ADI D VACHHA, MUMBAI V. ITO WD 12(3)(1), MUMBAI

ITA 2755/MUM/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5880 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Capital asset; Business income; Cost of acquisition; Competent authority; Capital receipt; Benefit of exemption; Condonation of delay; Speculative transactions
• Section: 2(14); 43(5); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENCH M UMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEM BER ITA NO.2755/MUM/2011 ( ASSESSMENT YEAR :2005-06 ) ADI D VACHHA 101 BAJAJ BHAVAN NARIMAN POINT MUMBAI-400 021 VS. ITO,WARD-12(3)(1) MUMBAI PAN/GIR NO. AA CPV3027C APPELLANT ) .. RE SPONDENT ) ASSESSEE BY PRAKASH JOTWANI REVENUE BY N.PADMANABAN DATE OF HEARING 2 2 / 07 /201 9 DATE OF PRONOUNCEMENT 09 / 0 8 /201 9 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX APPEALS12, MUMBA I, DATED 09/03/2009 AND IT PERTAINS TO THE ASSESSMENT YEAR 2 005-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN HOLDING THAT THE GAINS OF RS.25,00,000/- WERE ASSESSABLE AS SPECULATION GAINS AND IN DOING SO HE AMONGST OTHERS FAILED TO APPRECI ATE THAT A. THE CONSIDERATION RECEIVED UNDER THE DEED OF T RANSFER DATED 14.6.2004 RELATED TO A CAPITAL ASSET (TDR RIGHTS) B. THE TDR RIGHTS HAVE BEEN GRANTED BY THE GOVERN MENT OF MAHARASHTRA FOR THE CITY OF PUNE C. THE APPELLANT HAD NOT TRANSFERRED THE CAPITAL ASSET VIZ. TDR UNDER THE MEMORANDUM OF UNDERSTANDING DATED 17.8.1996. D. THE AMOUNT RECEIVED BY THE APPELLANT UNDER THE 'DEED OF TRANSFER' OF TDR RIGHTS WAS IN THE NATURE OF CAPITAL RECEIPT NOT LIABLE TO INCOME TAX. ITA NO.2755/MUM/2011 ADI D VACHHA 2 E. THE CAPITAL ASSET TRANSFERRED DID NOT HAVE ANY COST OF ACQUISITION AND ACCORDINGLY THE GAIN ARISING ON TRANSFER OF TDR WAS NOT ASSESSABLE U / S . 45 OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN RIOT ASSESSING THE INCOME ARISING ON RECEIPT OF CONSIDER ATION UNDER THE 'DEED OF TRANSFER' DATED 14.6.2004 AS INCOME UNDER THE HE AD 'LONG TERM CAPITAL GAINS' 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN NOT GRANTING DEDUCTION U/S. 54EC OF THE ACT FOR THE CON SIDERATION INVESTED BY THE APPELLANT IN NABARD CAPITAL GAINS BONDS 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN CHARGING INTEREST U/S. 234A, 234B, 234C AND 2340 OF THE ACT AND HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE APPELLANT DENIES HIS LIABILITY FOR PAYMENT OF INTER EST UNDER THE AFORESAID SECTIONS. 2. AT THE TIME OF HEARING, THE LD. AR FOR THE ASSES SEE, SUBMITTED THAT THERE IS A DELAY OF 658 DAYS IN FILING APPEAL BEFORE THE TRIBUNAL, FOR WHICH NECESSARY PETITION FOR CONDONATION IN DEL AY APPEAL ALONG WITH AFFIDAVIT HAS BEEN FILED EXPLAINING REASONS FO R DELAY IN FILING OF APPEAL. AS PER WHICH, THE ASSESSEE COULD NOT FILE A PPEAL WITHIN THE TIME ALLOWED UNDER THE ACT, BECAUSE OF HIS ILL-HEAL TH, FOR THAT PERIOD STARTING FROM 24/07/2008 TO 11/09/2009, WHERE THE A SSESSEE WAS ADMITTED WITH THREE FRACTURES OF HIS SHOULDER AND H AD UNDERGONE EMERGENCY OPERATION FOR OBSTRUCTED HERNIA, DUE TO T HIS THE ASSESSEE COULD NOT DO HIS DAY TO DAY ACTIVITIES, WHICH IS RE SULTED IN NOT FILING APPEAL BEFORE THE TRIBUNAL. THEREFORE, THE DELAY IN FILING OF APPEAL MAY BE CONDONED IN THE INTEREST OF JUSTICE. IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE C ASE OF UMMER ITA NO.2755/MUM/2011 ADI D VACHHA 3 VS. POTTENGAL SUBIDA AND OTHERS IN CIVIL APPEAL NO . 2599 TO 2600/2018. 3. THE LD. DR, ON THE OTHER HAND, STRONGLY OPPOSING CONDONATION PETITION FILED BY THE ASSESSEE SUBMITTED THAT THE A SSESSEE IS SEEKING CONDONATION OF DELAY IN FILING APPEAL BY FILING AN AFFIDAVIT WITHOUT THERE BEING ANY EVIDENCE TO SUPPORT CONTENTS OF SAI D AFFIDAVIT, THEREFORE THE DELAY IN FILING APPEAL SHOULD NOT BE CONDONED. 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERI AL AVAILABLE ON RECORD. ALTHOUGH, THERE IS NO SUPPORTING EVIDEN CES FILED IN SUPPORT OF CONTENTS OF AFFIDAVIT EXPLAINING REASONS FOR NOT FILING THE APPEAL, BUT A SWORN STATEMENT IN FORM OF AFFIDAVIT CANNOT BE IGNORED IN TOTAL. FURTHER, WHEN WE GO THROUGH, THE REASONS GIVEN BY THE ASSESSEE FOR NOT FILING APPEAL IN TIME, WE FIND TH AT THE ASSESSEE WAS HOSPITALIZED FOR SICKNESS, WHICH IS EVIDENT FROM TH E FACT THAT DURING THE PERIOD FROM 24/07/2008 TO 11/09/2009, HE WAS IN HOSPITAL FOR THREE OCCASIONS FOR DIFFERENT TREATMENTS. WE, FURTH ER NOTED THAT WHEN HEALTH ISSUES AND INCOME TAX MATTER COMES TOGETHER, CERTAINLY THE MATTER CONCERNING HEALTH ISSUES NEEDS TO BE GIVEN P REFERENCE. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE I S AGED MORE THAN 82 YEARS AND OBVIOUSLY, THE AGE OLD RELATED SICKNESS/H EALTH ISSUES WILL ITA NO.2755/MUM/2011 ADI D VACHHA 4 FOLLOW. THEREFORE, WE DO NOT FIND ANYTHING SUSPICIO US ABOUT REASONS GIVEN BY THE ASSESSEE FOR CONDONATION OF DELAY IN F ILING OF APPEAL. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS A MERIT IN CONDONATION PETITION FILED BY THE ASSESSEE AND ACCO RDINGLY, CONDONED, THE DELAY IN FILING IN APPEAL AND ADMIT T HE APPEAL FOR HEARING. THIS VIEW EXPRESSED BY US IS FORTIFIED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UMMER VS. POTT ENGAL SUBIDA AND OTHERS (SUPRA), WHERE IN PARAGRAPH 17, THE HON BLE SUPREME COURT CATEGORICALLY HELD THAT THE HONBLE HIGH COUR T SHOULD HAVE TAKEN LIBERAL VIEW IN THE MATTER AND HELD THE CAUSE SHOWN BY THE APPELLANT AS SUFFICIENT CAUSE WITHIN THE MEANING OF SECTION 5 OF THE LIMITATION ACT, AND ACCORDINGLY SHOULD BE CONDONED, THE DELAY IN FILING OF THE APPEAL. THEREFORE, CONSIDERING FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO TAKEN SUPPORT FROM THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE DISCUSSED HEREINABOVE, WE CONDONED DELAY IN FILING APPEAL AND ADMIT APPEAL FOR HEARI NG. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A INDIVIDUAL, FILED HIS RETURN OF INCOME FOR AY 2005- 06 ON 20/07/2005 DECLARING TOTAL INCOME AT RS. 1,04,510/-. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS ITA NO.2755/MUM/2011 ADI D VACHHA 5 COMPUTED LONG TERM CAPITAL GAIN FROM SALE OF TDR AN D ACCORDINGLY, CALLED UPON THE ASSESSEE TO FILE NECES SARY EVIDENCES INCLUDING DETAILS OF ASSETS SOLD, COST OF ACQUISITI ON AND PROOF FOR INVESTMENT IN NABARD BONDS TO CLAIM EXEMPTION U/S 5 4EC OF THE I.T.ACT, 1961. IN RESPONSE, THE ASSESSEE HAS FILED A DEED OF TRANSFER DATED 14/06/2004 AND AS PER SAID DEED, THE ASSESSEE HAS TRANSFERRED TDR RIGHTS TO M/S PANCHSHEEL RECREATIO N CLUB PVT.LTD. FOR TOTAL CONSIDERATION FOR RS. 50 LACS. THE ASSESE E CLAIMS THAT HE HAD RIGHT TO ACQUIRE TDR IN VIEW OF LAND ACQUIRED B Y PUNE MUNICIPAL AUTHORITY AND THE SAME HAS BEEN TRANSFERRED TO THE THIRD PARTY FOR A CONSIDERATION OF RS. 50 LACS. IT WAS FURTHER SUBMIT TED THAT THE RIGHT IN TDR IN LIEU OF LAND IS A CAPITAL ASSET AND HENCE, T HE SAME HAS BEEN RIGHTLY CONSIDERED UNDER THE HEAD CAPITAL GAINS AND AFTER CONSIDERING NECESSARY COST OF ACQUISITION COMPUTED LONG TERM CA PITAL GAIN OF RS. 25 LACS. THE ASSESSEE HAS ALSO CLAIMED EXEMPTIO N U/S 54EC FOR INVESTMENTS IN NABARD BONDS. THE LD. AO AFTER C ONSIDERING THE RELEVANT SUBMISSION OF THE ASSESEE HELD THAT THE AS SESSEE HAS SOLD RIGHTS IN TDR IN THE YEAR 1996 AND ACCORDINGLY, PAI D ALL TAXES THEREON FOR THE RELEVANT ASSESSMENT YEAR 1997-98. T HE LD. AO FURTHER OBSERVED THAT THE ASSESSEE HAD ONCE AGAIN P URCHASED TDR BY VIRTUE OF DEED OF CANCELLATION DATED 14/06/2004. THEREFORE, THE PERIOD OF HOLDING OF THE ASSET I.E, TDR IS LESS THA N 36 MONTHS AND ITA NO.2755/MUM/2011 ADI D VACHHA 6 ACCORDINGLY, GAIN RECEIVED FROM TRANSFER OF TDRS IS ASSESSABLE UNDER THE HEAD SHORT TERM CAPITAL GAIN AND ACCORDIN GLY, ASSESSED SURPLUS FROM SALE OF TDR UNDER THE HEAD SHORT TERM CAPITAL GAIN AND ALSO DENIED BENEFIT OF EXEMPTION CLAIMED U/S 54 EC OF THE I.T.ACT, 1961. 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE REITERATED HIS ARGUMENTS MADE BEFORE THE AO. THE SU M AND SUBSTANCE OF ARGUMENTS OF THE ASSESSEE BEFORE THE L D.CIT(A) ARE THAT RIGHT IN TDRS IS A CAPITAL ASSET AS DEFINED U /S 2(14) AND HENCE, GAIN AROSE FROM TRANSFER OF CAPITAL ASSET IS ASSESS ABLE UNDER THE HEAD CAPITAL GAINS. THE LD. CIT(A) AFTER CONSIDERIN G THE RELEVANT SUBMISSION OF THE ASSESEE AND ALSO TAKEN NOTE OF SA LE OF TDR IN THE YEAR 1996, REPURCHASE THE SAME ON 14/06/2004 AND SU BSEQUENT SALE TO THIRD PARTY DURING THE SAME FINANCIAL YEAR, CAME TO THE CONCLUSION THAT THE TRANSACTIONS IS IN THE NATURE O F SPECULATIVE TRANSACTIONS AS DEFINED U/S 43(5) AND ACCORDINGLY, ASSESSED SURPLUS GENERATED FROM SALE OF TDRS AS SPECULATIVE BUSINESS PROFIT. SIMILARLY, IN RESPECT OF EXEMPTION U/S 54EC OF THE I.T.ACT, 1961, THE LD. CIT(A) HELD THAT WHEN CONSIDERATION RECEIVED FR OM SALE OF TDR DOES NOT FALL UNDER THE HEAD CAPITAL GAINS, THE QUE STION OF GIVING ITA NO.2755/MUM/2011 ADI D VACHHA 7 BENEFIT U/S 54EC OF THE I.T.ACT,1961, FOR THE SAID AMOUNT DOES NOT ARISE. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE ASSTT. ORDER. IT IS AN UNDISPUTED FACT THAT THE TRANSFERAB LE DEVELOPMENT RIGHTS (TDR) WAS NOT INEXISTENCE WHEN THE MOU DT 17.8*96 W AS MADE AND ALSO ON THE DATE WHEN THE SUBSEQUENT TRANSFER WAS MADE O N 14.6.04. AS SUCH THERE WAS NO CAPITAL ASSET ON THE DATE OF THE SAID MOU AND THE SUBSEQUENT TRANSFER MADE. THE PURPORTED TDR WHICH W ERE TRANSACTED UPON WERE NEVER ALLOTTED BY CONCERNED AUTHORITIES. THE APPELLANT HAD ALSO NOT FILED ANY MATERIALS TO EVIDENCE THAT IT HA D MADE A CLAIM FOR ALLOTMENT OF TDR OR THAT ITS PROPOSAL IS UNDER ACTI VE CONSIDERATION OF THE CONCERNED THE PAPER BOOK FILED FOR THE APPELLANT IT COULD BE SEEN THAT THE GOVT. HAS ONLY ALLOWED TDRS IN RESPECT OF SLUM REDE VELOPMENT SCHEME IN PUNE AND THE CASE OF THE APPELLANT DOGS NOT FALL UNDER THE SAID SCHEME. MOREOVER, THE TDR UNDER SLUM REDE VELOPMENT SCHEME HAD BEEN SANCTIONED ONLY WITH EFFECT FROM 5.08.04. IN THE CASE OF THE APPELLANT THE PROPERTY HAD BEEN ACQUIRED BY THE PUN E MUNICIPAL COMMISSIONER ON 12.06.1986 AND SO FAR THERE HAS BEE N NO SANCTION FOR THE ALLOTMENT OF TDRS IN RESPECT OF SAID ACQUISITIO N TILL DATE. IN THE ABSENCE OF ANY CONCRETE SANCTION FOR TDR, THE TRANS ACTIONS MADE BY THE APPELLANT IS ON A NON-EXISTING ASSET AND AS SUCH CA NNOT BE TREATED AS CAPITAL ASSET WITHIN THE MEANING OF SEC.2(14). AS T HE TRANSACTIONS PERTAIN TO A NON-EXISTING ASSET, SUCH TRANSACTIONS CANNOT B E HELD AS PROFIT OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. IN VIEW OF THE ABOVE, THE CONTENTION OF THE APPELLANT THAT THE GAINS BE TREATED AS LTCG AND THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SAME AS 5TCG IS E RRONEOUS. THE PROVISIONS OF CHAPTER -IVE PERTAINING TO CAPITAL GA INS DOES NOT APPLY TO THE TRANSACTIONS MADE BY THE APPELLANT RESULTING IN THE PROFIT OF RS.25 LACS. THE APPELLANT HAD TRANSACTED ON THE N ON -EXI STING CAPITAL ASSET IE TDR, ONCE BY WAY OF MOU ON 17.8.96, SECONDLY WHILE CANCELING THE EARLIER MOU AND THIRDLY ON TRANSFER OF THE PURPORTE D TDR ON 14.6.04. ALL THESE ACTIVITIES LEAD TO A CONCLUSION THAT THE APPE LLANT HAD PLANNED OUT A SYSTEMATIC BUSINESS ACTIVITY IN TRANSACTING IN THE NON-EXISTING TDRS WITH A MOTIVE TO EARN PROFIT THE TRANSACTIONS CARRIE D OUT BY THE APPELLANT IS IN THE NATURE OF TRADE AND DOES NOT AMOUNT TO EARNI NG OF CAPITAL GAINS ON TRANSFER OF CAPITAL ASSET. AS THE APPELLANT WAS NOT OWNING ANY CAPITAL ASSET AS ON THE DATES THE TRANSACTIONS WERE MADE, T HE INTENTION OF THE APPELLANT BECOMES CLEAR THAT HE WAS NOT CONTEMPLATI NG ON THE ACTUAL DELIVERY OF THE TDRS. THE APPELLANT HAD CONTEMPLATE D TO MAKE PROFITS OUT OF TRANSACTIONS WITHOUT THE REQUIREMENT OF DELIVERI NG THE TDRS. IN THE INSTANT CASE, THE TDR HAS TO BE TREATED AS A COMMOD ITY LIKE STOCK AND SHARES, IMMOVABLE PROPERTIES, ETC. THE TRANSACTIONS CARRIED OUT BY THE APPELLANT ARE WITHIN THE MEANING OF SPECULATIVE TRA NSACTIONS AS PROVIDED IN SECTION 43(5). ITA NO.2755/MUM/2011 ADI D VACHHA 8 IN VIEW OF THE ABOVE, IT IS HELD THAT THE TRANSACTI ONS MADE ON ACCOUNT OF THE NON-EXISTING TDRS CANNOT BE HELD AS A TRANSFER OF CAPITAL ASSET. THE TRANSACTIONS ARE NOTHING BUT A SPECULATI VE BUSINESS ACTIVITY OUT BY THE APPELLANT AND THE PROFITS MADE THEREOF A RE IN THE NATURE OF SPECULATIVE INCOME. THE ASSESSING OFFICER IS DIRECT ED TO TREAT THE GAINS OF RS.25 LACS AS SPECULATIVE BUSINESS INCOME OF THE AP PELLANT. ACCORDINGLY, THE GROUND NOS. 1 & 2 ARE DISMISSED. 3. THE GROUND NO.3 IS THAT THE ASSESSING OFFICER ER RED IN NOT GRANTING DEDUCTION U/S 54EC FOR THE CONSIDERATION INVESTED B Y THE APPELLANT IN NABARD BONDS. 3.1 AS I HAVE HELD THAT THE CONSIDERATION RECEIVED AMOUNTING TO RS.25 LACS HITS NOT FALLING UNDER THE HEAD CAPITA! GAINS, THE QUESTION OF GRANTING DEDUCTION U/S 54EC FOR THE SAID AMOUNT DOES NOT ARI SE. ACCORDINGLY, THIS GROUND OF APPEAL IS REJECTED. 7. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING, SUBMITTED THAT THE LD. CIT(A) WAS ERRED IN ASSESSING SURPLUS GENERATED FROM SALE OF TDR AS SPECULATIVE PROFIT WITHOUT APPRECIAT ING THE FACT THAT, WHEN THE ASSET WAS SOLD ON 1996, THE DEPARTMENT HAS ASSESSED SURPLUS UNDER THE HEAD CAPITAL GAINS. THE LD. AR, F URTHER SUBMITTED THAT RIGHT IN TDR IS A CAPITAL ASSETS, BECAUSE SUC H RIGHT HAS BEEN INEXTRICABLE LINKED WITH THE ASSET, WHICH WAS ACQUI RED BY THE MUNICIPAL CORPORATION. ALTHOUGH, THERE IS NO TDR WA S ALLOTTED TO THE ASSESSEE, BUT THE ASSESSEE HAD A RIGHT TO ACQUIRE T DR IN LIEU OF ACQUISITION OF LAND BY THE AUTHORITIES. THE SAID RI GHT HAS BEEN TRANSFERRED TO THE THIRD PARTY, FOR WHICH NECESSARY CONSIDERATION HAS BEEN PAID. WHEN, TDR IS CONSIDERED TO BE ASSET, TH EN ANY RIGHT IN SUCH TDR IS ALSO A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) ITA NO.2755/MUM/2011 ADI D VACHHA 9 OF THE I.T.ACT, 1961. THEREFORE, THE ASSESSEE HAS R IGHTLY COMPUTED SURPLUS UNDER THE HEAD LONG TERM CAPITAL GAIN AND A CCORDINGLY, TAKEN BENEFIT OF EXEMPTION U/S 54EC OF THE I.T.ACT, 1961 FOR PURCHASE OF NABARD BONDS. 8. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD. CIT(A) SUBMITTED THAT ON PERUSAL OF SEQUENTS O F EVENTS, IT IS ABUNDANTLY CLEAR THAT THE NATURE OF TRANSACTIONS UN DERTAKEN BY THE ASSESSE ARE IN THE NATURE OF SPECULATIVE TRANSACTIO NS. THEREFORE, THE LD. CIT(A) HAS RIGHTLY INVOKED PROVISION OF SECTION 43(5) TO TAX SURPLUS AS SPECULATIVE BUSINESS PROFIT AND HIS ORDE R SHOULD BE UPHELD. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE FACTS BORNE OUT FROM RECORDS CLEARLY INDICATES THAT THE ASSESSEE HAS GOT A RIGHT IN TDR IN LIEU OF ACQUISITION OF IMMOVA BLE PROPERTY BY THE MUNICIPAL CORPORATION OF PUNE. ALTHOUGH, THERE WAS NO TRANSFERABLE DEVELOPMENT RIGHTS (TDR) WAS IN EXISTENCE, WHEN THE MOU DATED 17/08/1996 WAS ENTERED INTO BY THE ASSESEE WITH THI RD PARTY FOR TRANSFER OF RIGHT IN TDR, BUT SURPLUS DERIVED FROM TRANSFER OF TDR RIGHTS HAS BEEN ASSESSED UNDER THE HEAD CAPITAL GAI NS. DURING THE ITA NO.2755/MUM/2011 ADI D VACHHA 10 YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CANCELLE D MOU ENTERED ON 17/08/1996 FOR TRANSFER OF TDR, BECAUSE THE PURC HASER WAS NOT WILLING TO WAIT ANY MORE, BECAUSE OF DELAY IN ALLOT MENT OF TDRS BY THE COMPETENT AUTHORITY. HOWEVER, THE ASSESSEE HAS GOT A NEW BUYER FOR RIGHT IN TDR AND ACCORDINGLY, ONE MORE MO U AGREEMENT DATED 17/08/1996 WAS ENTERED INTO AND TRANSFERRED R IGHT IN TDR TO THIRD PARTY FOR A CONSIDERATION OF RS. 50 LAC. THE FACT THAT THERE WAS NO TDR IN HAND, WHEN ORIGINAL MOU WAS ENTERED INTO IN THE YEAR 1996 AND ALSO IN THE YEAR 2004 WAS NOT DISPUTED BY BOTH THE PARTIES. THE LD. AO HAS ASSESSED SURPLUS FROM SALE OF RIGHT IN TDR UNDER THE HEAD SHORT TERM CAPITAL GAIN, FOR THE REASON TH AT THE PERIOD OF HOLDING OF THE ASSET IS LESS THAN 36 MONTHS, BECAUS E THE ASSESSE HAS SOLD RIGHT IN TDR IN THE YEAR 1996 AND BOUGHT B ACK, THE SAME DURING THE FINANCIAL YEAR 2004-05, THEREFORE, HE OP INED THAT THE PERIOD OF HOLDING OF THE ASSET IS LESS THAN 36 MONT HS AND HENCE, THE SAME IS ASSESSABLE UNDER THE HEAD SHORT TERM CAPITA L GAIN. THE LD. CIT(A) HAS ALTOGETHER TAKEN A DIFFERENT VIEW AN D ASSESSED SURPLUS UNDER THE HEAD SPECULATIVE PROFITS BY TAKIN G NOTE OF PROVISIONS OF SECTION 43(5), FOR THE REASONS THAT T HE ASSESSEE IS INVOLVED IN REPETITIVE TRANSACTIONS OF BUYING AND S ELLING OF TDR. EXCEPT THIS, THE LOWER AUTHORITIES HAD NEVER DISPU TED THE FACT THAT THE ASSESSEE HAS TRANSFERRED RIGHT IN TDR TO THIRD PARTY. IN THIS ITA NO.2755/MUM/2011 ADI D VACHHA 11 FACTUAL BACK GROUND, IF YOU EXAMINE, WHETHER RIGHT IN TDR IS A CAPITAL ASSET AND SURPLUS FROM SALE OF SUCH CAPITAL ASSETS IS ASSESSABLE UNDER THE HEAD CAPITAL GAIN, THERE IS NO DOUBT OF W HATSOEVER, WITH REGARD TO THE FACT THAT TDR IS A CAPITAL ASSET, BEC AUSE IT IS INEXTRICABLY LINKED WITH IMMOVABLE PROPERTY AND ALS O FLOWS FROM TRANSFER OF IMMOVABLE PROPERTY. WHEN, TDR IS CONSID ERED TO BE AN IMMOVABLE PROPERTY/ASSETS WITHIN THE MEANING OF SEC TION 2(14) OF THE I.T.ACT, THEN ANY RIGHT IN SUCH TDR IS ALSO NEE DS TO BE CONSIDERED AS A ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) WAS ERRED IN CONSIDERING SURPLUS FROM TRANSF ER OF TDR UNDER THE HEAD SPECULATIVE BUSINESS PROFITS. 10. COMING TO THE OBSERVATIONS OF THE AO. THE LD. A O HAS OBSERVED THAT THE PERIOD OF HOLDING OF THE ASSESSEE IS LESS THAN 36 MONTHS, CONSEQUENTLY SURPLUS GENERATED FROM SALE OF SUCH ASSET IS ASSESSABLE UNDER THE HEAD SHORT TERM CAPITAL GAINS. WE FIND THAT THE ASSESSE HAS SOLD RIGHT IN TDR WAY BACK IN 1996 BY VIRTUE OF A MOU DATED 17/08/1996. THE SAID MOU HAS BEEN CANCELL ED BY WAY OF CANCELLATION DEED DATED 14/06/2004, BECAUSE THE PURCHASES WAS NOT WILLING TO WAIT ANY MORE, BECAUSE OF DELAY IN A LLOTMENT OF TDRS BY THE COMPETENT AUTHORITY. THE ASSESSEE HAS SOLD T HE SAME RIGHT IN ITA NO.2755/MUM/2011 ADI D VACHHA 12 TDR TO THIRD PARTY VIDE AGREEMENT DATED 14/06/2006, FOR A CONSIDERATION OF RS. 50 LACS. THEREFORE, NOW THE QU ESTION BEFORE US IS DETERMINATION OF PERIOD OF HOLDING, WHETHER IT I S FROM THE DATE OF ORIGINAL TRANSFER OF ASSETS OR THE DATE, WHEN THE A SSESSE HAS CANCELLED MOU ENTERED INTO IN THE YEAR 1996. ADMITT EDLY, THE CANCELLATION DEED DATED 14/06/2009 CLEARLY STATES T HAT THE PURCHASER WAS NOT WILLING TO WAIT ANY MORE, BECAUSE OF DELAY IN ALLOTMENT OF TDR RIGHTS AND ACCORDINGLY, THE ASSESSEE WAS FORCED TO CANCEL DEED OF TRANSFER ENTERED INTO IN THE YEAR 1996. WHEN, TH E ASSET TRANSFERRED WAS CANCELLED FOR SOME REASONS, THE SAME CANNOT BE CONSIDERED AS REPURCHASE OF THE ASSET, FOR THE PURPOSE DETERMINAT ION OF PERIOD OF HOLDING, BECAUSE THE PERIOD OF HOLDING OF THE ASSET HAS TO BE DETERMINED FROM THE DATE OF ORIGINAL ACQUISITION/PU RCHASE. IN THIS CASE, THERE IS NO DOUBT, WITH REGARD TO THE FACT T HAT THE ASSESSEE HAS DERIVED RIGHT IN TDR BY VIRTUE OF ACQUISITION O F IMMOVABLE PROPERTY BY THE MUNICIPAL AUTHORITIES IN THE YEAR 1986 AND SUCH RIGHT IS CONFERRED ON THE ASSESSEE FROM THE DATE OF ACQUI SITION OF THE PROPERTY. THE SUBSEQUENT CANCELLATION AND SALE OF T DR TO THIRD PARTY CANNOT BE CONSIDERED AS PURCHASE OF TDR FROM A THIR D PARTY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT, FOR THE PURPOSE OF DETERMINATION OF PERIOD OF HOLDING, THE PERIOD OF H OLDING OF THE ASSET FROM THE DATE OF ACQUISITION OF PROPERTY BY THE MUN ICIPAL AUTHORITIES ITA NO.2755/MUM/2011 ADI D VACHHA 13 HAS TO BE CONSIDERED, BUT NOT FROM THE DATE, WHEN M OU WAS CANCELLED IN THE YEAR 2004. IF YOU TAKE, THE ORIGIN AL DATE OF ACQUISITION OF PROPERTY, THEN THE PERIOD OF HOLDING OF THE ASSET IS MORE THAN 36 MONTHS AND HENCE, SURPLUS FROM TRANSFE R OF ASSET IS RIGHTLY ASSESSABLE UNDER THE HEAD LONG TERM CAPITAL GAINS. 11. COMING TO EXEMPTION CLAIMED U/S 54EC OF THE I. T.ACT, 1961. THE AO NEVER DISCUSSED, THE ISSUE OF EXEMPTION CLAI MED U/S 54EC OF THE I.T.ACT, 1961 FOR PURCHASE OF NABARD BONDS I N HIS ASSESSMENT ORDER, ALTHOUGH SURPLUS GENERATED FROM T RANSFER OF RIGHT IN TDR HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM CAPITAL GAINS. ALTHOUGH, THE LD. CIT(A) HAS ADMITTED FACT THAT THE ASSESSEE HAS CLAIMED BENEFIT OF EXEMPTION U/S 54EC OF THE I. T.ACT, 1961, BUT EXEMPTION CLAIMED WAS DENIED, BECAUSE INCOME FROM T RANSFER OF TDR HAS BEEN ASSESSED UNDER THE HEAD SPECULATIVE BU SINESS PROFIT. THE ASSESSEE HAS FILED COPIES OF CAPITAL GAIN BONDS ISSUED BY NABARD FOR AMOUNTING TO RS. 25 LACS. HOWEVER, THE F ACTS WITH REGARD TO PURCHASE OF NABARD CAPITAL GAIN BONDS WIT HIN PRESCRIBED LIMIT PROVIDED U/S 54EC OF THE I.T.ACT, 1961, HAS N OT BEEN EXAMINED BY THE LD.AO, AS WELL AS THE LD. CIT(A). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE RE-EXAMI NED BY THE AO, IN LIGHT OF THE EVIDENCES FILED BY THE ASSESSEE AND HENCE, WE SET ITA NO.2755/MUM/2011 ADI D VACHHA 14 ASIDE THE ISSUE TO THE FILE OF THE AO, FOR THE LIMI TED PURPOSE OF VERIFICATION ON FACTS WITH REGARD TO THE INVESTMENT S IN NABARD CAPITAL GAIN BONDS FOR THE PURPOSE OF EXEMPTION CLA IMED U/S 54EC OF THE I.T.ACT, 1961. IN CASE, AO FOUND THE INVESTMENT IS WITHIN STIPULATED TIME AND IT HAS FULFILLED ALL OTHER COND ITIONS, THEN AO IS DIRECTED TO ALLOW BENEFIT OF EXEMPTION U/S 54EC OF THE ACT, AS CLAIMED BY THE ASSESSEE 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 /08/2 019 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 09/08/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//