ITO WD 21(1)(1), MUMBAI V. BHARAT RAOJIBHAI PATEL, MUMBAI

ITA 5038/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3551 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Sale consideration of property below Jantri Value; Capital asset
• Section: 143(3); 50C; 2(14); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5038/MUM/2010 ASSESSMENT YEAR : 2007-08 ITO WARD 21(1)(1), MUMBAI VS. SHRI BHARAT RAO JIBHAI PATEL 34, RAM NIWAS VALABHNAGAR SOCIETY, N S ROAD NO.3, JVPD, VILE PARLE (W), MUMBAI- 400 056 PAN AABPP3141Q (APPELLANT) RESPONDENT) APPELLANT BY : SMT BHARATI SINGH RESPONDENT BY : SHRI SANJAY R PARIKH DATE OF HEARING : 23 .0 5 .201 6 DATE OF PRONOUNCEMENT : 31 .0 5 . 201 6 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER THIS APPEAL BY REVENUEE IS ARISING OUT OF THE ORDER OF THE CIT(A) 32, MUMBAI, IN APPEAL NO.CIT(A)-32/21(1)(1)/IT-261/09-1 0 DATED 31.03.2010. THE ASSESSMENT WAS FRAMED BY THE ITO 21(1)(1), MUMB AI, FOR A.Y. 2007-08 VIDE HIS ORDER DATED 20.11.2009 U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE TWO INTERCONNECTED ISSUES RAISED BY THE REVE NUE ARE AS UNDER: I) WHETHER CONSIDERATION RECEIVED AS A RESULT OF TR ANSFER OF LAND AND BUILDING IN TERM OF DEVELOPMENT AGREEMENT CONSTITUTES LONG T ERM CAPITAL GAIN OR INCOME FROM OTHER SOURCES IN THE GIVEN FACTS AND CI RCUMSTANCES OF THE CASE? ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 2 II) WHETHER THE CIT(A) HAS ERRED IN NOT CONSIDERING STAMP DUTY VALUATION U/S 50C OF THE ACT FOR THE PURPOSE OF COMPUTING LONG TE RM CAPITAL GAINS FOR DEVELOPMENT AGREEMENT. FOR THESE TWO ISSUES, THE REVENUE HAS RAISED THE FO LLOWING TWO GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GIVING FINDING THAT SEC. 50C IS APPLICABLE ONLY IN CASE OF TRANSFER OF LAND AND BUILDING WITHOUT CONSIDERING T HE FACT THAT IN THE INSTANT CASE, THE DEVELOPMENT RIGHT COULD NOT BE EXECUTED W ITHOUT TRANSFER OF LAND AND BUILDING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE STAMP DUTY VALUATION OF THE DEVELOPMENT AGREEMENT OF RS.2,31,41,000/- AND RS.34 ,36,000/- WHILE CONSIDERING TOTAL SALE CONSIDERATION U/S. 50C OF TH E ACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A CO-OWNER WITH HIS BROTHER OF A PROPERTY I.E. LAND AND BUILDING AT PLOT NO.34, RAM NIWAS, VALLABHNAGAR SOCIETY, N.S.ROAD NO.3, VILE PARLE (W), MUMBAI 40 0056. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ALONG WITH HIS BR OTHER EXECUTED AN AGREEMENT OF SALE-CUM-DEVELOPMENT OF THE SAID PROPE RTY DATED 01.12.2006 WITH A BUILDER VIZ. M/S. M L BUILDERS FOR THE FOLLO WING CONSIDERATION: A. TWO FLATS OF 4000 SQ. FT. CARPET AREA EACH B. CAR PARKING SPACE C. CONSIDERATION IN CASH AMOUNTING TO RS.3 CRORES (RS. 1.75 CRORES EACH) ANOTHER CONDITION PLACED WAS THAT AS PER PLANS APPR OVED BY THE MUNICIPAL CORPORATION, THE DEVELOPER IN CASE REDUCES THE AREA THEN HE HAS TO PAY FURTHER SUM OF RS.11.20 LACS TO THE ASSESSEE. THE ASSESSEE WAS FINALLY GIVEN CARPET AREA OF 3776.22 SQ.FT. AND ALSO FURTHER SUM OF RS.11.20 LACS AS PER SUB-AGREEMENT DATED 19.03.2007. THE ASSESSEE WORKE D OUT THE CAPITAL GAIN ON TRANSACTION OF SALE CUM DEVELOPMENT OF THE PLOT AS UNDER: ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 3 SALE OF DEVELOPMENT RIGHT RS. A) AMOUNT RECD IN CASH 18620000 B) FLAT OF 3776.22 SQ FT CARPET AREA (CONSTRUCTION COST) 9062928 27682928 LESS : SELLING EXP 262080 NET SALES PROCEEDS 27420848 COST COST INDEXED COST LAND VALUED AS ON 1981 1274000 6612060 BUILDING 1 ST BLDG 1985 953308 3958135 2 ND BLDG 1998 834974 1309219 98-99 188695 279011 99-2000 1854832 2474699 TOTAL LAND & BLDG COST 5105809 14633123 LESS: 50% SHARE OF COST 7316562 7316562 CAPITAL GAIN 20104286 LESS: EXEMPTION U/S 54 VALUE OF FLAT RECD 906292 8 LESS: EXEMPTION U/S. 54 EC INVESTMENT IN REC BONDS 5000000 LESS: EXEMPTION U/S. 54 CAPITAL GAIN SCHEME 60000 00 20062928 TAXABLE LONG TERM GAIN ON SALE OF HOUSE PROPERTY (C O-OWNED) 41358 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS WENT THROUGH THE RECITALS OF THE DEVELOPMENT AGREEMENT, WHICH ARE RE PRODUCED IN THE SAME AND NOTED THAT THERE IS NO TRANSFER OF RIGHTS, TITL E AND INTEREST IN THE PLOT AND THE INCOME ARISING FROM SALE OF DEVELOPMENT RIGHTS IS TO BE TREATED AS INCOME FROM OTHER SOURCES AND NOT AS LONG TERM CAPITAL GAI NS AS DECLARED BY THE ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 4 ASSESSEE. THE AO FINALLY TREATED THE ENTIRE SUM OF RS.1.71 LACS AS INCOME FROM OTHER SOURCES BY OBSERVING IN PARA 7 AS UNDER: IN VIEW OF THE ABOVE, THE ENTIRE AMOUNT OF RS.3,50 ,00,000/- (ASSESSEES SHARE BEING 50% THE AMOUNT OF RS.1,75,00,000) IS TREATED AS INCOME FROM OTHER SOURCES. FURTHER, DUE TO THE DIFFERENCE IN THE CAR PET AREA AS AGREED UPON IN THE ABOVE SAID AGREEMENT OF GIVING 4000 SQ. FT. (EACH) TO THE CO-OWNERS, THE AGGREGATE AREA OF THE 3 RD & 4 TH FLOORS IS 3776.22 ST. FT ONLY. DUE TO THE DIFFERENCE AREA OF 224 SQ.FT., CARPET ARE FOR BOTH THE 3 RD & 4 TH FLOORS THE DEVELOPER HAS MADE A SEPARATE AGREEMENT AND BY THIS AGREEMENT THE DEVELOPER HAS PAID AN ADDITIONAL AMOUNT OF RS.11,20,000/- TO THE SECOND OWNER I.E., THE ASSESSEE. THE TOTAL MONETARY CONSIDERATION RECEIVE D BY THE ASSESSEE IS WORKED OUT AT RS.1,86,20,000/- AS PER ASSESSEES COMPUTATI ON OF LONG TERM CAPITAL GAIN. BESIDES THE MONETARY BENEFIT, THE ASSESSEE IS ALSO RECEIVING THE FLATS OF 3776.22 SQ.FT (CARPET) AREA I.E., THE CONSTRUCTION COST AND THE ASSESSEE HAS ADOPTED THE VALUE AT RS.90,62,928/-. THE TOTAL BENEFIT RECEIVE D BY WAY OF DEVELOPMENT AGREEMENTS IS WORKED OUT TO RS.2,76,82,928/- 4. FURTHER, THE AO ALSO NOTED THAT AS PER STAMP DUT Y VALUATION THE RATES /MARKET VALUATION OF THE PROPERTY IS AT 4,62,82,000 /- AS AGAINST THE VALUE DECLARED BY THE ASSESSEE AT RS.3,50,00,000/- VIDE F IRST AGREEMENT DATED 1.12.2006 AND FURTHER IN SECOND AGREEMENT THE VALUE ADOPTED IS RS.34,36,000/- AS AGAINST 11,20,000/- OFFERED BY TH E ASSESSEE. ACCORDINGLY, THE AO VERIFIED THE FACTUAL DETAILS AND FURTHER REC OMPUTED THE TOTAL SALE CONSIDERATION OF DEVELOPMENT RIGHTS AT RS.3,56,39,9 28/- AND ENTIRE CONSIDERATION WAS TREATED AS INCOME FROM OTHER SOUR CES. THE AO ALSO DISALLOWED THE CLAIM OF EXEMPTIONS U/S. 54 AND 54EC OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WH O FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CHA TURBHUJ DWARKADAS KAPADIA 260 ITR 491 (BOM) ALLOWED THE CLAIM OF THE ASSESSEE AND TREATED THE SALE OF PROPERTY BY WAY OF DEVELOPMENT RIGHTS A S CAPITAL ASSET U/S. 2(14) OF THE ACT. 5. AS REGARDS THE APPLICATION OF THE PROVISIONS OF SECTION 50C FOR ADOPTING THE STAMP DUTY VALUATION, THE CIT(A) HELD THAT THE CONSIDERATION RECEIVED AT RS.2,76,82,928/- IS HIGHER THAN THE STAMP AUTHORITY VALUATION AND ACCORDINGLY DELETED THE DIRECTIONS OF THE AO. THE CIT(A) ALSO O BSERVED THAT THE PROVISIONS OF SECTION 50C IS APPLICABLE ONLY IN THE CASE OF TR ANSFER OF LAND OR LAND AND ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 5 BUILDING AND NOT TO OTHER CAPITAL ASSET SUCH AS DEV ELOPMENT RIGHTS ASSOCIATED WITH THE LAND. IN VIEW OF THESE FACTS, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED AGAINST THE ORDER OF CIT(A) ON BOTH THE COUNTS THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. BEFORE US THE LEARNED SENIOR DR RELIED ON THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE DREW OUR ATTENTION TO CLAUSE 44 OF THE DEVELOPMENT AGREEMENT GIVEN AT PAGE 207 OF THE ASSESSEES PAPER-BOOK, WHEREBY THE FOLLOWING IS MENTIONED: 44. THE PARTIES HERETO AGREE, RECORD AND CONFIRM TH AT NO TRANSFER OF THE SAID PROPERTY OR ANY PART THEREOF IS EFFECTED OR IN TENDED TO BE EFFECTED IN FAVOUR OF DEVELOPERS AS CONTEMPLATED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO PAGE 78 OF THE PAPER- BOOK WHEREIN, THE OWNERS HAVE AGREED TO GRANT DEVEL OPMENT RIGHTS ONLY BY VIRTUE OF THE DEVELOPMENT AGREEMENT DATED 01.12.200 6. HE DREW OUR ATTENTION TO CLAUSE 13 AT PAGE 78. THE LEARNED COUN SEL FOR THE ASSESSEE ALSO STATED THAT THE MONETARY CONSIDERATION WAS NOT MORE THAN 3.50 CRORES AND FOR THIS ALSO HE REFERRED TO CLAUSE 4 OF THE DEVELO PMENT AGREEMENT AT PAGE 80 OF THE ASSESSEES PAPER-BOOK, WHICH READS AS UND ER: 4. IN CONSIDERATION OF THE OWNERS GRANTING TO THE D EVELOPERS, THE RIGHT OF DEVELOPMENT OF THE SAID PROPERTY AS STIPULATED HERE INABOVE, THE DEVELOPERS SHALL PAY TO THE OWNERS A MONETARY CONSIDERATION OF RS.3,50,00,000/- (RUPEES THREE CRORES FIFTY LACS ONLY) IN THE MANNER FOLLOWI NG:- A) RS.3,00,00,000 (RUPEES THREE CRORES ONLY) IMMEDIATE LY ON THE EXECUTION OF THIS AGREEMENT (THE RECEIPT WHEREOF THE OWNERS D O HEREBY ADMIT AND ACKNOWLEDGE) TO BE SHARED EQUALLY BY THE OWNERS B) RS.50,00,000/- (RUPEES FIFTY LACS ONLY) TO BE SHARE D EQUALLY BY THE OWNERS, BEING THE BALANCE MONIES, WITHIN SEVEN DAYS FROM THE DATE OF SANCTION OF THE PLANS BY THE MUNICIPAL CORPORATION OF GREATER MUMBAI AND THE IOD BEING GRANTED IN RESPECT THEREOF AND SIMULT ANEOUSLY AGAINST THE OWNERS VACATING THE SAID PROPERTY AND HANDING OVER THE SAME TO THE DEVELOPERS FOR THE PURPOSE OF DEVELOPMENT. 7. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO EXPLAI NED THE FACT THAT IN LIEU OF THESE DEVELOPMENT AGREEMENTS THE ASSESSEE WAS TO BE ALLOTTED ACCOMMODATION OF 8000 SQ.FT. CARPET AREA (TO BOTH T HE CO-OWNERS) AND CAR ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 6 PARKING SPACE IN THE STILT. AS REGARDS THE INCREAS E IN CONSIDERATION THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO CLAUSE 8 OF THE DEVELOPMENT AGREEMENT WHEREIN THEY AGREED THAT DEVELOPER SHALL PAY A LUMP SUM AGREED AMOUNT OF RS.5000 PER SQ. FT. CARPET AREA FOR ANY S HORTFALL IN THE AREA TO BE ALLOTTED TO THE OWNERS. 8. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE LE ARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE DEVELOPMENT RIGHT IS A PRO PERTY BY ITSELF WHICH WILL FALL IN THE EXPRESSION CAPITAL ASSET AS DEFINED U NDER SECTION 2(14) OF THE ACT. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE TE RM PROPERTY AS STATED IN THE DEFINITION OF CAPITAL ASSET U/S. 2(14) DOES NOT MERELY MEAN PHYSICAL PROPERTY BUT ALSO INCLUDES RIGHTS, TITLE OR INTERES T IN IT AND THAT OWNERSHIP OF LAND CARRIES WITH IT RIGHT ATTACHED TO IT, OF WHICH RIGHT TO DEVELOPMENT IS THE MOST IMPORTANT RIGHT. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF BERTHA T ALMEIDA VS. ITO [2015] 53 TAXMANN.COM 522 (BOM). HE ALSO R ELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMBHAJI N AGAR CO-OP HSG. SOCIETY LTD. [2015] 370 ITR 325 (BOM) AND ALSO ON THE DECIS ION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DINESH D RANKA [2016] 380 ITR 440 (KAR). IN VIEW OF THESE DECISIONS, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT TRANSFER OF PROPERTY UNDER DEVELOPMENT AGREEMENT IS A CAPITAL ASSET AND THIS IS SUPPORTED BY THE PROPOSITIONS CIT ED SUPRA. 9. IN RESPECT TO THE OTHER ISSUE OF NOT CONSIDERING THE STAMP DUTY VALUATION VALUE ADOPTED BY AO FOR DEVELOPMENT AGREE MENT U/S. 50(C) OF THE ACT. LD. SR. DR ARGUED THAT IF THE ENTIRE CONSIDERA TION IS TREATED AS LONG TERM CAPITAL GAINS, EVEN THEN, THE PROVISIONS OF SECTION 50C OF THE ACT TO THE CONSIDERATION RECEIPT FOR SALE OF DEVELOPMENT RIGHT S VIDE DEVELOPMENT AGREEMENT. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE DEVELOP MENT AGREEMENT DATED ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 7 01/12/2006 ENTERED INTO BY THE ASSESSEE, IN WHICH A S PER CLAUSE 2, THE ASSESSEE HAS TRANSFERRED ALL RIGHTS TO DEVELOPERS T O CONSTRUCT NEW BUILDING ON THE PLOT OF LAND OF THE ASSESSEE BY DEMOLISHING THE EXISTING BUNGLOW I.E. THE RESIDENCE OF THE ASSESSEE AND HIS BROTHER. FOR THE SAKE OF CLARITY, CLAUSE 2 OF THE DEVELOPMENT AGREEMENT IS REPRODUCED BELOW:- THE OWNERS HEREBY AGREE AT THE COSTS OF THE DEVELO PERS TO GRANT TO THE DEVELOPERS AND THE DEVELOPMENT RIGHTS AS CONTAINED HERE IN ONL Y FOR THE PURPOSE OF THE SAID PROPERTY BEING PLOT NO. 34 ADMEASURING ABOUT 1016 S QUARE YARDS EQUIVALENT TO 849.50 SQUARE METERS AND ADMEASURING 825.50 SQ. MTR S. OR THEREABOUTS AS PER CITY SURVEY RECORDS BEARING SURVEY NO. 287 (PART) AND BE ARING CORRESPONDING C.T.S. NO. 203 OF VILE PARLE (WEST), TALUKA ANDHERI, SITUATE A T N.S. ROAD NO. 3 WITHIN THE REGISTRATION SUB-DISTRICT OF ANDHERI, DISTRICT MUMB AI SUBURBAN, WITHIN GREATER MUMBAI, IN THE J.V.P.D. SCHEME, VILE PARLE WEST, MUMBAI 400 056 IN THE ESTATE OF VALLABHNAGAR CO-OPERATIVE HOUSING SOCIETY LTD. AND MORE PARTICUL ARLY DESCRIBED IN THE SCHEDULE HEREUNDER WRITTEN BY DEMOLISHING THE EXISTING BUILD ING AND CONSTRUCTING THEREON A NEW RESIDENTIAL BUILDING AT THE DEVELOPERS COSTS B Y UTILISING THEREON THE ENTIRE FSI AND TDR AS MAY BE PRESENTLY AVAILABLE AND STRICTLY AS PER THE PLANS THAT MAY BE APPROVED BY THE MUNICIPAL CORPORATION OF GREATER MU MBAI (THE CORPORATION) AND THE IOD WHICH MAY BE GRANTED. WE FIND THAT THE ASSESSEE HAS FILED FINAL FSI CALCU LATION IN RESPECT TO ABOVE PROPERTY. AS PER THE ABOVE STATED AGREEMENT AND CAL CULATION, THE ASSESSEE HAS NOT ONLY SOLD HIS RIGHT TO LOAD TDR ON PLOT BUT ALSO HIS EXISTING FSI ON THE PLOT. BY VIRTUE OF THE ABOVE SATED AGREEMENT THE AS SESSEE HAS SOLD ALL HIS RIGHTS ATTACHED TO THE PLOT OF LAND I.E. BASIC FSI AND RIGHT TO LOAD TDR ON THE PLOT OF LAND. IN THE GIVEN FACTS, NOW WE HAVE TO AS CERTAIN WHETHER DEVELOPMENT RIGHT INCLUDES THE EXPRESSION CAPITAL ASSET AS DEFINED U/S. 2(14) OF THE ACT. WE ARE OF THE VIEW THAT DEVELOPME NT RIGHT IN A PROPERTY IS ALSO A PROPERTY BY ITSELF AND WOULD BE INCLUDED IN THE EXPRESSION CAPITAL ASSET. THE TERM PROPERTY AS STATED IN THE DEFINI TION OF CAPITAL ASSET U/S. 2(14) DOES NOT MERELY MEAN PHYSICAL PROPERTY BUT AL SO INCLUDES RIGHTS, TITLE OR INTEREST IN IT AND THAT OWNERSHIP OF LAND CARRIED W ITH IT BUNDLE OF RIGHTS ATTACHED TO IT, OF WHICH THE RIGHT OF DEVELOPMENT I S MOST IMPORTANT ONE. 11. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND OTHERS VS. DINESH D. RANKA (2016) 380 ITR 440 (KAR), WHERE IN HONBLE HIGH COU RT HAS CONSIDERED THE ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 8 ISSUE OF SURRENDER OF FLOOR AREA RATIO RIGHTS IN LA ND AND HELD THAT THIS IS TRANSFER OF CAPITAL RIGHTS IN RELATION TO CAPITAL A SSETS AS DEFINED U/S. 2(14) R.W.S. 2(47) OF THE ACT. HONBLE HIGH COURT HAS CON SIDERED THE SECTION 2(47) OF THE ACT AND HELD THAT THE TERM TRANSFER IN REL ATION TO THE CAPITAL ASSET HAS BEEN DEFINED TO INCLUDE THE SALE, EXCHANGE OR R ELINQUISHMENT OF RIGHTS IN A CAPITAL ASSET. A CAPITAL ASSET MEANS PROPERTY O F ANY KIND HELD BY AN ASSESSEE WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION BUT DOES NOT INCLUDE WHAT IS DEFINED UNDER SUB-CLAUSE (I) AN D (II) OF SECTION 2(14), NAMELY THE DEFINITION CLAUSE OF CAPITAL ASSET. THE WORDS EMPLOYED IN SUB- CLAUSE (I) ARE SALE, EXCHANGE, OR RELINQUISHME NT AND UNDER SUB-CLAUSE (II) THE WORDS EMPLOYED ARE EXTINGUISHMENT OF ANY RIGHTS THEREIN. THE DEFINITION IS AN INCLUSIVE DEFINITION. THE EXPRESSI ON MUST BE READ WIDELY AND NOT NARROWLY. IT DENOTES EXTENSION AND CANNOT BE TR EATED AS RESTRICTED. TRANSACTIONS WHERE UNDER THE RIGHTS TO EXCLUSIVE PO SSESSION AND ENJOYMENT STOOD TRANSFERRED, EVEN SUBJECT TO RIGHT TO REVERSI ON IN FAVOUR OF THE TRANSFEROR WOULD BE COVERED BY THIS SECTION. 12. IN VIEW OF THE ABOVE PROPOSITION OF LAW AND THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE WHAT WAS T RANSFERRED BY THE ASSESSEE WAS DEVELOPMENT RIGHTS IN RESPECT OF THE PROPERTY. ON THE PLOT OF LAND OWNED BY THE ASSESSEE IN CO-OWNERSHIP, WHICH WAS SUBJECT MATTER OF DEVELOPMENT AGREEMENT, CERTAIN AREA OF CONSTRUCTION WAS PERMISS IBLE, WHICH WAS THE NORMAL FSI PERMISSIBLE AS PER THE DEVELOPMENT CONTR OL RULES OF THE STATE. BESIDES THE ABOVE, THE PLOT OF LAND OWNED BY ASSESS EE AND CARRIED OUT ADDITIONAL CONSTRUCTION, OVER AND ABOVE THE PERMISS IBLE FSI, CAN BE MADE AS THE PLOT OF LAND, WHICH WAS CAPABLE OF RECEIVING TD R. TDR COULD BE OBTAINED BY THE DEVELOPER AND COULD BE LOADED ON THE NORMAL FSI CONSTRUCTION PERMISSIBLE AS PER THE DEVELOPMENT CONTROL RULES. T HE RIGHT TO CONSTRUCT BUILDING ON THE SAID PLOT OF LAND BY CONSUMING FSI AND THE RIGHT AS A RECEIVING PLOT OWNER TO LOAD TDR OVER AND ABOVE NOR MAL FSI, ARE RIGHTS WHICH ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 9 ACCRUE TO THE ASSESSEE BY VIRTUE OF DEVELOPMENT CON TROL REGULATION OF THE STATE GOVERNMENT. THESE ARE RIGHTS OVER PROPERTY, W HICH ARE CAPITAL IN NATURE AND COMES WITHIN THE DEFINITION OF CAPITAL ASSET U/ S. 2(14) OF THE ACT. THE CONSIDERATION RECEIVED BY THE ASSESSEE IS FOR TRANS FER OF RIGHTS OVER SUCH CAPITAL ASSET FOR THE REASON THAT THE 3 RD PARTY PURCHASER HAS NO INTEREST OVER THE LAND IS NOT RELEVANT. THE PERMISSION TO LOAD THE TDR ON PERMISSIBLE FSI ALLOWED BY THE OWNER IS BY ITSELF A TRANSFER OF RIG HT IN IMMOVABLE PROPERTY AND THEREFORE, CLEARLY FALLS WITHIN THE PROVISION O F SECTION 45 OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IN TH E PRESENT CASE BEFORE US, THE SALE OF DEVELOPMENT RIGHTS IS TO BE TAXABLE AS LONG TERM CAPITAL GAIN AND NOT AS INCOME FROM OTHER SOURCES AS HELD BY AO. THE CONSEQUENTIAL DEDUCTIONS/EXEMPTIONS U/S. 54 OF THE ACT ETC. WILL BE ALLOWED TO THE ASSESSEE. WE DIRECT THE AO ACCORDINGLY. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 13. AS REGARDS TO THE SECOND ISSUE REGARDING ADOPTI ON OF MARKET VALUE AS PER THE PROVISIONS OF SECTION 50C OF THE ACT, WE AR E OF THE VIEW THAT IN THE PRESENT CASE ASSESSEE RECEIVED CONSIDERATION IN TWO -FOLDS I.E. PARTLY CASH AND PARTLY IN KIND I.E. BY WAY OF PROPERTY IN THE SHAPE OF FLATS IN THE RE-DEVELOPED PROPERTY. SUCH TRANSACTIONS ARE THUS A COMBINATION OF SALE AND EXCHANGE. THE ASSESSEE HAS GIVEN COMPLETE WORKING OF CONSIDER ATION RECEIPT AS PER DEVELOPMENT AGREEMENT WHICH READS AS UNDER:- PARTICULARS AMOUNT (IN RS.) REMARK BY CHEQUE 1,75,00,000 APPELLANT 50% SHARE BY CHEQUE 11,20,000 COMPENSATION FOR SHORTFALL IN F REE AREA. CONSTRUCTION COST OF FREE RESIDENTIAL AREA 90,62,928 CONSTRUCTION COST AS PER DEVELOPERS LETTER ATTACHED (ANNEXURE 4) TOTAL 2,76,82,928 WE FIND THAT AS PER DEVELOPMENT AGREEMENT THE MARKE T VALUE OF ASSESSEES SHARE IS RS. 2,31,41,000/-. FURTHER, ASSESSEE HAS RECEIVED T HE SUM OF RS. 11.20 LACS DUE TO FALL IN FREE AREA COMMITTED BY THE DEVELOPER I.E. COMMITTED AREA OF 4,000 SQ. FT. ITA NO.5038/MUM/2010 SHRI BHARAT RAOJIBHAI PATEL 10 AS AGAINST THE SAME RECEIVED AREA IS ONLY 3776 SQ. FT. THE ASSESSEE HAS COMPUTED MARKET VALUE AS PER AGREEMENT AT RS. 34.36 LACS WHICH IS THE TOTAL AREA OF 3776 SQ. FT. AS ATTACHED IN THE AGREEMENT. ACCORDINGLY, THE MARKET VALUE OF 224 SQ. FT. IS RS. 2,03,830/- ONLY. IN VIE W OF THE ABOVE, WE ARE OF THE VIEW THAT THE VALUE DECLARED IN AGREEMENT (INCL UDING ALL TRANSACTION) WILL BE HIGHER THAN THE STAMP DUTY VALUATION. ACCORDINGL Y, NO TINKERING CAN BE MADE TO THE VALUE DISCLOSED IN THE DEVELOPMENT AGRE EMENT. ACCORDINGLY WE AFFIRM THE ORDER OF CIT(A) ON THIS ISSUE AND THIS I SSUE OF REVENUES APPEAL IS DISMISSED. 14. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 1 ST MAY 2016. SD/- SD/- (RAJESH KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL EMBER MUMBAI, DATED :31 ST MAY, 2016. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI