ACIT-25(2), MUMBAI V. SHRI DILIP R. SHRINGARPURE, MUMBAI

ITA 6103/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2206 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 04-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; TDS
• Section: 50C; 54F; 2(14)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6103/M/2017 ASSESSMENT YEAR: 2012-13 OFFICE OF THE ACIT 25(2), R. NO.508, C-10, 5 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 VS. SHRI DILIP R. SHRINGARPURE, 1, SHREE VITHAL CO. OP. HSG, STY., HANUMAN ROAD, VILE PARLE (E), MUMBAI 400 057 PAN: AAZPS 3215N (APPELLANT) (RE SPONDENT) CO NO.49/M/2019 (ITA NO.6103/M/2017) ASSESSMENT YEAR: 2012-13 SHRI DILEEP R. SHRINGARPURE, G-1601, JADE GARDENS, GANDHI NAGAR, MIG COLONY, BANDRA EAST, MUMBAI 400 051 PAN: AAZPS 3215N VS. THE ACIT 25(2), ROOM NO.711, 7TH FLOOR, C-12, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MADHUR AGARWAL, A.R. SHRI PANKAJ K. JAIN, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 12.06.2019 DATE OF PRONOUNCEMENT : 26.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS HAVE BEEN PREFERRED AGAINST THE ORDER DATED 11.07.2017 OF THE COMMISSIONER OF I NCOME TAX ITA NO.6103/M/2017 SHRI DILIP R. SHRINGARPURE 2 (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2012-13. ITA NO.6103/M/2017 (REVENUES APPEAL) 2. THE ISSUE RAISED IN GROUND NO.1 OF APPEAL IS AGA INST THE DELETION OF ADDITION OF LD. CIT(A) AS MADE BY THE A O ON ACCOUNT OF CAPITAL GAIN ON SALE OF TDR DEVELOPMENT RIGHTS W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEES RIGHTS HA VE BEEN EXTINGUISHED BY SALE OF SAID TDR/FSI AND FALL WITH IN THE AMBIT OF CAPITAL ASSET UNDER SECTION 2(14) OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT DURING THE YEAR, THE ASSESSEE HAS SOLD TDR/FSI DEVELOPMENT RIGHTS FOR RS.6,00,00,000/ - WHICH WAS CLAIMED AS EXEMPT FROM TAX. ACCORDING TO THE A O THE TRANSFER OF DEVELOPMENT RIGHTS CLEARLY ATTRACTS THE CAPITAL GAIN TAX AS IT IS A TRANSFER OF CAPITAL ASSET. ACCORDIN GLY, THE AO DETERMINED THE MARKET VALUE OF THE TDR/FSI RIGHTS A T RS.8,76,55,000/- WHICH WAS THE VALUE PER STAMP DUT Y VALUATION AS AGAINST RS.6,00,00,000/- DECLARED FROM SALE OF T DR/FSI AND ACCORDINGLY DETERMINED THE CAPITAL GAIN IN THE HAND S OF THE ASSESSEE AT RS.3,80,00,000/- AS AGAINST NIL RETURNE D BY THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO CONSIDERAT ION THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE BY HOLD ING THAT THE ASSESSEE HAS ALLOWED THE BUILDER TO LOAD THE FSI/T DR ON THE PLOT AND THEREBY HAS NOT MADE ANY SALE OF LAND AND BUILDING. THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS PERMI TTED THE BUILDER LOAD FSI/TDR ON THE PLOT AND CONSTRUCT THE NEW ITA NO.6103/M/2017 SHRI DILIP R. SHRINGARPURE 3 BUILDING FOR WHICH THE ASSESSEE HAS RECEIVED RS. 6, 00,00,000/-. THE LD. CIT(A) HAS FURTHER HELD THAT AS THE TDR RIG HTS HAVE ARISEN ONLY ON ACCOUNT OF AMENDMENT IN DC REGULATIO NS 1991 AND THEREFORE THERE IS NO COST OF ACQUISITION AND N O CAPITAL GAIN TAX WAS ATTRACTED. THE LD. CIT(A) ALSO HELD THAT S INCE THERE IS NO SALE OF LAND AND BUILDING , THE PROVISIONS OF SECTI ON 50C OF THE ACT WERE ALSO WRONGLY INVOKED BY THE AO. FINALLY L D. CIT(A) DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF C APITAL GAIN ON SALE OF TDS/FSI RIGHTS BY HOLDING THAT THE SAME IS NOT CHARGEABLE TO CAPITAL GAIN TAX. 5. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE S UBMITTED BEFORE THE BENCH THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMBHAJI NAGAR CO-OP. HSG. SOCIETY LTD. (2015) 370 ITR 325 (BOM.) WHEREIN IT HAS BEEN SPECIFICALLY HELD THAT AS THERE IS NO COST OF ACQUISITION INCURRED OF TDR/FS I AS THESE ARE GENERATED BY THE PLOT ITSELF AND THEREFORE ANY RECE IPT ON ACCOUNT OF SALE OF TDR/FSI WOULD NOT RESULT IN CAPITAL GAIN ASSESSABLE TO TAX. THE LD. A.R. THEREFORE PRAYED THAT THE APPEAL OF THE REVENUE MAY KINDLY BE DISMISSED AS THE LD. CIT(A) H AS PASSED THE ORDER AFTER FOLLOWING THE ORDER OF JURISDICTION AL HIGH COURT. THE RELEVANT PORTION OF THE SAID ORDER HAS BEEN REP RODUCED BELOW: HELD, DISMISSING THE APPEAL, THAT IN THE CASE OF T HE ASSESSEE THE FLOOR SPACE INDEX/TRANSFERABLE DEVELOPMENT RIGHT WAS GENERATED BY THE PLOT ITSELF. THERE WAS NO COST OF ACQUISITION, WHICH HAD BEEN DETERMINED A ND ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD HAVE PROCEEDED TO LEVY AND ASSESS THE GAINS DERIVED AS CAPITAL GAINS. ADDITIONAL FLOOR SPACE INDEX/TRANSFE RABLE DEVELOPMENT RIGHT WAS GENERATED BY CHANGE IN THE DEVELOPMENT CONTROL RULE S, 1991. A SPECIFIC INSERTION WOULD, THEREFORE, BE NECESSARY SO AS TO ASCERTAIN I TS COST FOR COMPUTING THE CAPITAL GAINS. THEREFORE, THE TRANSFERABLE DEVELOPMENT RIGH T WHICH WAS GENERATED BY THE PROPERTY AND WAS TRANSFERRED UNDER A DOCUMENT IN FA VOUR OF THE PURCHASER WOULD ITA NO.6103/M/2017 SHRI DILIP R. SHRINGARPURE 4 NOT RESULT IN THE GAINS BEING ASSESSED TO CAPITAL G AINS. THE TRIBUNAL CONCLUDED THAT WHAT THE ASSESSEE SOLD WAS TRANSFERABLE DEVELOPMENT RIGHT RECEIVED AS ADDITIONAL FLOOR SPACE INDEX AS PER THE 1991 RULES. IT WAS NOT A CASE OF SALE OF DEVELOPMENT RIGHTS ALREADY EMBEDDED IN THE LAND ACQUIRED AND OW NED BY THE ASSESSEE. THE TRIBUNAL FOUND THAT THE ASSESSEE HAD NOT INCURRED A NY COST OF ACQUISITION IN RESPECT OF THE RIGHT WHICH EMANATED FROM THE 1991 RULES MAK ING THE ASSESSEE ELIGIBLE FOR ADDITIONAL FLOOR SPACE INDEX. THE LAND AND THE BUIL DING EARLIER IN THE POSSESSION OF THE ASSESSEE CONTINUED TO REMAIN WITH IT. EVEN AFTE R THE TRANSFER OF THE RIGHT OR THE ADDITIONAL FLOOR SPACE INDEX, THE POSITION DID NOT UNDERGO ANY CHANGE. THE REVENUE COULD NOT POINT OUT ANY PARTICULAR ASSET AS SPECIFI ED IN SUB-SECTION (2) OF SECTION 55. THE CONCLUSION OF THE TRIBUNAL WAS IMMINENTLY POSSI BLE ON THE FACTS AND IN THE LIGHT OF THE LEGAL POSITION AS NOTED BY THE LANGUAGE OF S ECTION 55(2). 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AO BY SUBMITTING THAT THE FSI/TDR FALLS WITHIN THE DEF INITION OF CAPITAL ASSET AS DEFINED UNDER SECTION 2(14) OF THE ACT AND THEREFORE LIABLE FOR CAPITAL GAIN UNDER THE PROVISI ONS OF SECTION 45 OF THE ACT. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMBHAJI NAGAR CO-OP. HSG. S OCIETY LTD. (SUPRA), WE OBSERVE THAT THE HONBLE BOMBAY HIGH CO URT HAS HELD THAT IN CASE OF SALE OF FSI/TDR RIGHTS BY THE ASSESSEE TO THE DEVELOPERS WHICH HAVE ACCRUED IN FAVOUR OF THE ASSESSEE FOLLOWING PROMULGATION OF DEVELOPMENT CONTROL RULES FOR GREATER MUMBAI, 1991AND THE SAID DEVELOPMENTAL RIGHT WERE GENERATED BY THE PLOT ITSELF AND THERE IS NO COST OF ACQUISIT ION AND THEREFORE NOT LIABLE FOR ANY CAPITAL GAIN TAX. IN THE PRESEN T CASE , THE FACTS ARE SIMILAR TO THE FACTS IN THE CASE AS DISCUSSED HEREINABOVE WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT NO CAPITAL GAIN TAX IS ATTRACTED IN THE CASE OF SALE OF FSI/TD R, WE THEREFORE, RESPECTFULLY FOLLOWING THE SAME UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE APPEAL OF THE REVENUE. ITA NO.6103/M/2017 SHRI DILIP R. SHRINGARPURE 5 CO NO.49/M/2019 8. THE ASSESSEE HAS ALSO FILED A CROSS OBJECTION WH EREIN THE ASSESSEE HAS CHALLENGED THE NON GRANTING OF FULL EX EMPTION OF CAPITAL GAIN UNDER SECTION 54F AND WITHOUT PREJUDIC E CHALLENGED THE INVOCATION OF PROVISIONS OF SECTION 50C. 9. SINCE WE HAVE ALREADY DISMISSED THE APPEAL OF TH E REVENUE WHEREIN THE REVENUE HAS CHALLENGED THE DELETION OF CAPITAL GAIN OF RS.2,76,55,000/- RESULTING FROM SALE OF FSI/TDRS , THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND IS DISMISSED ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 26.06.2019. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 26.06.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.