S.45: Capital gains-Capital asset-Transferable Development Rights -Transfer of 'transferable development
rights' available under Development Control Regulation of Greater Mumbai, 1991, amounts to 'transfer' of a
'capital asset, however, since no cost of acquisition can be ascribed to such a right, computational provisions
of section 48 cannot be applied and, therefore, such transfer cannot be subjected to tax under head 'capital
gain. (S. 2(14), 48)
In the return of income, assessee showed the above receipts as 'compensation received' on account of grant of
permission and towards settlement of disputes between the developer, the society and its members. The Assessing Officer, however, observed that the assessee-society was entitled to utilize the transferable development rights (TDRs) in respect of the land admeasuring 3367 square meters owned by them, in the ratio of 1:1 in accordance with the provisions of Development Control Rights, 1991. As per the Assessing Officer, the assessee had transferred such right (TDRs) to the Ariel View under the terms of consent. The Assessing Officer expressed that land is a bundle of rights and when land admeasuring 3367 square meter was purchased all rights, present and future, embedded in it were also acquired. As per the Assessing Officer, the assessee had transferred its TDR entitlement to the Ariel View under terms of consent which was nothing but an agreement towards transfer of the TDR entitlement of the assessee. The Assessing Officer, therefore, held that the benefit in the form of TDR arising out of the existing land was an immovable property, the transfer of which tantamounted to transfer of long term capital asset and hence liable to be taxed as income under the head 'capital gain'. Thereafter, the Assessing Officer computed the capital gain under section 48 by spreading over the cost of acquisition of land admeasuring 3367 sq. metre over the increased TDR provided by the Development Control Regulation, 1991. Commissioner (Appeals), under appeal from the assessee, confirmed the order of Assessing Officer.
Being aggrieved, the assessee preferred instant second appeal. Itwascontended that there was no transfer in the instant case, as just permission was given to use TDR and no part of the land was ever transferred. Computational provisions of section 48 would not be applicable in case of transfer of TDRs as there is no cost of acquisition in such cases. The Tribunal held that,The concept of TDRs originates 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 plan of DCR, would be eligible for award of compensation by way of development 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 building or additional floors. The plots on which those development rights could be used were termed as 'Receiving Plots' and on these plots in addition to whatever FSI were originally available to the owner or lessor of such plots, additional FSI can be allowed to the owner or lessor on using the transferable development rights contained in DRCs for the purpose of construction of the building. Thus, the TDR is available to the owner/lessee of the land which surrenders to the Govt. and, therefore, the acquisition of such TDRs are to detriment the land surrendered by the owner/lessee, and such TDRs can be utilized on any plot vacant or already developed or by erection of additional storeys subject to the FSI available in the DCR. TDR entitlement is capital asset and transfer thereof is 'transfer'. 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 available to the assessee in view of DCR, 1991, was a right acquired by virtue of being 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 developer amounts to transfer of capital asset. It is held that transfer of TDRs amounts to transfer of a 'Capital Asset'.However, it has to be seen as to whether there was any kind of cost in acquiring these rights. This right was acquired automatically by virtue of
DCR, 1991, and what the assessee has transferred is not the plot or the building but a right, parting with which, did 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 Commissioner (Appeals), because there was no detriment to cost of land by granting such rights. Even though, there was a transfer of a capital asset, however, there was no cost of acquisition or any cost can be ascribed to such right, because the land and the building continued with the possession of the assessee even when transfer of TDR was made to the developer. The reasoning and the logic given by the Assessing Officer and the Commissioner (Appeals) that these development rights were embedded with the land and, therefore, the sum chargeable to cost has to be ascribed, it is held, is not tenable for the reason that these development rights have been 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 such a right was embedded in the land. Therefore, the conclusion drawn by the Assessing Officer and the Commissioner (Appeals) on this score gets failed. In such a situation, computational provisions of section 48, also gets failed because no cost of acquisition can be ascribed to a right which has emanated from DCR, 1991. This issue has come up several times and has been dealt and discussed in detail by various decisions of Mumbai Co-ordinate Bench of the Tribunal. Respectfully following the ratio laid down in the such decisions and also as per instant findings and observations given above, it is held 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 acquiring the right which has been transferred and computational mode given in section 48, thus fails in this case. Therefore, taxing of the receipt from transfer of TDRs under the head 'capital gain' by the Assessing Officer for a sum of Rs. 10,70,46, 274 cannot be sustained. Accordingly, the same is directed to be deleted and order of the Commissioner (Appeals) is thus reversed. (A.Y. 2007-08)
No comments:
Post a Comment