ARJUN D. CHHABRIA, MUMBAI V. ACIT 19(3), MUMBAI

ITA 3242/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3328 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition
• Section: 54F

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./I.T.A./3242/MUM/2013 , / ASSESSMENT YEAR: 2008-09 SHRI ARJUN D. CHABRIA 15/15, SEA PEBBLES, PERRY CROSS ROAD BANDRA-(W) MUMBAI. PAN: AABPC 0847 J VS. ACIT, 19(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SANDEEP GOEL ASSESSEE BY: SHRI VIJAY MEHTA / DATE OF HEARING: 09.03.2016 / DATE OF PRONOUNCEMENT: 16.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !' #$ PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 5/02/2013,OF THE CIT-(A ) 30,MUMBAI THE ASSESSEE HAS FILED PRESENT APPEAL RAISING VARIOUS GROUNDS.HE IS ALSO F ILED AN ADDITIONAL GROUND OF APPEAL.ASSESSEE IS AN INDIVIDUAL AND HAD FILED HIS RETURN OF INCOME ON 17/09/2008, DECLARING TOTAL INCOME AT RS.14.94 LAKHS.THE ASSESSING OFFICE R (AO)COMPLETED THE ASSESSMENT, UNDER SECTION 143 (3) OF THE ACT,ON 24/12/2010, DETERMINI NG THE INCOME OF THE ASSESSEE AT RS. 1.72 CRORES. BRIEF FACTS: 2. THE CHHABRIA FAMILY OWNED PLOT OF LAND IN DOULAT NA GAR,BORIVALI.THE FATHER OF THE ASSESSEE, LATE DOULATRAM MOHAN DAS HAD DIVIDED THE PROPERTY INTO SEVERAL PLOTS OF LAND AND HAD CONSTRUCTED RESIDENTIAL QUARTERS AND SHOPS ON T HE SAID PLOTS.HE HAD LAID OUT INTERNAL ROADS BETWEEN THE PLOTS AND HAD SOLD SOME OF THE PLOTS WI TH OR WITHOUT THE STRUCTURES THEREON. ALL THE SAID INTERNAL ROADS LYING BETWEEN THE SAID PLOT S WITHIN DOULATNAGAR PROPERTY(ROADS IN SERIAL NUMBERS 174, 175, 176, 177 OF EKSAR TALUKA O F BORIVALI) WERE ACQUIRED BY THE MUNICIPAL CORPORATION OF GREATER MUMBAI IN 1954.ENT IRE MAINTENANCE OF THE ROADS, INCLUDING LIGHTNING OF THE ROAD, WAS BEING CARRIED OUT BY THE CORPORATION.SOMETIME IN THE YEAR 2004,AN AGREEMENT WAS EXECUTIVE BETWEEN THE ASSESSEE, ALONG WITH HIS TWO BROTHERS AND M/S. NAMAH BUILDERS-WHO WANTED TO PURCHASE POTENTIAL TDR RIGHT S. AN ADVANCE OF RS. 33 LAKHS WAS GIVEN BY THE BUILDER AT THAT POINT OF TIME.THE AGREEMENT WAS FURTHER EXTENDED IN APRIL, 2006. THE ASSESSEE ALONG WITH HIS BROTHERS RECEIVED CONSIDERA TION OF RS.4.72 CRORES.THE SHARE OF THE ASSESSEE WAS RS. 1.57 CRORES. 2.1. DURING THE ASSESSMENT PROCEEDINGS,THE AO HELD THAT THE SALE CONSIDERATION, RECEIVED BY THE ASSESSEE, HAD TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES, THAT THERE WAS NO ASSET IN EXISTENCE WHICH HAD BEEN SOLD BY THE ASSES SEE, THAT WHAT HAD BEEN CONTEMPLATED FOR TRADE WAS A RIGHT TO TDR WHEREAS IN REALITY NO SUCH WRITE EXISTED, THAT INTERNAL ROADS WERE ACQUIRED BY THE MUNICIPAL CORPORATION EVEN PRIOR TO THE COURT DEGREE,THAT THE DEGREE WOULD HAVE SIGNIFICANCE FOR ALL THE LAND EXCEPT THE AREA OF THE ROADS.THE AO REFERRED TO THE TERMS OF THE AGREEMENT OF ASSIGNMENT OF RIGHT TO TDR ON THE ROADS ENTERED INTO BY THE ASSESSEE AND HIS BROTHERS WITH THE BUILDER AND HELD THAT IN THE ABSE NCE OF THE CONCRETE RIGHT IN EXISTENCE IT COULD NOT BE SAID THAT AN AMOUNT RECEIVED FOR SALE OF AN ASSET WAS ATTRACTING CAPITAL GAINS. 3242/M/13-ARJUN CHABRIA 2 3. AGGREIVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HIM ,THE ASSESSEE PLACED RELIANCE ON SEVERAL DECISIONS WHICH HELD THAT RIGHT TO TDR WAS A CAPITAL ASSET AT TRACTING CAPITAL GAINS.AN AFFIDAVIT WAS ALSO FILED TO THE EFFECT THAT ALTHOUGH THE PROPERTY WAS SUBJECTED TO ACQUISITION BY THE MUNICIPAL CORPORATION-IT WAS ULTIMATELY NOT ACQUIRED,THAT NO CONVEYANCE OF THE INTERNAL ROADS IN FAVOUR OF MUNICIPAL CORPORATION HAD EVER BEEN EXECUTED,THA T THE PROPERTY REGISTER CARD WAS IN THE NAME OF THE ASSESSEE. 3.1 AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER,THE FAA HELD THAT ASSESSEE HAD HANDED OVER POSSESSION OF THE ROA DS,THAT THE RIGHTS OVER THE ROAD WERE IN ACTIVE POSSESSION OF MUNICIPAL CORPORATION RIGHT SI NCE 1954, THAT CORPORATION WAS LOOKING AFTER THE MAINTENANCE OF THE ROADS INCLUDING LIGHTN ING,THAT ONUS OF ESTABLISHING THE OWNERSHIP WAS ON ASSESSEE,THAT HE HAD NOT DISCHARGED HIS ONUS ,THAT WHAT HAD BEEN TRANSFERRED WAS NOT TDR BUT ONLY THE RIGHT TO RECEIVE TDR,THAT THERE WA S NO REAL ASSET IN EXISTENCE,THAT WHAT WAS TRANSFERRED UNDER THE AGREEMENT WAS ONLY A POTENTIA L ASSET,THAT SUCH AN ASSET COULD NOT CONSTITUTE A CAPITAL ASSETS,THAT THE AO HAD RIGHTLY THAT THE RECEIPT UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR)CONTENDED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD TRANSFERRED THE TDR RIGHTS IN RESPECT OF THE ROADS,THAT THE ASSESSEE HAD PURCHASE D A RESIDENTIAL HOUSE IN PUNE FOR A TOTAL CONSIDERATION OF RS. 1.20 CRORES IN ORDER TO CLAIM RELIEF UNDER SECTION 54F OF THE ACT. HE REFERRED TO THE PAGE NUMBER 54-56 OF THE PAPER BOOK AND STATED THAT CITY SURVEY OFFICE BORIVALI,MUMBAI HAD ISSUED THE PROPERTY CARD OF THE DISPUTED LAND IN NAME OF THE ASSESSEE AND HIS BROTHERS,THAT FROM THE PROPERTY CARD IT WAS CLEAR THAT ASSESSEE WAS THE OWNER OF THE ROADS AND THAT MUNICIPAL CORPORATION WAS IN POSSESS ION OF THE ROADS, THAT ONE OF THE BROTHERS WAS ASSESSED AT BANGALORE AND THE CLAIM OF TDR WAS ACCEPTED BY THE DEPARTMENT, THAT INCOME ARISING OUT OF SALE OF TDR WAS NOT TAXABLE. HE REFERRED TO THE CASES OF LAND THESE CO- OPERATIVE HOUSING SOCIETY (55SOT103), SHAMBHJI NAGA R CO-OPERATIVE HOUSING SOCIETY LTD.(370 ITR 325), MADHUBAN CHS (ITA/3257/ MUM/ 20 11-AY .2006-07, DATED 26/02/2014). THE DEPARTMENTAL REPRESENTATIVE (DR)ST ATED THAT MATTER COULD BE DECIDED ON MERITS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PARENTS THE MATERIAL BEFORE US.WE FIND THAT THE AO AND THE FAA HAD HELD THAT ASSESSEE WAS NOT THE O WNER OF THE ROADS FOR WHICH TDR AGREEMENT WAS EXECUTED. IN OUR OPINION,THE PROPERTY -CARD,PRODUCED BY THE ASSESSEE,LEAVES NO DOUBT THAT THE ASSESSEE WAS OWNER OF THE ROADS THOU GH THE POSSESSION OF THE ROAD WAS WITH BOMBAY MUNICIPAL CORPORATION FOR MAINTENANCE PURPOS ES.ONCE IT IS ACCEPTED THAT ASSESSEE WAS THE OWNER OF THE CAPITAL ASSETS, IT HAS TO BE A GREED THAT SALE OF TDR WITH REGARD TO SAID ASSET WOULD NOT BE TAXABLE. HERE,WE WOULD LIKE TO R ELY UPON THE CASE OF SHAMBHAJI NAGAR CHS LTD.(SUPRA). THE HONBLE JURISDICTIONAL HIGH CO URT HAS DECIDED THE ISSUE OF TAXABILITY OF TDR RIGHTS AS UNDER: AN ASSET WHICH IS CAPABLE OF ACQUISITION AT A COST WOULD BE INCLUDED WITHIN THE PROVISIONS PERTAINING TO THE HEAD CAPITAL GAINS AS OPPOSED T O ASSETS IN THE ACQUISITION OF WHICH NO COST AT ALL CAN BE CONCEIVED. IN THE PRESENT CASE A S WELL, THE SITUATION WAS THAT THE FSI/TDR WAS GENERATED BY THE PLOT ITSELF. THERE WAS NO COST OF ACQUISITION, WHICH HAS BEEN DETERMINED AND ON THE BASIS OF WHICH THE AO COULD HAVE PROCEED ED TO LEVY AND ASSESS THE GAINS DERIVED AS CAPITAL GAINS. IT MAY BE THAT SUBSECTION (2) OF SECTION 55 CLAUSE (A) HAVING BEEN AMENDED, THERE IS A STIPULATION WITH REGARD TO THE TENANCY R IGHTS. HOWEVER, EVEN IN THE CASE OF TENANCY RIGHT, THE VIEW TAKEN BY THE HON'BLE SUPREME COURT, AFTER THE PROVISION WAS SUBSTITUTED W.E.F. 1ST APRIL, 1995, IS AS ABOVE. THE FURTHER ARGUMENT IS THAT THE TENANCY RIGHTS NOW CAN BE 3242/M/13-ARJUN CHABRIA 3 BROUGHT WITHIN THE TAX NET AND IN THE PRESENT CASE THE ASSET OR THE BENEFIT IS ATTACHED TO THE PROPERTY. IT IS CAPABLE OF BEING TRANSFERRED. ALL T HIS MAY BE TRUE BUT AS THE HON'BLE SUPREME COURT HOLDS IT MUST BE CAPABLE OF BEING ACQUIRED AT A COST OR THAT HAS TO BE ASCERTAINABLE. IN THE PRESENT CASE, ADDITIONAL FSI/TDR IS GENERATED B Y CHANGE IN THE D. C. RULES. A SPECIFIC INSERTION WOULD THEREFORE BE NECESSARY SO AS TO ASC ERTAIN ITS COST FOR COMPUTING THE CAPITAL GAINS. THEREFORE, THE TRIBUNAL WAS IN NO ERROR IN C ONCLUDING 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 A SSESSED TO CAPITAL GAINS. 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 ACQ UIRED AND OWNED BY THE ASSESSEE. THE TRIBUNAL'S CONCLUSION IS BASED ON ITS VIEW TAKEN IN THE CASE OF NEW SHAILAJA COOPERATIVE HOUSING SOCIETY LTD. THE TRIBUNAL HAS REPRODUCED TH AT CONCLUSION. THE TRIBUNAL'S CONCLUSION ARRIVED AT IN THE CASE OF NEW SHAILAJA COOPERATIVE HOUSING SOCIETY LTD., IS BASED ON THE HON'BLE SUPREME COURT'S DECISION IN THE CASE OF B. C. SRINIVASA SHETTY. THE TRIBUNAL CONCLUDED THAT THE ASSESSEE HAD NOT INCURRED ANY CO ST OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM 1991 RULES, MAKING THE ASSESSEE ELIGIBLE TO ADDITIONAL FSI. THE LAND AND BUILDING EARLIER IN THE POSSESSION OF THE ASSES SEE CONTINUED TO REMAIN WITH IT. EVEN AFTER THE TRANSFER OF THE RIGHT OR THE ADDITIONAL FSI, TH E POSITION DID NOT UNDERGO ANY CHANGE. THE REVENUE COULD NOT POINT OUT ANY PARTICULAR ASSET AS SPECIFIED IN SUBSECTION (2) OF SECTION 55. THE CONCLUSION OF THE TRIBUNAL IS IMMINENTLY POSSIB LE AND IN THE GIVEN FACTS. THAT IS ALSO POSSIBLE IN THE LIGHT OF THE LEGAL POSITION AS NOTE D BY LANGUAGE OF SECTION 55(2) AND THE JUDGMENT OF THE HON'BLE SUPREME COURT, WHICH IS IN THE FIELD. RESPECTFULLY, FOLLOWING THE JUDGEMENT OF THE HONBL E BOMBAY HIGH COURT WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. ' 16 , 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.