal: 1. General ground: 1.1 The learned Commissioner of Income Tax (Appeals), NFAC (hereinafter referred to as CIT (A) for short) has erred in passing the order under section 250 in the manner passed by him. The order so passed to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. Addition of long-term capital gains on sale of TDR amounting to Rs. 6,01,53,500 2.1 The learned Assessment Unit erred in assessing the longterm capital gains on sale of TDR amounting to Rs. 6,01,53.500 and the learned CIT(A), NFAC erred in confirming the said addition. ....
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....onsidered the Rs.60,153,500 received from the sale liable to tax as long-term capital gains under "Capital gains." He treated the entire sale amount as long-term capital gains and calculated taxable gains at Rs.58,989,310. A draft assessment order and a show-cause notice were issued, and the final assessment order was passed on September 27, 2021, under sections 143(3) and 144 B of the Act, assessing total income at Rs.105,304,555, compared with the returned income of Rs.46,312,620. 6. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A). In paragraph 6.4 of the order, the Ld. CIT(A) concluded that the transferable development rights, the sale of which generated the disputed receipt, are considered a "capital asset" under section 2(14) of the Income-tax Act, 1961. He further stated that the consideration for this transfer is subject to tax as long-term capital gains under section 45 of the Act, with the cost of acquisition deemed nil for purposes of section 48 of the Act. Consequently, he upheld the addition made by the Assessing Officer and dismissed the assessee's grounds in this regard. 7. Being aggrieved by the order passed by the learned ....
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....rights, no capital gains can be brought to tax. 12. The learned authorised representative further referred to page 119 of the paper book, which contains the notice dated 23 September 2019 issued under section 143(2) of the Income-tax Act, 1961 for Assessment Year 2018-19. The notice states that the return was selected for scrutiny to verify the 'refund claim '. He submitted that the assessee had disclosed, in the return of income, exempt income of Rs.60,153,500 from the sale of TDR, treating it as a capital receipt. Since the case was selected only for limited scrutiny to verify the refund claim, he contended that making an addition in respect of the exempt income was beyond the scope of the assessment proceedings. 13. The assessee also contended that the learned CIT(A) erred in treating the cost of acquisition of the transferable development rights as Rs Nil despite holding that the amendment to section 55(2)(a) by the Finance Act, 2023, effective from 1 April 2024, applies prospectively from Assessment Year 2024-25. 14. Referring to the case-law compilation, the learned authorised representative relied on the decision of the coordinate bench in Land Breeze Co-operati....
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....High Court merely noted that the Revenue could not take one stand in the assessee's case and challenge the same position in another assessee's case where coordinate bench decisions were involved. According to the learned CITDR, accepting the assessee's argument would mean that if the Revenue failed to tax income in one assessee's case, it could never tax similar income in any other case, in eternity and eternally, even where the law permits taxation. Such an interpretation, he submitted, is not supported by law. 20. We have carefully considered the rival contentions and perused the orders of the lower authorities. The relevant facts, briefly stated, are that the assessee, in his return of income, claimed Rs.60,153,500 received from the sale of transferable development rights as a capital receipt not chargeable to tax. The learned Assessing Officer questioned this claim because transferable development rights constitute a capital asset under section 2(14) of the Income-tax Act, and their transfer during the year attracts capital gains tax under section 45. In response, by letter dated 3 April 2021, the assessee submitted that income chargeable under the head "Capital gains" must ....
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....pecifying the quantum of development rights, including the built-up area and balance rights available for transfer. The certificate may then be sold or transferred to the owner or developer of a receiving property through a TDR agreement, and the transferee may use the rights on receiving property in the same TDR zone, subject to applicable rules. TDR certificates may also be mortgaged, charged or used as security for loans and are generally valid for a specified period from the date of issue. The underlying agreement for the transfer or sale of TDRs must be registered under the Registration Act, 1908. Thus, transferable development rights facilitate planned and sustainable urban development within a specified region. 22. In the present case, the assessee owned land and a building admeasuring 2,839.55 sq. mtrs. at SY No. 10, situated at Harlur Village, Jala Hobli, Bangalore North Taluk, Ward No. 05. The property was required by the Commissioner, Bruhat Bengaluru Mahanagara Palike, for widening the existing 30-feet road on the 250 Double Road stretch from Bellandur Cross to Bangalore Road, and for widening Road from National Highway 72 to Country Club, in accordance with the term....
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....ng those rights is attributable to the 2,839 sq. mtrs. of land surrendered by the assessee. Accordingly, the capital gain is capable of computation under section 48 and is chargeable to tax under the head "Capital gains." 28. However, we find that there are two transfers during the year, one of land and consideration received is TDRs and second of TDR for which cash is received. Though, while computing capital gains on the sale of transferable development rights for Rs.60,153,500, the learned Assessing Officer did not allow the cost of acquisition of those rights. Such cost is attributable to the 2,839 sq. mtrs. land owned by the assessee and surrendered to the Bruhat Bengaluru Mahanagara Palike. The learned Assessing Officer is therefore directed to compute capital gain correctly by allowing proper deductions and cost of acquisition while computing the capital gains. 29. We now consider the decision of the Hon'ble Bombay High Court in CIT v. Sambhaji Nagar Co-operative Housing Society Ltd. (2015) 54 taxmann.com 77 (Bombay), relied upon by the learned authorised representative. The foundational legal architecture rests on decision of Honourable supreme court in Commissioner o....
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....per in exchange for consideration. The rights arose from a change in law and the grant of additional floor space index under the Development Control Regulations, and not from the assessee's transfer or exchange of any existing property. On those facts, it was held that the transfer of such rights did not give rise to taxable capital gains. 32. The present case is materially different. Here, the assessee received transferable development rights in exchange for surrendering his existing land and building. The cost of acquisition of those rights is therefore ascertainable, the cost attributable to the land surrendered by the assessee being the cost of acquisition of TDRs. 33. The learned authorised representative also relied on the decision of the coordinate bench in Land Breeze Co-operative Housing Society Ltd. v. ITO, 28 taxmann.com 196, which was upheld by the Hon'ble Bombay High Court on 11 March 2015 in Tax Appeal No. 624 of 2013. That decision also arose under the Development Control Regulations, 1991. Therefore, its facts are similar to those in Sambhaji Nagar Co-operative Housing Society Ltd., which we have already distinguished in the preceding paragraph. Thus, othe....
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....but it is ascertainable with reasonable precision as it is the cost of the land surrendered (proportionately, if only a part of the land was given up). The doctrine of computation failure as propounded by the Honourable supreme court in B.C. Srinivasa Setty [ supra] has no application where the computation mechanism, though complex, remains operative. Thus, where TDR is acquired by actual payment of consideration, in this case, by surrender of land, the TDR is not a "right for which no consideration has been paid for acquisition." The amendment targets self-generated assets where cost is conceptually absent. Where the assessee has paid a price (land), Section 55(2)(a) as amended does not override that actual cost. The cost of acquisition of the TDR in this scenario remains the value of the land surrendered and is not rendered nil by the 2023 amendment. 37. The facts of the case though look simple but have two different events. The event no 1 is Surrender of land in exchange for TDR. This is a transfer of a capital asset (land) within Section 2(47) of The Act. The full value of consideration is the fair market value of the TDR received (the exchange value). Capital gains on the l....
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....so relevant that the assessee paid self-assessment tax of Rs.1 crore and claimed a refund of Rs.9,171,930, which substantially represents the self-assessment tax amount, with a minor variation as a refund due. The reason for paying self-assessment tax and then claiming refund thereof is not apparent. In these circumstances, we reject the assessee's contention that the case was selected only for limited scrutiny. In our view, the assessment was open to complete scrutiny; the notice did not indicate in any manner that this was a limited-scrutiny case; further, the initial reason for verification was a refund due to the assessee. Thus, the learned Assessing Officer was competent to examine the chargeability of Rs.60,153,500 received on sale of transferable development rights. 39. The next argument of the learned authorised representative concerns the assessment order in the case of Shri Dinesh Pukhraj Talera, stated to be the assessee's brother, for Assessment Year 2018-19. In that case, the Assessing Officer noted that the assessee had not produced proof in support of income of Rs.60,153,400 from the sale of transferable development rights, which was claimed as an exempt capital r....
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....inciple, the learned authorised representative argued that, because the Assessing Officer in the case of Shri Dinesh Pukhraj Talera for Assessment Year 2018-19 had accepted Rs.60,153,400 from the sale of transferable development rights as an exempt capital receipt, the Revenue could not take a different view in the present assessee's case. 42. We are unable to accept this contention. The Honourable Karnataka High Court relied on the decision of the Hon'ble Supreme Court in Berger Paints India Ltd. v. CIT (2004) 266 ITR 99, where it was held that, if the Revenue has accepted the correctness of a legal position laid down by a High Court in the case of one assessee, it cannot, without just cause, challenge that position in the case of another assessee. 43. In the present case, there is no binding High Court decision on identical facts holding that capital gains are not chargeable where there is a capital asset, a transfer of that asset, consideration received, and an ascertainable cost of acquisition represented by the land surrendered in exchange for transferable development rights. What is relied upon here is only an assessment order in another assessee's case, which may still....
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....e principle of estoppel does not run against a statute as held by the Honourable supreme court in Dai-Ichi Karkaria Ltd. vs. Union of India 2000 taxmann.com 1350 (SC)/ [2000] 119 ELT 516 (SC) [11-04-2000] (1999) 7 SCC 448 (SC). Further If the AO of the brother erred in not taxing the amount as the assessee himself seems to concede, since he acknowledges the "law is against him" then the correct response in law by revenue is to bring that error to the attention of the appropriate revisionary authority (Section 263 or Section 147, as the case may be) rather than to extend the error to the assessee's case or to other cases. The maxim ex dolo malo non oritur actio i.e. no right arises from a wrong applies with strong and full force. Further what is indefensible in law cannot be defended by pointing to another's error. Further, the principle enunciated in Chittharanjan A. Dasannacharya [Supra] and in the broader line of parity and consistency principle operates where the Revenue actively takes contradictory positions on the same transaction i.e. taxing one party while granting relief to the other for inconsistent reasons or accepting one characterisation on one hand and rejectin....