LAND BREEZ CO OP HSG SOCIETY LTD, MUMBAI V. ITO 19(3)(2), MUMBAI

ITA 4130/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9012 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAGATI KUMAR
• Assessee Lawyers: M V SUBRAMANIAN
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition
• Section: 143(3); 2(14); 234B

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , , !' !' !' !' #$ %& #$ %& #$ %& #$ %& , ,, , ' ' ' ' ( ( ( ( BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 4130/MUM./2011 ( '* + ',+ / ASSESSMENT YEAR : 200708 ) LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD., NARGIS DUT ROAD 52, PALI HILL ROAD, BANDRA (WEST) MUMBAI 400 050 .. -. / APPELLANT * V/S INCOME TAX OFFICER WARD19(3)(2) PIRAMAL CHAMBERS, PAREL MUMBAI 400 012 .... /0-. / RESPONDENT - . / PERMANENT ACCOUNT NUMBER AAAAL1781C '* +2$ 3 4 / ASSESSEE BY : MR. M.V. SUBRAMANIAN 5 ' 3 4 / REVENUE BY : MR. PRAGATI KUMAR *' 3 $ / DATE OF HEARING 19.07.2012 % 6, 3 $ / DATE OF ORDER 14.09.2012 % % % % / ORDER #$ %& #$ %& #$ %& #$ %& , ,, , ' ' ' ' 7 7 7 7 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS DI RECTED AGAINST IMPUGNED ORDER DATED 25 TH MARCH 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXX, MUMBAI, FOR THE QUANTUM OF ASSESSMEN T PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), FOR THE ASSESSMENT YEAR 200708. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED: LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW , THE ASSESSMENT ORDER PASSED U/S 143(3) IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL A ND THAT TOO WITHOUT GIVING FULL AND PROPER OPPORTUNITY OF BEING HEARD I N THE MATTER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.I.T. (A) ERRED IN DISMISSING THE APPEAL AND THAT TOO WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E FULLY AND PROPERLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE ACTION O F THE A.O. IN DETERMINING AND ASSESSING AN AMOUNT OF RS.1O,70,46, 274/- AS CAPITAL GAINS INCOME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED C.I.T.(A) ERRED IN HOLDING THAT CAPITAL GAI NS OF RS.1 1 .66 CRORES HAS ACCRUED TO THE APPELLANT SOCIETY AND IS LIABLE TO BE TAXED AS CAPITAL GAINS OF THE APPELLANT SOCIETY. 6. WITHOUT PREJUDICE TO GROUND NUMBER 5 AND 6, AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LE ARNED C.I.T.(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN ADOPTING CO ST OF ACQUISITION AT RS.71 ,11,852/- FOR COMPUTING CAPITAL GAINS INCOME. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO ERRED IN CHARGING INTEREST OF RS.68,37,9 90/- U/S 234B OF THE L.T. ACT, 1961. 2. BEFORE US, AT THE OUTSET, THE LEARNED COUNSEL FOR T HE ASSESSEE DID NOT PRESS GROUNDS NO.1, 2, 3 AND 4 , TO WHICH, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT MADE ANY OBJECTION. CONSEQUENTLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED . 3. THE MAIN CRUX OF THE ISSUE INVOLVED IN THIS APPEAL ARE ARISING OUT OF GROUNDS NO.5 AND 6, WHICH RELATES TO TAXING OF CAPI TAL GAIN FOR A SUM OF ` 10,70,46,274, ON THE TOTAL RECEIPT OF ` 11,66,00,000, ARISING OUT OF TRANSFER OF DEVELOPMENT RIGHTS (FOR SHORT TDRS ) IN RESPECT OF LAND OWNED BY THE ASSESSEE. 4. FACTS RELATING TO THE ISSUE AS TO HOW THE ASSESSEE HAS RECEIVED THE MONEY FROM THE TRANSFER OF TDRS HAVE BEEN ELABORATE LY DISCUSSED IN THE LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 3 ASSESSMENT ORDER AS WELL AS THE LEARNED COMMISSIONE R (APPEALS)S ORDER WHICH, FOR THE SAKE OF READY REFERENCE, ARE ALSO IN CORPORATED HEREUNDER: 1. LATE SMT. DMA DADY BAXTER WAS OWNER OF LAND ADME ASURING ABOUT 5715 SQ. MT AT PALL HILL BANDRA(SURVEY NO. C/ 1388 TO C/1393 ETC.) IN ADDITION TO THE BUNGLOW (ADMEASURIN G 2,352, SQ. MT.) AND TWO OTHER GROUND FLOOR STRUCTURES. II) ON A PLOT OF LAND ADMEASURING 3367 SQ. MT. OUT OF LARGER PLOT OF 5715 SQ. MT. AS MENTIONED ABOVE, A BUILDING LAND B REEZE (STILT + 7 FLOOR) WAS CONSTRUCTED BY M/S. GREAT WESTERN FI NANCE CORPORATION IN THE YEAR 1978. IN ACCORDANCE WITH TH E TERMS OF THE DEVELOPMENT AGREEMENT DATED 28.04.1978, THE LAND OW NER LATE SMT. DMA DADY BAXTER RECEIVED A CONSIDERATION OF RS .23,66,000/- IN THIS REGARD AS HER FIXED SHARE IN THE SAID PROJE CT INCLUDING THE VALUE OF THE LAND BROUGHT IN BY HER IN THIS PROJECT . THE RESIDENTS OF THIS BUILDING FORMED SOCIETY NAMELY LAND BREEZE CO-OPERATIVE HOUSING SOCIETY LTD. REGISTERED UNDER THE MAHARASHT RA CO- OPERATIVE SOCIETIES ACT, 1960. III) SUBSEQUENTLY, THE PART PLOT OF LAND ADMEASURIN G 3367 SQ. MTRS OUT OF LARGER PLOT (ADMEASURING 5715 SQ. MTRS) ALON GWITH THE BUILDING NAMELY LAND BREEZE CONSTRUCTED ON IT. WA S CONVEYED BY LATE SMT. DINA DADY BAXTER VIDE CONVEYANCE DEED DAT ED 26TH FEBRUARY, 1979 IN FAVOUR OF THE LAND BREEZE CO- OPE RATIVE HOUSING SOCIETY LTD. IV) THUS, ON 26TH FEBRUARY; 1979 CONVEYANCE DEED EX ECUTED BY LATE SMT. DINA DADY BAXTER IN FAVOUR OF THE LAND BR EEZE SOCIETY VESTING OWNERSHIP OF LAND ADMEASURING 3367 SQ. MTRS . ALONG WITH THE BUILDING WITH M/S. LAND BEEZE CO-OP. HSG SOCIET Y LTD. V). ON 17.11.2004 DAUGHTER OF LATE SHRI DINA DADY, MS.SILLO DADY BAXTER, EXECUTRIX OF THE LAST WILL AND TESTAMENT O F LATE SMT. DMA LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 4 DADDY BAXTER [WHO WAS OWNER OF REMAINING PLOT ADMEA SURING 2348 SQ. MTRS. (5715-3367)] SIGNED AN AGREEMENT WIT H THE DEVELOPER, PROMOTERS OF (PROPOSED) ARIEL VIEW COOP ERATIVE HOUSING SOCIETY (IN HER CAPACITY AS EXECUTOR OF THE LAST WILL AND TESTAMENT OF LATE DINA DADY BAXTER)GRANTING FULL AN D COMPREHENSIVE DEVELOPMENT RIGHTS TO THEM IN RESPECT OF THE BALANCE PLOT OF LAND ADMEASURING 2348 SQ. MTRS. INT ER ALIA SHE GRANTED RIGHTS TO UTILISE ENTIRE FSI AND TDR AS MAY BE AVAILABLE ON THE SAID SUB PLOT ADMEASURING 2348 SQ. MTRS. TO THE PROMOTERS ARIEL VIEW CO-OPERATIVE HOUSING SOCIETY(PROPOSED). VI) APPREHENDING THAT THE DEVELOPER AND MS. BAXTER WILL SEEK TO DEVELOP THE PROPERTY BY INTER-ALIA UTILIZING THE FS I PERTAINING TO THE PLOT OF LAND ADMEASURING 3367 SQ. MTRS. OWNED B Y THE LAND BREEZE CO-OP. HSG. SOC. LTD. ALSO, THE APPELLANT SO CIETY THROUGH ITS MEMBERS FILED A WRIT PETITION (NO. 2653/2005) B EFORE THE BOMBAY HIGH COURT AGAINST THE PART PLOT OWNER, THE DEVELOPERS, SHRI SANJAY KANUBHAI PATEL AND SHRI VIJAY MOHANLAL PAREKH, CHIEF PROMOTERS, ARIEL VIEW CO-OPERATIVE HOUSING SOCIETY( PROPOSED) ETC. VII) THE SAID WRIT PETITION WAS ADMITTED AND AN INT ERIM ORDER PASSED ON 18.04.2006 IN FAVOUR OF THE SOCIETY ACCEP TING THE APPELLANTS PRAYER THAT FURTHER CONSTRUCTION BY THE DEVELOPER ON THE REMAINING PLOT SHOULD BE STOPPED. VIII) BEING AGGRIEVED SLP WAS FILED AGAINST THE ORD ER DATED, 18.04.2006 BY THE LAND OWNER AND DEVELOPERS; MEANWH ILE THE APPELLANT SOCIETY ALSO FILED A SUIT IN BOMBAY HIGH COURT ON ITS ORIGINAL SIDE, TO FURTHER PROTECT ITS INTEREST. IX) IN THE MEANWHILE, THE DEVELOPERS WHO ARE PROMOT ERS OF NEW PROPOSED SOCIETY ON BALANCE PORTION OF PLOT (ADMEA SURING 2348 LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 5 SQ. MTRS.) APPROACH THE APPELLANT SOCIETY AND ITS A DVOCATES FO SETTLEMENT. AFTER NEGOTIATIONS A COMPROMISE IN THE FORM OF CONSENT TERMS WAS FINALIZED AND THESE TERMS OF CONS ENT WERE FILED BEFORE THE BOMBAY HIGH COURT: X) THE BOMBAY HIGH COURT VIDE ORDER DATED 19.12.200 6 DISMISSED THE SUIT FILED BEFORE THEM IN TERMS OF THE CONSENT ON DATED 19.12.2006 FOR WANT OF PROSECUTION. THUS, IN THE IN STANT CASE, THE APPELLANT M/S. LAND BREEZE COOPERATIVE HOUSING SOC . LTD. MADE A NEGOTIATED SETTLEMENT WITH THE DEVELOPERS. IX) THUS, AS PER THE TERMS OF CONSENT, FOLLOWING P AYMENTS WERE MADE TO THE SOCIETY AND THE MEMBERS OF THE DEVELOPE RS: SR. NO. PAYMENT MADE TO IN A.Y. 2007 08 ( ` ) IN A.Y. 200809 ( ` ) TOTAL CONSIDERATION ( ` ) 1. LAND BREEZE CO.OP HSG. SOC. 1,91,00,000 1,17,00,000 3,08,00,000 2. MEMBERS OF THE SOCIETY 4,78,50,000 3,79,50,000 8,58,00,000 5. IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YE AR 200708, THE ASSESSEE HAD SHOWN RECEIPT OF ` 1.91 CRORES AS COMPENSATION RECEIVED ON ACCOUNT OF GRANT OF PERMISSION AND TOWARDS SETTLEME NT OF DISPUTES BETWEEN THE BUILDERS, THE SOCIETY AND ITS MEMBERS. ON VERIF ICATION OF THE DETAILS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SOCIETY W AS ENTITLED TO UTILISE TDRS IN RESPECT OF LAND ADMEASURING 3,367 SQ.MTRS. OWNED BY THEM IN THE RATIO OF 1:1 IN ACCORDANCE WITH THE PROVISIONS OF DEVELOPMEN T CONTROL RIGHTS, 1991. THE ASSESSEE HAS TRANSFERRED THIS RIGHT TO THE DEVE LOPERS M/S. ARIAL VIEW CO OPERATIVE HOUSING SOCIETY, VIDE TERMS OF CONSENT DA TED 9 TH DECEMBER 2006. AS PER THESE TERMS, THE ASSESSEE RECEIVED A CONSIDERAT ION OF ` 3,08,00,000, TOWARDS GRANTING THIS RIGHTS TO THE DEVELOPERS OUT OF WHICH ` 1,91,00,000, WAS RECEIVED IN ASSESSMENT YEAR 200708 AND REMAINING A MOUNT OF ` 1,17,00,000, WAS RECEIVED IN ASSESSMENT YEAR 200809. THE MEMBER S OF THE ASSESSEE LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 6 SOCIETY ALSO RECEIVED A SUM OF ` 8,58,00,000, OUT OF WHICH ` 4,78,50,000, WAS RECEIVED IN A.Y. 200708 AND ` 3,79,50,000 IN ASSESSMENT YEAR 200809. IN RESPONSE TO THE SHOW CAUSE NOTICE AS TO WHY THE SAI D AMOUNT WAS NOT OFFERED FOR TAXATION, THE ASSESSEE, IN SUM AND SUBSTANCE, S UBMITTED THAT THE SAID RECEIPTS IS NOT TAXABLE AS IT DID NOT HAD ANY COST OF ACQUISITION, THEREFORE, IT WAS OUTSIDE THE PURVIEW OF CHARGEABILITY AS PER SEC TION 45 OF THE ACT AND PROVISIONS OF SECTION 55, CANNOT BE INVOKED ON SUCH KIND OF TRANSACTION. IN SUPPORT OF THIS, IT WAS SUBMITTED THAT THERE ARE VA RIOUS JUDICIAL VIEWS IN FAVOUR OF THE ASSESSEE THAT THE AMOUNT RECEIVED IN TRANSFE R OF TDRS IS NOT TAXABLE. WITH REGARD TO THE AMOUNT RECEIVED BY THE MEMBERS, IT WAS REITERATED THAT THERE IS NO OWNERSHIP RIGHTS AND NO COST OF ACQUISI TION. 6. THESE CONTENTIONS OF THE ASSESSEE WERE NOT FOUND AC CEPTABLE BY THE ASSESSING OFFICER ON THE GROUND THAT THE LAND IS AN ASSET AND SO ARE THE RIGHTS ATTACHED TO THE LAND. THE LAND WAS ACQUIRED BY THE ASSESSEE AFTER PAYING A CONSIDERATION AND OWNERSHIP OF THE LAND CARRIES WIT H IT, BUNDLE OF RIGHTS ATTACHED TO IT AND OF WHICH THE RIGHT OF DEVELOPMEN T IS AN IMPORTANT ONE. THEREFORE, THE BENEFIT IN THE FORM OF TDR ARISING O UT OF THE EXISTING LAND IS AN IMMOVABLE PROPERTY, THE TRANSFER OF WHICH IS LIABLE TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAINS . THE CONSIDERATION RECEIVED BY THE ASSESSEE AND ITS MEMBERS ON TRANSFER OF ITS TDRS AND ENTITLE MENTS TO THE DEVELOPERS IS NOTHING BUT A TRANSFER OF A CAPITAL ASSET ONLY. EVE N THE MEMBERS RECEIVING THE CONSIDERATION ARE ONLY ON ACCOUNT OF RESULT OF TRAN SFER OF CAPITAL ASSET BY THE ASSESSEE SOCIETY AND, HENCE, NEEDS TO BE TAXED IN T HE HANDS OF THE ASSESSEE ONLY WHO IS HAVING THE OWNERSHIP RIGHT ON THE LAND. HE FURTHER OBSERVED THAT IN VIEW OF THE PROVISIONS OF SECTION 48, IT CAN BE INFERRED THAT FULL VALUE OF CONSIDERATION RECEIVED OR ACQUIRED AS A RESULT OF T RANSFER OF CAPITAL ASSET HAS TO BE TAXED IN THE ASSESSMENT YEAR FOR WHICH SUCH CAPI TAL ASSET HAS BEEN TRANSFERRED WHICH, IN THE PRESENT CASE, IS ASSESSME NT YEAR 200708 AND, THEREFORE, THE ENTIRE CONSIDERATION IS TAXABLE IN T HIS YEAR ONLY. 7. THE ASSESSING OFFICER REQUIRED THE ASSESSEE AGAIN T O JUSTIFY THE CLAIM OF EXEMPTION OF RECEIPTS TOWARDS TRANSFER OF TDRS AND AS TO WHY THE ENTIRE CONSIDERATION RECEIVED BY THE ASSESSEE AND ITS MEMB ERS CANNOT BE TAXED IN LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 7 THE HANDS OF THE ASSESSEE IN ASSESSMENT YEAR 20070 8. IN RESPONSE, THE ASSESSEE MADE A VERY ELABORATED SUBMISSION RELYING UPON THE DECISION OF A COORDINATE BENCH OF THE TRIBUNAL, MUMBAI, IN JETHALAL D. MEHTA V/S DCIT, [2005] 2 SOT 422 (MUM.), ITO V/S LOTIA COURT COOPE RATIVE HOUSING SOCIETY, [2009] 121 TTJ 62 (MUM.) 62 , AND THE HON'BLE SUPREME COURT IN CIT V/S B.C. SRINIVASA SHETTY, 128 ITR 294 (SC) . BESIDES THIS, VARIOUS OTHER CONTENTIONS BASED ON THE JUDICIAL PRONOUNCEMENTS WE RE MADE BY THE ASSESSEE WHICH HAS BEEN INCORPORATED IN THE ASSESSMENT ORDER FROM PAGES5 TO 8. 8. THE ASSESSING OFFICER DID NOT FIND THE ASSESSEES S UBMISSION TO BE TENABLE ON VARIOUS COUNTS. FIRST OF ALL, HE ANALYSE D THE TERM PROPERTY AND HELD THAT IT IS A BUNDLE OF RIGHTS AND IT TAKES INT O ITS CONSPECTUOUS ALL THE RIGHTS ASSOCIATED WITH THE LAND, WHICH WILL ESSENTIALLY IN CLUDE THE DEVELOPMENT RIGHTS WHICH ARE IDENTIFIED BY THE DEVELOPMENT CONTROL RUL ES, 1991. HE FURTHER PROCEEDED TO ANALYSE THE DEFINITION OF CAPITAL ASSETS AS DEFINED IN SUB SECTION (14) OF SECTION 2, THAT IT IS OF EMBRACING CONNOTATION AND INCLUDE EVERY KIND OF PROPERTY AS GENERALLY UNDERSTOOD EXCEPT THA T WHICH IS EXCLUSIVELY EXCLUDED FROM THE DEFINITION. THE DEFINITION IS WID E ENOUGH TO INCLUDE ALL TANGIBLE OR INTANGIBLE ASSETS. IN SUPPORT OF THE ME ANING AND TERM OF THE WORD CAPITAL ASSETS , HE RELIED UPON CATENA OF CASE LAWS WHICH HAVE BEE N DISCUSSED FROM PAGES8 AND 9 OF THE ASSESSMENT ORDE R. HE FURTHER HELD THAT IN SHAKTI INSULATED WIRES LTD. V/S JCIT, 87 ITD 56 (MU M.) , THE TRIBUNAL HELD THAT THE PROPERTY TAKES INTO ITS CONSPECTUOUS ALL T HE RIGHTS ASSOCIATED WITH THE LAND, WHICH WILL ESSENTIALLY INCLUDE THE DEVELOPMEN T RIGHTS WHICH WERE DULY IDENTIFIED BY DEVELOPMENT CONTROL RIGHTS, 1991. IN THE SAID DECISION, THE TRIBUNAL HAS HELD THAT THE INCOME FROM TRANSFER OF TDR IS LINKED WITH THE OWNERSHIP OF THE LAND AND IS IS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM CAPITAL GAINS . HE FURTHER REFERRED TO THE DECISION OF THE JURISD ICTIONAL HIGH COURT IN CHHEDA HOUSING DEVELOPMENT CORPORATION V/S BIBI JAN SHEKH FARID, [2007] 3 MHLJ 402 BOM. , WHEREIN IT WAS HELD THAT TRANSFER OF DEVELOPMENT RIGHTS WHICH ENABLES THE FSI TO BE USED ON ANY OTHER PLOT OF LAND, IT IS A BENEFIT ARISING OUT OF LAND AND IS AN IMMOV ABLE PROPERTY. HE FURTHER HELD THAT THE SUBSEQUENT DECISIONS OF THE TRIBUNAL, AS R ELIED UPON BY THE ASSESSEE CANNOT BE TAKEN INTO CONSIDERATION AS THE DECISION SHAKTI INSULATED WIRES LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 8 (SUPRA) WAS NOT TAKEN INTO CONSIDERATION AND, THERE FORE, ARE PERINCURIAM. WITH REGARD TO THE ASSESSEES CONTENTION THAT THERE WAS NO COST OF ACQUISITION, HE RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COUR T IN A.R. KRISHNA MOORTY, [1989] 176 ITR 417 (SC) , THAT THE LAND IS A BUNDLE OF RIGHTS AND WHEN CONSIDERATION IS PAID FOR LAND, A PART OF IT IS ALL OCABLE TO EACH OF THE RIGHTS WHICH GOES ALONG WITH THE OWNERSHIP OF THE LAND. BA SED ON THESE JUDGMENTS, HE HELD THAT THERE IS A TRANSFER OF CAPITAL ASSET H ELD BY THE ASSESSEE WHICH IS CHARGEABLE TO TAX. 9. ON THE MODE OF COMPUTATION OF SECTION 48, RELIANCE PLACED ON THE VARIOUS DECISION OF THE TRIBUNAL BY THE ASSESSEE, T HE ASSESSING OFFICER HELD THAT THE SAME ARE PER INCURIAM BECAUSE NONE OF THES E DECISIONS HAVE TAKEN INTO CONSIDERATION THE EARLIER DECISION OF SHAKTI INSULATED WIRES LTD. (SUPRA). LASTLY, HE HELD THAT THE HON'BLE SUPREME COURT IN A.R. KRISHNA MOORTY (SUPRA) , HGAS DISTINGUISHED AND EXPLAINED THE RATIO OF B.C. SRINIVASA SHETTY (SUPRA) AND, THEREFORE, THERE IS NO MERIT IN THE CONTENTIO NS OF THE ASSESSEE THAT NO COST OF ACQUISITION CAN BE ASCRIBED. HE FUR THER RELIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS RELATING TO COST OF ACQUISI TION AFTER TAKING INTO CONSIDERATION THE JUDGMENT OF B.C. SRINIVASA SHETTY (SUPRA). THESE OBSERVATIONS OF THE ASSESSING OFFICER ARE APPEARING AT PAGES13 AND 14 OF THE ASSESSMENT ORDER. 10. AFTER DISCUSSING THE ISSUE IN DETAIL, THE ASSESSING OFFICER REACHED TO THE FOLLOWING CONCLUSION: I. UNDOUBTEDLY THE ASSESSEE, M/S. LAND BREEZE CO. O P. HSG. SCTY. IS THE OWNER OF LAND ADMEASURING 3367 SQ.MTRS. AT PALI HILL, BANDRA (W), MUMBAI, EVEN THE HONBLE BOMBAY HIGH COURT HAS CONF IRMED THE RIGHTS OF SOCIETY IN RESPECT OF THIS LAND. II. LAND IS A BUNDLE OF RIGHTS. IN THE INSTANT CASE , WHEN LAND WAS PURCHASED (I.E., OWNERSHIP OF LAND ACQUIRED BY THE SOCIETY IN CONSEQUENCE TO THE EXECUTION OF CONVEYANCE DEED IN FAVOUR OF IT), ALL RIGHTS PRESENT AND FUTURE EMBEDDED IN IT ARE ALSO A CQUIRED. III. THE SOCIETY HAS TRANSFERRED ITS TDR ENTITLEMEN T TO THE DEVELOPERS. CONSIDERATION RECEIVED BY THE SOCIETY AND THE MEMBE RS IN THIS REGARD UNDER CONSENT TERMS WHICH ARE NOTHING BUT AGREEMENT TOWARDS TRANSFER OF THE TDR ENTITLEMENT OF THE SOCIETY. LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 9 IV. THEREFORE, THE BENEFIT IN THE FORM OF TDR ARISI NG OUT OF THE EXISTING LAND IS AN IMMOVABLE PROPERTY, THE TRANSFE R OF WHICH TANTAMOUNT TO TRANSFER OF A LONG TERM CAPITAL ASSET AND HENCE LIABLE TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAIN. V. ` 8,58,00,000, RECEIVED BY THE SOCIETY AND THE MEMBER S IN THIS REGARD IS CHARGEABLE TO TAX AS INCOME UNDER THE HEA D LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE SOCIETY IN THE A .Y. 200708 . 11. THEREAFTER, HE COMPUTED THE INCOME UNDER LONG TERM CAPITAL GAINS AFTER OBSERVING AND HOLDING AS UNDER:- AS STATED IN THE PRECEDING PARAGRAPHS THE OWNERSHIP OF LAND WAS VESTED WITH THE M/S. LAND BREEZE COOP. HOUSING SOCIETY IN CONSEQUENCE TO EXECUTION OF CONVEYANCE DEED ON 26.02.1979 BY THE L AND OWNER LATE SMT. DINA DADDY BAXTER IN FAVOUR OF THE SOCIETY. AS STATED IN THE CONVEYANCE DEED SHE RECEIVED A CONSIDERATION OF ` 23,66,000, IN THIS REGARD AS HER FIXED SHARE IN THE SAID PROJECT INCLU DING THE VALUE OF THE LAND BROUGHT IN BY HER IN THIS PROJECT. ON PERUSAL OF THE COPY OF CONVEYANCE DEED FILED BY REPRESENTATIVE OF THE ASSE SSEE DATED 26.2.1979, IT IS SEEN THAT A STAMP DUTY OF ` 3,50,900 AND REGISTRATION CHARGES AMOUNTING TO ` 23,698 WERE ALSO PAID FOR REGISTRATION OF THIS DEED. THUS, EXPENDITURE TOTALING TO ` 27,40,598 WAS INCURRED TOWARDS ACQUISITION OF LAND. TAKING INTO CONSIDERATION, THE FACTS OF THE CASE, THE VALUE OF LAND OWNED BY THE SOCIETY AS ON 1.4.1981, IS ARRIVED AT ` 27,40,598. ON PERUSAL OF COPY OF BALANCE SHEET OF T HE SOCIETY AS ON 31 ST MARCH 2007, ANNEXED ALONG WITH THE RETURN OF INCOME , THE VALUE OF LAND AND BUILDING IS SHOWN AT ` 95,34,000. THUS, IT CAN BE SEEN THAT VALUE OF THE LAND AS ON 1.4.1981, DETERMINED AT ` 27,40,598, IS JUST AND FAIR. THE OWNERSHIP OF THE PLOT OF LAND ENTITLED THE ASSE SSEE TO CONSUME THE PERMISSIBLE TDR, THE ORIGINAL COST OF LAND HAS TO B E CONSEQUENTIALLY SPREAD OVER THE INCREASED TDR PROVIDED BY THE DEVEL OPMENT CONTROL REGULATION 1991. SINCE THE ASSESSEE WAS ENTITLED TO THE TDR IN THE RATIO OF 1:1 OF THE SIZE OF LAND HOLDING, THE VALUE OF TD R ENTITLEMENT OF THE SOCIETY AS ON 1.4.1981, IS ARRIVED AT ` 13,70,299 (I.E., 50% OF ` 27,40,598). IN VIEW OF THE ABOVE, THE INCOME CHARGEABLE TO TAX UNDER THE HEAD LONG TERM CAPITAL GAIN IS COMPUTED AS UNDER: INCOME FROM CAPITAL GAIN (AS DISCUSSED ABOVE) ` 11,66,00,000 LESS: EXPENSES INCURRED IN RELATION TO THE ABOVE ` 24,41,874 ` 11,41,58,126 COST OF ACQUISITION AS ON 1.4.1981 = ` 13,70,299 LESS: INDEXED COST OF ACQUISITION FOR A.Y. 200708 LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 10 13,70,299 X 519 = 100 ` 71,11,852 INCOME TAXABLE UNDER THE HEAD LONG TERM CAPITAL GAIN ` 10,70,46,274 12. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE MAD E A VERY DETAIL SUBMISSION AND RELIED UPON VARIOUS DECISIONS PASSED BY THE TRIBUNAL, MUMBAI BENCHES, WHEREIN, ON SIMILAR ISSUE AND FACTS, IT WA S HELD THAT COMPUTATIONAL PROVISION OF SECTION 48, WILL NOT BE APPLICABLE IN CASE OF TRANSFER OF TDRS, AS THERE IS NO COST OF ACQUISITION. THESE SUBMISSIONS OF THE ASSESSEE HAVE BEEN INCORPORATED FROM PAGES-15-21 OF THE APPELLATE ORDE R. THE COMMISSIONER (APPEALS) REJECTED THE SAID CONTENTIONS OF THE ASSE SSEE AND ON THE REASONING GIVEN BY THE ASSESSING OFFICER, HE GAVE FOLLOWING F INDINGS AND THE CONCLUSION, WHICH, FOR THE SAKE OF READY REFERENCE, ARE REPRODU CED HEREIN BELOW:- 19. APPLYING THE ABOVE RATIO TO THE FACTS OF THE TD RS, UNLIKE SELF GENERATED GOODWILL, WHERE IT IS NOT POSSIBLE TO DET ERMINE THE DATE OF ACQUISITION, IN THE CASE OF TDRS THE DATE OF ACQUIS ITION IS CLEARLY ASCERTAINABLE, WHICH IS EVIDENCED IN THE FORM OF DE VELOPMENT RIGHT CERTIFICATE ISSUED BY THE BMC. FURTHER IN B.C. SRIN VAS SHETTYS CASE, IT WAS HELD THAT THE GOODWILL GENERATED IN NEWLY COMME NCED BUSINESS CANNOT BE DESCRIBED AS AN ASSET WITHIN THE TERMS OF SECTION 45 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION IT IS EVIDENT THAT THE RATIO OF B.C. SRINIVAS SHETTY IS ALSO DIRECTLY NOT APPLICABLE TO THE TDRS AND HENCE IS DISTINGUISHABLE. AS REGARDS THE CASE OF NEW SHAILAJ A CHS LTD. VS. ITO, IT CAN BE OBSERVED THAT THE ITAT DID NOT CONSIDER THE EARLIER DECISION ON THIS ISSUE IN THE CASE OF SHAKTI INSULATED WIRES CI TED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF B.C. SRIN IVASA SHETT HAS ALSO BEEN EXPLAINED BY THE BOMBAY HIGH COURT IN THE CASE OF TRIKAMAL MANEKLAL (HUF) 168 ITR 733 (BORN). THE HONBLE HIGH COURT HAS VERY CLEARLY LAID DOWN THAT THE RATIO OF THE DECISION OF THE APEX COURT IN THE CASE OF B.C. SRINIVASA SHETTY IS APPLICABLE IN CASE OF ASSETS WHICH CANNOT BE ACQUIRED FOR A COST. IN THE INSTANT CASE, LAND H AS BEEN ACQUIRED FOR A COST. THE RIGHTS WHICH HAVE BEEN TRANSFERRED FORM P ART OF THE OWNERSHIP OF LAND. THEREFORE, THE RATIO OF DECISION OF THE AP EX COURT IN B.C. SRINIVASA SHETTYS CASE IS NOT APPLICABLE TO THE CA SE OF THE ASSESSEE. TO SUM UP THE JUDGMENT IN THE CASE OF B.C. SRINIVASA S ETTY (1981) 128 ITR 294 (SC) IS APPLICABLE IN THE CASES WHERE THERE IS NO COST OF ACQUISITION AND NOT IN THE INSTANT CASE WHERE THE CAPITAL ASSET S HAS BEEN ACQUIRED BY INCURRING A DEFINITE COST AND THE DATE OF ACQUIS ITION IS ALSO CLEARLY DETERMINABLE. 20. IN THE CASE ON HAND, IN CONSIDERATION FOR THE O WNERS IRREVOCABLY PERMITTING AND AUTHORISING GRANTING THE RIGHT TO TH E DEVELOPERS THE DEVELOPERS AGREED TO PAY A SUM OF RS.11.66 CRORES T O THE APPELLANT SOCIETY. THE NATURE OF CAPITAL ASSET WHICH HAS BEEN TRANSFERRED RELATES TO LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 11 RIGHT TO TRANSFER THE TDR ARISING OUT OF THE EXISTI NG LAND. THIS RIGHT ACCRUED TO THE APPELLANT SOCIETY WHO IS THE LEGAL A ND BENEFICIAL OWNER OF THE LAND ON WHICH THE EXISTING FLATS HAVE ALREADY B EEN CONSTRUCTED. THE OWNERSHIP OF LAND LIES WITH THE ASSESSEE SOCIETY. A S PER THE SECTION 30 OF MAHARASHTRA SOCIETY ACT, THE SOCIETY IS A LEGAL PER SON AND CAN HOLD PROPERTY IN ITS OWN NAME, MEMBERS ARE NOT THE OWNER S OF THE LAND/RIGHTS THEREIN. MEMBERS HAVE RECEIVED CONSIDER ATION AS A RESULT OF TRANSFER OF CAPITAL ASSETS BY THE SOCIETY. CONSIDER ATION TO MEMBERS IS ARISING AS A RESULT OF TRANSFER. HENCE THAT NEEDS T O BE TAXED IN THE HANDS OF THE SOCIETY. 21. THE REPRESENTATIVE :OF THE ASSESSEE IN PARA I AND ALSO IN PARA III OF HIS SUBMISSION DATED 14.12.2009 FILED BEFORE AO HAS VERY CLEARLY STATED THAT THE MEMBERS HAVE THE RIGHT TO OCCUPY TH E PLACE IN THE SOCIETY. THE MEMBERS OF THE ASSESSEE HAVE A RIGHT T O OCCUPY THE FLATS ALLOTTED TO THEM. BEYOND THAT, THE ASSESSEE SOCIETY OWNS ALL OTHER RIGHTS. CONSIDERATION HAS BEEN RECEIVED BY THE MEMBERS OF T HE ASSESSEE UNDER THE CONSENT TERMS ONLY BECAUSE THE ASSESSEE HAS TRA NSFERRED ITS RIGHTS IN FAVOUR OF THE DEVELOPERS. BUT FOR THE TRANSFER OF R IGHTS BY THE ASSESSEE THE MEMBERS WOULD NOT BE ENTITLED TO ANY CONSIDERAT ION UNDER CONSENT TERMS. 22. THE CONSIDERATION HAS ACCRUED AS A RESULT OF TH E TRANSFER. AS PER PROVISIONS OF SECTION 48 OF THE ACT, CAPITAL GAINS ARE TO BE COMPUTED BY CONSIDERING FULL VALUE OF CONSIDERATION ACCRUING AS A RESULT OF TRANSFER. THE CONSIDERATION OF RS. 8,58,00,000/- HAS ACCRUED TO THE MEMBERS AS A RESULT OF TRANSFER. THE AMOUNT MAY HAVE BEEN PAID T O THE MEMBERS BUT IT IS THE AMOUNT WHICH ACCRUES AS A RESULT OF THE T RANSFER AND BUT FOR THE TRANSFER BY THE ASSESSEE THE MEMBERS WOULD NOT HAVE RECEIVED THE AMOUNTS. THEREFORE, THIS AMOUNT OF RS. 8,58,00,000/ - RECEIVED BY THE MEMBERS IS ALSO CHARGEABLE TO TAX IN THE HANDS OF T HE ASSESSEE AS CONSIDERATION ACCRUING AS A RESULT OF THE TRANSFER. 23. THE RIGHT HAS ACCRUED TO THE APPELLANT SOCIETY BY VIRTUE OF THE AMENDMENT IN DEVELOPMENT REGULATIONS OF BMC. IT CAN NOT BE SAID THAT THERE WAS NO COST INCURRED FOR ACQUIRING THIS RIGHT . IT IS WELL ESTABLISHED THROUGH SEVERAL JUDICIAL PRONOUNCEMENTS THAT WHILE ACQUIRING LAND, THERE ARE A BUNDLE OF RIGHTS WHICH ARE ALSO ACQUIRED AND THE SAME MAY FRUCTIFY IN PRESENT OR FUTURE ALSO. ACCORDINGLY, IN THIS CAS E, THE RIGHT WHICH HAS MATERIALIZED BY VIRTUE OF THE ORIGINAL OWNERSHIP OF THE LAND CANNOT BE SAID TO HAVE NO COST. THE A.O. HAS RIGHTLY APPLIED THE RELEVANT CASE LAWS THAT THE SUM OF RS.11.66 CRORES IS TAXABLE IN THE H ANDS OF THE APPELLANT SOCIETY. FURTHER THE A.O. HAS ALLOWED TO THE APPELL ANT COST TO THE EXTENT OF RS.71,11,852/- IN THE ASSESSMENT ORDER AND THEN ARRIVED AT THE NET LONG TERM CAPITAL GAIN OF RS. 10,70,46,274/-. THERE FORE, IT IS NOT CORRECT TO SAY THAT THERE IS NO COST TO THE APPELLANT SOCIE TY. 24. THE CASES RELIED UPON BY THE APPELLANT ARE BASE D ON THE PRINCIPLE OF MUTUALITY. THE AO HAS DEALT WITH ALL THE CASE LAWS CITED BY THE APPELLANT AND HAVE DISTINGUISHED THEM. HOWEVER, IN THIS CASE, THE TRANSACTION IS NOT TAKING PLACE BETWEEN THE MEMBERS OF THE SOCIETY AND THE SOCIETY ITSELF .WHO. ARE OTHERWISE TWO SEPARATE LEGAL ENTIT IES IF A TRANSACTION TAKES PLACE WITH ANY THIRD PARTY. THE PRINCIPLE OF MUTUALITY THEREFORE FAILS WITH REFERENCE TO THE RIGHT AND THE CAPITAL ASSET WHICH HAS BEEN LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 12 TRANSFERRED BY THE SOCIETY TO A THIRD PARTY. AS PER THE PROVISIONS OF LAW, IT IS THE APPELLANT SOCIETY WHICH IS LIABLE TO PAY TAX SUCH CAPITAL GAINS. THEREFORE, IT IS HELD THAT :- (I) THE APPELLANT IS THE OWNER OF LAND ADMEASURING 3367 SQ.MTRS. AT PALI HILL, BANDRA (W), MUMBAI. EVEN THE HON'BLE BOM BAY HIGH COURT HAS CONFIRMED THE RIGHTS OF SOCIETY IN RESPECT OF THIS LAND. (II) LAND IS A BUNDLE OF RIGHTS. IN THE INSTANT CASE, WH EN LAND WAS PURCHASED (I.E., OWNERSHIP OF LAND ACQUIRED BY THE SOCIETY IN CONSEQUENCE TO THE EXECUTION OF CONVEYANCE DEED IN FAVOUR OF IT), ALL RIGHTS PRESENT AND FUTURE EMBEDDED IN IT ARE ALSO A CQUIRED. (III) THE APPELLANT SOCIETY HAS TRANSFERRED ITS TDR ENTITLEMENT TO THE DEVELOPERS. CONSIDERATION RECEIVED BY THE SOCIETY A ND THE MEMBERS IN THIS REGARD UNDER CONSENT TERMS WHICH ARE NOTHING B UT AGREEMENT TOWARDS TRANSFER OF THE TDR ENTITLEMENT OF THE SOCI ETY. (IV) THEREFORE, THE BENEFIT IN THE FORM OF TDR ARIS ING OUT OF THE EXISTING LAND IS AN IMMOVABLE PROPERTY, THE TRANSFER OF WHIC H TANTAMOUNT TO TRANSFER OF A LONG TERM CAPITAL ASSET AND HENCE LIA BLE TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAIN. (V) HENCE, THE TOTAL CONSIDERATION OF RS. 11,66,00, 000/- (RS. 3,08,00,000 + RS.8,58,00,000) RECEIVED BY THE SOCIE TY AND THE MEMBERS IN THIS REGARD IS CHARGEABLE TO TAX AS INCO ME UNDER THE HEAD LONG TERM CAPITAL GAIN IN THE HANDS OF THE APPELL ANT SOCIETY IN THE A.Y. 2007-2008. THE ACTION OF THE A.O. IS FULLY JUSTIFIE D IN THIS REGARD. 25. THE A.O. HAS DISCUSSED ELABORATELY THE GROUNDS ON WHICH THE RECEIPT OF RS.1L66 CRORES IS TO BE TAXED AS CAPITAL GAINS I N THE HANDS OF THE APPELLANT SOCIETY. THE A.O. HAS GIVEN ADEQUATE REAS ONING AND QUOTED RELEVANT CASE LAWS FOR DOING SO. I AGREE WITH THE R EASONING AND ARGUMENTS GIVEN BY THE A.O. FOR MAKING THE IMPUGNED ADDITIONS. THEREFORE, IN MY CONSIDERED OPINION, CAPITAL GAINS HAS ACCRUED ON THE SUM OF RS.11.66 CRORES TO THE APPELLANT SOCIETY. TH E CASE LAWS CITED BY THE APPELLANT DO NOT HELP THE CAUSE OF THE APPELLAN T AS DISCUSSED ABOVE. THEREFORE, THE AMOUNT OF ` .11.66 CRORES IS LIABLE TO BE TAXED AS CAPITAL GAINS OR THE APPELLANT SOCIETY AND THE A.O. HAS RIG HTLY TAXED THE SAME IN THE HANDS OF THE APPELLANT SOCIETY. THE ACTION OF T HE AO FOR DOING SO IS ACCORDINGLY CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE FACTS AS WAS INCORPORATED IN THE ASSESSMENT ORD ER AS WELL AS THE COMMISSIONER (APPEALS)S ORDER AND ALSO REFERRED TO THE VARIOUS DOCUMENT IN THE PAPER BOOK TO CLARIFY THE FACTS INCORPORATED IN THE IMPUGNED ORDERS. HE SUBMITTED THAT, IN FACT, THERE IS NO TRANSFER IN TH IS CASE BUT PERMISSION WAS GIVEN TO USE TDR AND NO PART OF THE LAND WAS EVER T RANSFERRED BY THE SOCIETY BUT MAINLY PERMISSION TERMS TO THE DEVELOPER TO CAR RY OUT THE DEVELOPMENT NEAR THE EXISTING BUILDING. THEREFORE, THERE IS NO QUESTION OF ANY TRANSFER OF LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 13 TDR. IN SUPPORT OF THIS CONTENTION, HE HEAVILY RELI ED UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN RAJ RATAN PALACE, ITA NO.674/MUM./2004, ORDER DATED 25 TH FEBRUARY 2011 . WITHOUT PREJUDICE, HE SUBMITTED THAT EVEN OTHERWISE ALSO, THE CHARGEABILITY OF CAPITAL GAIN O N ACCOUNT OF TRANSFER OF TDRS HAS BEEN SETTLED BY VARIOUS DECISIONS OF THE TRIBUN AL, MUMBAI BENCHES, AND HE REFERRED TO SEVERAL SUCH DECISIONS. SOME OF THE DEC ISIONS RELIED UPON BY HIM ARE GIVEN AS UNDER: 1. JETHALAL D. MEHTA V/S DCIT, [2005] 2 SOT 422 (MUM.) . 2. AURO VILLE CO. HSG. SCT. LTD. V/S ACIT, ITA NO.570/ M/2008, ORDER DATED 31 ST MARCH 2010. 3. OM SHANTI CO. OP. SCTY. LTD. V/S ITO, ITA NO.2550/M /2008, ORDER DATED 28 TH AUGUST 2009. 4. NEW SHAILAJA CO. OP. HSG. SCT. LTD. V/S ITO, [2009] 121 TTJ (MUM.) 62, ORDER DATED 2 ND DECEMBER 2008. 5. ITO V/S LOTIA COURT CO. OP. HSG. SCT. LTD., (2008) 12 DTR (MUM.) 396, ORDER DATED 6 TH JUNE 2008. 6. MAHESHWAR PRAKASH CO. OP. HSG. SCT. LTD. V/S ITO, [ 2009] 118 ITD 223 (MUM.), ORDER DATED 15 TH MAY 2008. 14. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE, RELYING ON THE REASONS GIVEN BY THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS), ARGUED AT LENGTH AS TO HOW THE ASSESSEES CASE IS NOT COVERED BY THE JUDGMENT IN B.C. SRINIVASA SHETTY (S UPRA) AND THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS OF THE PARTIES AND HAVE PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. INSOFAR AS THE FACTS NARRATED HEREIN ABOVE, THERE IS NO DISPUTE. THE CRUX OF THE ISSUE BEFORE US IS THAT, W HETHER THE ASSESSEE SOCIETY WHICH WAS ENTITLED TO UTILISE THE TDR IN RESPECT OF THE LAND ADMEASURING 3,367 SQ.MTRS. OWNED BY IT IN THE RATIO OF 1:1 IN ACCORDA NCE WITH THE DEVELOPMENT CONTROL RIGHTS, 1991, AND HAS TRANSFERRED THIS RIGH T TO ARIAL VIEW COOPERATIVE HOUSING SOCIETY, VIDE TERMS OF CONSENT DATED 19 TH DECEMBER 2006 BY WHICH THE ASSESSEE AND ITS MEMBERS HAD RECEIVED ` 11,66,00,000, SPREAD OVER IN LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 14 ASSESSMENT YEAR 200708 AND 200809, AMOUNTS TO TRA NSFER. SECONDLY, WHETHER THE AMOUNT RECEIVED FROM SUCH TRANSFER / AS SIGNMENT OF TDRS CAN BE SAID TO BE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS . THE CONCEPT OF TDRS HAS BEEN EXPLAINED IN SEVERAL DECISIONS OF THE TRIBUNAL. AS CULLED OUT FROM THE DECISION RELIED UPON BY THE ASSESSEE, WHIC H HAS BEEN DISCUSSED IN SUCCEEDING PARAGRAPHS, THE CONCEPT OF TDRS ORIGINAT ES FROM THE REGULATION OF DEVELOPMENT CONTROL REGULATION OF GREATER MUMBAI I.E., DCR, 1991 , WHEREIN IT WAS PROVIDED THAT THE OWNER OR A LESSEE OF A PLOT, WHICH WAS RESERVED FOR PUBLIC PURPOSE UNDER THE DEVELOPMENT P LAN OF DCR, WOULD BE ELIGIBLE FOR AWARD OF COMPENSATION BY WAY OF DEVELO PMENT RIGHT CERTIFICATE OF EQUIVALENT FLOOR SPACE INDEX (FSI). IN OTHER WORDS, THE GOVT. DECIDED TO GRANT TRANSFERABLE DEVELOPMENT RIGHTS TO THE LAND OWNERS, WHO AGREED TO SURRENDER THEIR LANDS ON FSI FOR PUBLIC PURPOSES. THESE TDRS CAN BE TRANSFERRED TO OTHER LAND OWNERS OR BUILDING FOR CONSTRUCTING OF THE BUI LDING OR ADDITIONAL FLOORS. THE PLOTS ON WHICH THOSE DEVELOPMENT RIGHTS COULD BE US ED WERE TERMED AS RECEIVING PLOTS AND ON THESE PLOTS IN ADDITION TO WHATEVER FSI WER E ORIGINALLY AVAILABLE TO THE OWNER OR LESSOR OF SUCH PLOTS, ADD ITIONAL FSI CAN BE ALLOWED TO THE OWNER OR LESSOR ON USING THE TRANSFERABLE DEVEL OPMENT RIGHTS CONTAINED IN DRCS FOR THE PURPOSE OF CONSTRUCTION OF THE BUILDIN G. THUS, THE TDR IS AVAILABLE TO THE OWNER / LESSEE OF THE LAND WHICH S URRENDERS TO THE GOVT. AND, THEREFORE, THE ACQUISITION OF SUCH TDRS ARE TO DETR IMENT THE LAND SURRENDERED BY THE OWNER / LESSEE, AND SUCH TDRS CAN BE UTILISE D ON ANY PLOT VACANT OR ALREADY DEVELOPED OR BY ERECTION OF ADDITIONAL STOR EYS SUBJECT TO THE FSI AVAILABLE IN THE DCR. THE CONTENTIONS AND REASONING OF THE ASSESSING OFFICER TO THE EXTENT THAT THE WORD PROPERTY NOT ONLY INCLUDES TANGIBLE ASSET BUT ALSO INTANGIBLE ASSET AND, THEREFORE, ADDITIONAL FSI AVA ILABLE TO THE ASSESSEE IN VIEW OF DCR, 1991, WAS A RIGHT ACQUIRED BY VIRTUE OF BEI NG OWNER OF THE PLOT IS CORRECT. THUS, SUCH A RIGHT IS DEFINITELY A CAPITAL ASSET HELD BY THE ASSESSEE AND ASSIGNMENT OF SUCH A RIGHT IN FAVOUR OF THE DEV ELOPER AMOUNTS TO TRANSFER OF CAPITAL ASSET. IN OUR CONCLUSION, TRANSFER OF TD RS AMOUNTS TO TRANSFER OF A CAPITAL ASSET . 16. HOWEVER, IT HAS TO BE SEEN AS TO WHETHER THERE WAS ANY KIND OF COST IN ACQUIRING THESE RIGHTS. AS STATED EARLIER, THIS RIG HT WAS ACQUIRED AUTOMATICALLY LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 15 BY VIRTUE OF DCR, 1991, AND WHAT THE ASSESSEE HAS T RANSFERRED IS NOT THE PLOT OR THE BUILDING BUT A RIGHT, PARTING WITH WHICH, DI D NOT RESULT IN PARTING WITH LAND OR BUILDING. THEREFORE, SUCH A RIGHT CANNOT BE SAID TO BE EMBEDDED IN THE LAND AS HELD BY THE ASSESSING OFFICER AND THE LEARN ED COMMISSIONER (APPEALS), BECAUSE THERE WAS NO DETRIMENT TO COST OF LAND BY G RANTING SUCH RIGHTS. EVEN THOUGH, THERE WAS A TRANSFER OF A CAPITAL ASSET, HO WEVER, THERE WAS NO COST OF ACQUISITION OR ANY COST CAN BE ASCRIBED TO SUCH RIG HT, BECAUSE THE LAND AND THE BUILDING CONTINUED WITH THE POSSESSION OF THE ASSES SEE EVEN WHEN TRANSFER OF TDR WAS MADE TO THE DEVELOPER. THE REASONING AND TH E LOGIC GIVEN BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APP EALS) THAT THESE DEVELOPMENT RIGHTS WERE EMBEDDED WITH THE LAND AND, THEREFORE, THE SUM CHARGEABLE TO COST HAS TO BE ASCRIBED, IN OUR CONSI DERED OPINION, IS NOT TENABLE FOR THE REASON THAT THESE DEVELOPMENT RIGHTS HAVE B EEN AVAILABLE TO THE ASSESSEE AS PER THE DCR, 1991, AND IS SEPARATE AND DISTINCT FROM THE ORIGINAL RIGHT IN LAND AND, HENCE, IT CANNOT BE HELD THAT SU CH A RIGHT WAS EMBEDDED IN THE LAND. THEREFORE, THE CONCLUSION DRAWN BY THE AS SESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) ON THIS SCORE GETS F AILED. IN SUCH A SITUATION, COMPUTATIONAL PROVISIONS OF SECTION 48, ALSO GETS F AILED BECAUSE NO COST OF ACQUISITION CAN BE ASCRIBED TO A RIGHT WHICH HAS EM ANATED FROM DCR, 1991. THIS ISSUE HAS COME UP SEVERAL TIMES AND HAS HAS BE EN DEALT AND DISCUSSED IN DETAIL BY VARIOUS DECISIONS OF MUMBAI COORDINATE B ENCH OF THE TRIBUNAL, AS HAVE BEEN REFERRED TO BY THE LEARNED COUNSEL. IN TH ESE CASES, DEEP ANALYSIS OF APPLICABILITY OF SECTION 48, AND B.C. SRINIVAS SHEE TS CASE HAS BEEN DONE. FOR THE SAKE OF BETTER APPRECIATION, GIST OF FEW OF THE M ARE INCORPORATED HEREIN BELOW. (I) THE TRIBUNAL IN JETHALAL D. MEHTA, OBSERVED AND HEL D AS FOLLOWS: WE MAY MENTION THAT AS FAR CADELL WVG. MILL CO. (P .) LTD. CASE (SUPRA) IS CONCERNED, THE SPECIAL BENCH DECISION OF THE TRI BUNAL HAS SINCE BEEN REVERSED BY THE HONBLE BOMBAY HIGH COURT IN THE JU DGMENT REPORTED AS CADELL WVG. MILL CO. (P.) LTD. V. CIT[2001] 249 ITR 2652. SUFFICE TO SAY THAT FOR THIS REASON ALONE REVENUES REJECTION OF A SSESSEES CLAIM, BY RELYING UPON CADELL WVG. MILL CO. (P.) LTD. S CASE (SUPRA IS NO LONGER SUSTAINABLE IN LAW. WE NEED NOT GO FURTHER INTO THI S ASPECT OF THIS ASPECT OF THE MATTER. THE ONLY OTHER REASON OF REJECTING T HE CLAIM THAT THE LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 16 ASSIGNMENT OF ADDITIONAL FLOOR SPACE INDEX IS THAT, ACCORDING TO THE AUTHORITIES BELOW, THIS RIGHT HAS COST OF ACQUISITI ON WHICH CONSISTS OF COST OF PURCHASE OF PLOT, COSTS OF GETTING THE DESIGNS A PPROVED AND COSTS OF CONSTRUCTING THE BUILDING. IN THIS CONTEXT, HOWEVER , WHAT IS NECESSARY TO APPRECIATE IS THAT THE RIGHTS ASSIGNED TO THE DEVEL OPER ARE THE RIGHTS TO RECEIVE AND APPLY THE TRANSFERABLE DEVELOPMENT RIGH TS, AND THAT THESE RIGHTS AROSE TO THE ASSESSEE BY THE VIRTUE OF INTRO DUCTION OF DEVELOPMENT CONTROL REGULATION FOR GREATER MUMBAI 1991. UNTIL THE POINT OF TIME THESE DEVELOPMENT REGULATION CAME INTO EXISTENCE, T HE ASSESSEE DID NOT HAVE RIGHT TO RECEIVE AND APPLY THE TRANSFERABLE DE VELOPMENT RIGHTS, IT IS THESE RIGHTS ON THE ASSIGNMENT OF WHICH THE ASSESSE E HAS RECEIVED THE IMPUGNED AMOUNT. THEREFORE, THE EXPENDITURE INCURRE D ON PURCHASE OF PLOT AND CONSTRUCTION THEREON CANNOT BE SAID TO BE THE COSTS FOR ACQUISITION OF THESE RIGHTS. THE RIGHTS ARE ACQUIRE D BY THE VIRTUE OF BEING OWNER OF THE PLOT IN THE SPECIFIED AREA BUT THAT DO ES NOT MEAN THAT THE COST INCURRED ON THE PLOT IS THE COST OF ACQUIRING THESE RIGHTS. THE EFFECT OF THE RIGHTS BEING RELATABLE TO THE LEASEHOLD RIGH TS IN THE PLOT COULD AT BEST BE THAT THE AMOUNT RECEIVED BY THE ASSESSEE ON ASSIGNMENT OF RIGHTS TO RECEIVE THE TRANSFERABLE DEVELOPMENT RIGH TS ENDS UP REDUCING EFFECTIVE COST OF ACQUISITION OF THE LAND AND BUILD ING IN THE SAID PLOT. THEREFORE, AS AND WHEN THE ASSESSEE TRANSFERS THE S AID PLOT, BUILDING OR ANY PORTION THEREOF AND WHILE DETERMINING CAPITAL G AINS ARISING ON SUCH SALE, THE COST OF ACQUISITION MAY STAND REDUCED BY THE AMOUNT RECEIVED BY THE ASSESSEE ON ASSIGNMENT OF RIGHTS TO RECEIVE THE TDRS. THE CIT(A)S OBSERVATIONS THAT THIS RIGHT CANNOT BE SAI D TO BE WITHOUT ANY COST OF ACQUISITION BECAUSE THE TDRS HAVE BEEN RECE IVED ON SURRENDER OF RESERVED PLOT TO THE GOVERNMENT IS EX FACIE INCORRE CT INASMUCH AS WHAT WE ARE REALLY CONCERNED WITH IS THE RIGHT TO RECEIV E THE TDR ON THE PLOT OWNED BY THE ASSESSEE, AND NOT WITH THE RIGHT TO RE CEIVE THE TDR FROM THE GOVERNMENT. THE PERSON GETTING TDRS FROM THE GO VERNMENT HAS TO SURRENDER THE RESERVED PLOT BUT THE PERSON- ON WHOS E PLOT SUCH TDRS CAN BE USED, AS IS THE CASE WE ARE IN SEISIN OF, DO ES NOT DO ANYTHING MORE THAN OWNING THE RECEIVING PLOT. THE COSTS IN CURRED BY A THIRD PARTY FOR ACQUIRING THE TDR HAS NOTHING TO DO WITH THE RIGHT TO AVAILING THE SAID TDR ON ASSESSEES PLOT. SIMILARLY, THE COS TS OF PLOT AND COSTS OF CONSTRUCTION ARE ALSO NOT THE COST OF ACQUISITION O F THESE RIGHTS. WHAT THE ASSESSEE HAS TRANSFERRED IS NOT THE PLOT OR THE BUI LDING, BUT A RIGHT PARTING WITH WHICH DOES NOT RESULT IN PARTING WITH LAND OR BUILDING. THE COSTS OF OBTAINING BMC APPROVAL FOR THE BUILDING PL AN CAN ALSO NOT BE SAID TO BE THE COSTS OF ACQUISITION OF THESE RIGHTS AS THESE RIGHTS DO NOT ARISE BY THE VIRTUE OF GETTING THESE APPROVALS BUT BY THE VIRTUE OF A LEGAL RIGHT INDEPENDENT THEREOF. THE LAW IS TRITE, AND TH ERE IS NO DISPUTE ON THE SAID POSITION, THAT WHEN AN ASSET HAS NO COST OF AC QUISITION, THE GAINS ON SALE OR TRANSFER OF SAME CANNOT BE BROUGHT TO TAX. THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF (SHRI B.C. SRINIVASA SETTY [1981J 128 ITR 294] CLEARLY HOLDS SO. FOR ALL THESE REASONS, WE ARE OF THE CONSIDERED VIEW THAT THE RECEIPTS ON SALE OF AS SIGNMENT OF RIGHTS TO RECEIVE TDR5 ARE NOT LIABLE TO TAX. THE AUTHORITIES BELOW ERRED IN LAW AND ON FACTS IN HOLDING TO THE CONTRARY. (II) FURTHER, THE TRIBUNAL IN MAHESHWAR PRAKASH 2 C O. OP. HSG. SCT. LTD . (SUPRA), AFTER RELYING UPON THE DECISIONS IN JETHAL AL D. LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 17 MEHTA (SUPRA) AND D.C. SRINIVASA SHETTY (SUPRA), OB SERVED AND HELD AS FOLLOWS: 12. THIS ASPECT OF THE MATTER HAS BEEN EXAMINED BY THE TRIBUNAL IN THE CASE OF JETHALAL D. MEHTA (SUPRA). IN THAT CASE, TH E ASSESSEE HAD ACQUIRED THE LEASEHOLD RIGHTS IN A PLOT OF LAND IN OCTOBER, 1971 ON WHICH THE ASSESSEE HAD CONSTRUCTED TWO STOREYS BUILDING C ONTAINING SOME FLATS AND THE FSI AVAILABLE ON THAT WAS FULLY EXHAUSTED. HOWEVER, BY A VIRTUE OF THE DEVELOPMENT CONTROL REGULATIONS, 1991, THE A SSESSEE BECAME THE OWNER OF THE VALUABLE RIGHT OF AVAILING ADDITIONAL FLOOR SPACE INDEX THROUGH TRANSFER DEVELOPMENT RIGHTS. ACCORDINGLY HE ENTERED INTO AN ARRANGEMENT WITH A DEVELOPER WHO USED TDR ON ASSESS EES FLAT TO AVAIL ADDITIONAL FSI AGAINST SUCH CONSIDERATION. THE QUES TION AROSE WHETHER THE ASSESSEE COULD BE CHARGEABLE TO TAX UNDER SECTI ON 45 OF THE ACT IN RESPECT OF THE CONSIDERATION RECEIVED BY HIM. THE C ONTENTION OF THE ASSESSEE BEFORE THE AUTHORITIES WAS THAT THERE WAS NO COST OF ACQUISITION OF THE RIGHT OBTAINED BY HIM AND THEREFORE, THE CAP ITAL GAIN COULD NOT BE COMPUTED IN VIEW OF THE HONBLE SUPREME COURT JUDGM ENT IN THE CASE OF B.C. SHRINIVASA SHETTY (SUPRA). THE LOWER AUTHORITI ES DID NOT ACCEPT SUCH CONTENTION. HOWEVER, THE TRIBUNAL UPHELD THE CONTEN TION OF THE ASSESSEE BY HOLDING THAT RIGHT TO CONSTRUCT THE ADDITIONAL F LOORS UNDER THE DEVELOPMENT CONTROL REGULATION, 1991 WAS ACQUIRED W ITHOUT INCURRING ANY COST AND THEREFORE, ASSESSEE WAS NOT CHARGEABLE TO TAX IN RESPECT OF SUCH RECEIPTS IN VIEW OF THE AFORESAID HONBLE SUPR EME COURT JUDGMENT. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE AF ORESAID CASE AND THEREFORE, THE SAID DECISION WOULD SQUARELY APPLY T O THE PRESENT CASE. EVEN AS A RULE OF PRECEDENT, WE ARE BOUND BY THE DE CISION OF A CO- ORDINATE BENCH IN THE ABSENCE OF ANY DECISION OF HI GH COURT OR THE SUPREME COURT. 13. THE CONTENTION OF THE REVENUE THAT THE AFORESAI D DECISION OF THE TRIBUNAL IS NOT APPLICABLE AFTER THE AMENDMENT OF S UB-SECTION (2) OF SECTION 55 OF THE ACT IS ALSO WITHOUT FORCE. SECTIO N 55(2)(A) OF THE ACT WHICH IS RELEVANT WITH REFERENCE TO THE CONTENTION OF THE REVENUE READS AS UNDER : (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, COST OF ACQUISITION, (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS [OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS] [OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THIN G] [OR RIGHT TO CARRY ON ANY BUSINESS], TENANCY RIGHTS, STAGE CARRIAGE PE RMITS OR LOOM HOURS, (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURC HASE PRICE; AND (II) IN ANY OTHER CASE [NOT BEING A CASE FALLING UN DER SUB-CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49], SHALL BE TA KEN TO BE NIL. CLAUSE, (AA) AND CLAUSE (AB) OF SECTION 55(2) DEAL WITH THE CASE OF SHARES OR SECURITIES AND, THEREFORE, THE SAME ARE N OT RELEVANT FOR DISPOSAL OF THIS APPEAL AND, THEREFORE, THE SAME AR E NOT REPRODUCED HERE. THE PERUSAL OF SECTION 55(2)(A) REVEALS THAT COST OF ACQUISITION IS LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 18 TO BE TAKEN AT NIL IN THOSE CASES WHERE THE CAPITAL ASSET TRANSFERRED IS EITHER GOODWILL OF BUSINESS OR THE TRADEMARK OR A B RAND NAME ASSOCIATED WITH BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIER PERMITS OR LOOM HOURS. IN THE PRESENT CASE, THE ASS ESSEE IS NOT CARRYING ON ANY BUSINESS AND THE RIGHT TO CONSTRUCT ADDITION AL FLOORS IS NOT COVERED BY ANY OF THE ASSETS MENTIONED IN THE AFORE SAID SUB-SECTION (2) OF SECTION 55. THEREFORE, THE AMENDED PROVISIONS OF SECTION 55(2) DO NOT APPLY TO THE PRESENT CASE AND THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN TAKING THE COST OF ACQUISITION OF THE CAPITAL ASSET BEING RIGHT TO CONSTRUCT THE ADDITIONAL FLOORS AS NIL. 14. WE MAY ALSO REFER TO THE CONTENTION OF THE LEAR NED DR THAT RIGHT TO CONSTRUCT THE ADDITIONAL FLOORS WAS EMBEDDED IN THE LAND AND, THEREFORE, THE PRESENT CASE WAS AKIN TO THE ISSUE OF BONUS SHA RES AND CONSEQUENTLY, IT CANNOT BE SAID THAT THERE IS NO CO ST OF ACQUISITION IN RESPECT OF SUCH RIGHT. WE ARE UNABLE TO ACCEPT SUCH CONTENTION OF THE LEARNED DR FOR TWO REASONS. FIRSTLY, BECAUSE IT IS NOT THE CASE OF THE ASSESSING OFFICER OR THE CIT(A) SINCE THE COST OF A CQUISITION WAS TAKEN BY THEM AS NIL AS PER THE AMENDED PROVISIONS. SECONDLY , BECAUSE THE THEORY OF SPREADING OVER THE COST OF ORIGINAL SHARE OVER THE ORIGINAL SHARES AND BONUS SHARES WAS BASED ON THE FACT THAT BONUS SHARES WERE ISSUED TO THE DETRIMENT OF THE ORIGINAL SHARES AS H ELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. DALMIYA INVESTM ENT CO. [1964] 52 ITR 567. IN THAT CASE, IT WAS HELD THAT BY ISSUE OF BONUS SHARES THE PRICE OF ORIGINAL SHARES HAD DECLINED IN THE MARKET AND, THEREFORE, IT COULD NOT BE SAID THAT ACQUISITION OF BONUS SHARES WAS WITHOU T COST. HOWEVER, IN THE PRESENT CASE, THE RIGHT TO CONSTRUCT ATTACHED W ITH THE LAND ON THE DATE OF PURCHASE OF LAND HAD ALREADY BEEN EXHAUSTED BY CONSTRUCTION OF FLATS PRIOR TO 1991 AS PER THE FSI AVAILABLE ACCORD ING TO LAW AS IT WAS IN FORCE. THEREFORE, THERE WAS NO FURTHER RIGHT TO CON STRUCT ANY FLAT ON THAT LAND. IT WAS BECAUSE OF DCR, 1991 THAT ADDITIONAL R IGHT ACCRUED TO THE ASSESSEE WHICH WAS DISTINCT AND SEPARATE FROM THE O RIGINAL RIGHT. THEREFORE, IT CANNOT BE SAID THAT SUCH RIGHT EMBEDD ED IN THE LAND. EVEN ASSUMING, FOR THE SAKE OF ARGUMENT, THAT SUCH RIGHT EMBEDDED IN THE LAND, THERE WAS NO DETRIMENT TO THE COST OF LAND BY GRANTING SUCH RIGHT ON THE ASSESSEE-SOCIETY. ON THE CONTRARY, PRICE OF THE LAND HAD INCREASED BECAUSE OF THE ADDITIONAL RIGHT MADE AVAILABLE TO T HE ASSESSEE-SOCIETY. THEREFORE, THE THEORY APPLIED BY THE HONBLE SUPREM E COURT IN THE CASE OF BONUS SHARES CANNOT BE APPLIED TO THE PRESENT CA SE. (III) IN NEW SHAILAJA CO. OP. HSG. SCT. LTD. (SUPR A), IT WAS OBSERVED AND HELD AS FOLLOWS: HELD THE ASSESSEE WAS THE OWNER OF THE LAND AND BUILDIN G AND CONTINUED TO REMAIN THE SAME EVEN AFTER TRANSFER OF THE SAID CAP ITAL ASSET. THUS, THE COST OF THE LAND AND BUILDING OF THE EXISTING STRUC TURE COULD NOT BE ATTRIBUTED TO THE ADDITIONAL FSI RECEIVED BY MEANS OF 1991 RULES. IT IS TRUE THAT SUCH RIGHT IS A CAPITAL ASSET AS PER THE PROVISIONS OF S. 2(14) BUT IN ORDER TO COMPUTE CAPITAL GAINS APART FROM TH E EXISTENCE OF CAPITAL ASSET, THERE SHOULD BE SALE CONSIDERATION ACCRUING AS A RESULT OF TRANSFER LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 19 OF CAPITAL ASSET AS WELL AS THE COST OF ACQUISITION OF THE ASSET ALONG WITH THE COST OF ANY IMPROVEMENT THERETO, IF ANY. SEC. 4 8 SETS OUT THE MODE OF COMPUTATION OF INCOME UNDER THE HEAD CAPITAL GAI NS BY PROVIDING THAT THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF A CAPITAL ASSET ALONG WITH THE COST OF ACQUISITION AND COST OF ANY IMPROVEMENT, IF ANY, SHALL BE DEDUCTED FROM THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF CAPITAL ASSET. TRANSFER OF CAPITAL ASSET WHICH DOES NOT HAV E ANY COST OF ACQUISITION DOES NOT RESULT INTO CAPITAL GAINS CHAR GEABLE TO TAX UNDER S. 45. THE LEGISLATURE IN ITS WISDOM BROUGHT OUT CERTA IN CATEGORIES OF CAPITAL ASSETS UNDER S. 55(2) AS HAVING COST OF ACQUISITION AT RS. NIL, WHERE SUCH ASSETS HAVE NOT BEEN PURCHASED BY THE ASSESSEE FOR CONSIDERATION. THE EFFECT OF THIS SUB-SECTION IS THAT WHEN THE ASSETS SO SPECIFIED IN SUB-S. (2) OF S. 55 ARE TRANSFERRED, THEN THE COST OF ACQU ISITION HAS BEEN TAKEN AT RS. NIL EXCEPT WHERE THE ASSESSEE HAD ACQUIRED S UCH ASSETS BY MEANS OF PURCHASING FROM THE PREVIOUS OWNER, AND THE COMP UTATION OF THE CAPITAL GAIN WOULD BE DONE ACCORDINGLY. THERE IS A DIFFERENCE IN THE SITUATION WHEN COST OF ACQUISITION IS RS. NIL AND W HERE THE COST OF ACQUISITION CANNOT BE ASCERTAINED OR NO COST OF ACQ UISITION HAS BEEN INCURRED. THE ITEMS OF CAPITAL ASSETS SPECIFIED IN S. 55(2) ARE THOSE FOR WHICH THE COST OF ACQUISITION SHALL BE TAKEN AT RS. NIL FOR COMPUTING CAPITAL GAINS. HOWEVER IF THE ASSESSEE HAD NOT INCU RRED ANY COST OF ACQUISITION ON A CAPITAL ASSET AND SUCH CAPITAL ASS ET DOES NOT FALL IN THE CATEGORY OF THE CAPITAL ASSETS SPECIFIED IN S. 55(2 ) THEN NO CAPITAL GAIN WOULD BE CHARGED. IT IS ABUNDANTLY CLEAR THAT THE A SSESSEE HAD NOT INCURRED ANY COST OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM THE 1991 RULES MAKING THE ASSESSEE ELIGIBLE TO ADDITIONAL FSI. THE LAND AND BUILDING EARLIER IN THE POSSESSION OF THE ASSESSEE CONTINUED TO REMAIN WITH IT AS SUCH EVEN AFTER THE TRANSFER OF T HE RIGHT TO ADDITIONAL FSI FOR RS. 48.96 LAKHS. THE DEPARTMENTAL REPRESENT ATIVE COULD NOT POINT OUT ANY PARTICULAR ASSET AS SPECIFIED IN SUB- S. (2) OF S. 55, WHICH WOULD INCLUDE THE RIGHT TO ADDITIONAL FSI. NO CAPIT AL GAINS COULD BE CHARGED ON THE TRANSFER OF THE ADDITIONAL FSI BY TH E ASSESSEE FOR SALE CONSIDERATION OF RS. 48.96 LAKHS FOR THE REASON THA T IT HAS NO COST OF ACQUISITION.JETHALAL D. MEHTA VS. DY. CIT (ITA NO. 672/MUM/2000) FOLLOWED; CIT VS. B.C. SRINIVASA SETTY (1981) 21 CT R (SC) 138 : (1981) 128 ITR 294 (SC) APPLIED. 17. IN OTHER DECISIONS ALSO, SIMILAR VIEW HAS BEEN TAKE N BY THE TRIBUNAL. THUS, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE AFORESAID DECISIONS AND ALSO AS PER OUR FINDINGS AND OBSERVATIONS GIVEN ABO VE, WE HOLD THAT EVEN THOUGH THE TRANSFER OF TDR AMOUNTS TO TRANSFER OF A CAPITAL ASSET, HOWEVER, THE SAME CANNOT BE SUBJECTED TO TAX UNDER THE HEAD CAPITAL GAIN FOR THE REASON THAT THERE IS NO COST OF ACQUISITION IN ACQU IRING THE RIGHT WHICH HAS BEEN TRANSFERRED AND COMPUTATIONAL MODE GIVEN IN SE CTION 48, THUS FAILS IN THIS CASE. THEREFORE, TAXING OF THE RECEIPT FROM TRANSFE R OF TDRS UNDER THE HEAD CAPITAL GAIN BY THE ASSESSING OFFICER FOR A SUM OF ` 10,70,46,274, CANNOT BE LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 20 SUSTAINED. ACCORDINGLY, THE SAME IS DIRECTED TO BE DELETED AND ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS THUS REVERSED. 18. GROUND NO.7, IS AN ALTERNATIVE GROUND AND, THEREFOR E, NO SEPARATE ADJUDICATION IS REQUIRED. 19. GROUND NO.8, RELATES TO CHARGING OF INTEREST UNDER SECTION 234B. 20. BEFORE US, THE LEARNED COUNSEL CONTENDS THAT THIS G ROUND IS CONSEQUENTIAL IN NATURE. ACCORDINGLY, WE DIRECT THE A.O TO GIVE CONSEQUENTIAL EFFECT IN ACCORDANCE WITH LAW WHILE RE-COMPUTING TH E INCOME OF THE ASSESSEE. 21. 2 $N '* +2$ 3 #% '$ O 3 5$ PQ R 21. IN THE RESULT, APPEAL IS TREATED PARTLY ALLOWED . % 3 , S T*N 14 TH SEPTEMBER 2012 3 U R ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER 2012 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- #$ #$ #$ #$ %& %& %& %& ' ' ' ' AMIT SHUKLA JUDICIAL MEMBER MUMBAI, T* T* T* T* DATED: 14 TH SEPTEMBER 2012 % 3 /'$#V WV,$ / COPY OF THE ORDER FORWARDED TO : (1) '* +2$ / THE ASSESSEE; (2) 5 ' / THE REVENUE; (3) X () / THE CIT(A); (4) X / THE CIT, MUMBAI CITY CONCERNED; (5) V'[U /'$'* , , / THE DR, ITAT, MUMBAI; (6) U+ \ / GUARD FILE. 0V$ /'$ / TRUE COPY %* / BY ORDER / 5. ] / PRADEEP J. CHOWDHURY '2_ '*5 ]' / SR. PRIVATE SECRETARY LAND BREEZ CO. OPERATIVE HOUSING SOCIETY LTD. 21 ` / P 5 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI SELF DRAFTED DATE INITIAL ORIGINAL DICTATION PAID IS ENCLOSED AT THE END OF T HE FILE 1. DRAFT DICTATED ON 5.9.2012 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 12.9.2012 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 12.9.2012 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 12.9.2012 JM/AM