Income Tax Appellate Tribunal - Mumbai
Late Shri Lauriano Mendonca Through ... vs Jcit Rg 19(3), Mumbai on 4 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " A" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI G. MANJUNATHA, AM, AM
ITA No. 3000/Mum/2011
(AY: 2002-03)
ITA No. 3001/Mum/2011
(AY: 2004-05)
Late Shri Lauriano Mendonca Asst. Commissioner of
through Legal heir Mrs. Natalia Income Tax
D'souza Range 19(3), Parimal
Vs.
Flat No.201, Neefam, Plot No. 34, Chambers, Paral, Mumbai-
CTS IV, Almalda Road, Bandra 400012
(W), Mumbai-400 050
PAN No.ACJPM9657Q
Appellant .. Respondent
Assessee by .. Shri Amar Gahlot & S. Sriram,
ARs
Revenue by .. Shri Rajesh Kumar Yadav, DR
Date of hearing .. 27-07-2017
Date of pronouncement .. 04-08-2017
ORDER
PER MAHAVIR SINGH, JM:
These two appeals by the Assessee are arising out of the different order of CIT(A)-30, Mumbai, in appeal No. CIT(A)-30/ACIT-19(3)/IT-708& 736/09-10 even date 24-01-2011. The assessments were framed by ACIT Circle-19(3), Mumbai for the A.Ys. 2002-03 & 2004-05 vide order dated 29-11-2007 & 22-12-2006 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2. The first inter-connected issue in these appeals of assessee is as regards to the taxability or assessibility of the income in which year and whether the receipts on account of development agreement relating to TDR related FSI is taxable as capital gains or not ? In this regard assessee in ITA No. 3001/Mum/2011 for the AY 2004-05 raised following ground No.1 & 4: -
ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza "1. Long Term Capital Gain, Taxability and Year of Taxability- Rs.84,76,234/-.
1.1 The learned CIT(A) erred in taking a view that transfer of relevant capital asset under Sec.2(47)(v) has taken place during the Financial Year 2001-2002 and not during the Financial Year 2003-2004 as claimed by the appellant and accordingly, the amount of Long Term Capital Gain is chargeable to tax in the Asst. Year 2002-2003 and not in the Asst. Year 2004-2005.
1.2 For the purpose of taking the view referred to in ground no.1.3 above, the learned CIT(A) further erred in taking a view that the date of agreement is the date: of transfer of the relevant capital asset under Sec.2(47)(v) without appreciating the facts of the case of the appellant in proper perspective.
1.2.1. For the purpose of taking the above view, the CIT(A) further erred in recording erroneous findings that "majority of the amount i.e. Rs.
1,18,00,0001'- has been received
before 31.03.2002 and only Rs.
44,00,000/- has been received by the
appellant after 31.03.2002 but before 15.11.2002" which are contrary to the actual facts.
1.3 While taking the above view, the learned CIT(A) further erred in only considering the small part of the written submissions filed Page 2 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza from time to time during the course of hearings and totally ignoring the remaining part of such written submissions [copy enclosed - marked at Exhibit J & II] 1.4 After taking the view referred to hereinbefore, the learned CIT(A) further erred in taxing the above referred amount of Long Term Capital Gain on protective bass in the Asst. Year 2004-2005.
4. Consideration relating to permission granted for the use of TDR related FSI wrongly treated as taxable Capital Gain - Rs.1,32,0000/-.
4.1 The learned CIT(A) erred in treating the consideration relating to permission granted for the use of TDR related FSI [Rs.1,32,00,000/-] as taxable. The learned CIT(A) ought to have appreciated that considering its nature, the same is capital receipt having no cost and does not give rise to any taxable capital gain and the same cannot considered for taxation.
4.2 For the above purpose, the learned CIT(A) further erred in recording erroneous finding that "in the case of the appellant there is a definite cost of acquisition o TDR' without appreciating the fact that the consideration is question is not for transfer of any TDR and the appellant was neither holding any TDR nor the appellant has transferred any TDR."
3. In ITA No. 3000/Mum/2011 for the AY 2002-03, the assessee has challenged the assessibility in this year by following ground No. 2 to 3 : -
Page 3 of 18ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza "2. Long Term Capital Gain, Taxability and Year of Taxability Rs.84,76,234/-
2.1 The learned CIT(A) erred in taking a view that transfer of relevant capital asset under Sec.2(47)(v) has taken place during the financial year 2001-02 and not during the Financial Year 2003-04 as claimed by the appellant and accordingly, the amount of Long Term Capital Gain is chargeable to tax in the AY 2002-03 and not in the Asst. Year 2004-05.
2.2 For the purpose of taking the view referred to in ground no. 2.1 above, the learned CIT(A) further erred in taking a view that the date of agreement is the date of transfer of the relevant capital asset under Sec.2(47)(v) without appreciating the facts of the case of the appellant in proper perspective.
2.3 While taking the above view, the learned CIT(A) further erred in only considering the small part of the written submissions filed from time to time during the course of hearings and totally ignoring the remaining part of such written submissions [copy enclosed - marked as Exhibit --I & II).
3. Consideration relating to permission granted for the use of TOR related FM wrongly treated as taxable Capital Gain - Rs.1,32,00,000/-.
3.1 The learned CIT(A) erred in impliedly treating the consideration relating to Page 4 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza permission granted for the use of TDR related FSI [Rs.1,32,00,000/-] as taxable. The learned CH (A) ought to have appreciated that considering it's nature, the same is capital receipt having no cost and does not give rise to any taxable capital gain and the same cannot be considered for taxation.
3.2 The learned CIT(A) erred in not dealing with the following ground relating to above issue [being ground No.2.3 raised before him]:-
"The learned ACIT further erred in computing taxable Long Term Capital Gain at Rs. 84,46,234 without realizing that out of total consideration stated in the Agreement, part of the amount relates to permission granted for loading TDR which, in any case, does not give rise to any taxable capital gain there being no cost to the appellant for the same."
4. Briefly stated facts are that the assessee is owner of property, Plot No. 34 Professor Almedia Road, Bandra, Mumbai-50. This plot was acquired by assessee in 1955 and constructed residential building consisting of ground, 1st & 2nd Floors. The total accommodation provided there was six residential flats on each floor having two flat on either sides, while the four apartments on ground floor and first floor occupied by the tenants and the second floor and both the apartments where occupied by the assessee. It means that ground floor and first floor were rented and second floor was as occupied by the assessee. The total plot area of residential use was admeasuring 777.60 sq. mts having unconstructed Page 5 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza FSI of 12,00 sq. ft. In response to which the assessee was free to construct in the said plot of land. Further, the assessee was entitled to construct more floors on the existing building to the extent of 8,000 sq. ft. by purchasing TDR from persons who has been granted TDR by the Government. The assessee entered into development agreement with West Coast International on 18-08-2000 i.e. entered in Memorandum of Understanding for granting permission to the developer to use the unutilized FSI of 1,200 sq. ft. owned by the assessee and purchase of TDR and FSI from the open market of 8,000 sq. ft. and use it on the existing building owned by the assessee. Based on the MoU dated 18- 08-2008, the AO issued NOC (No Objection Certificate). The assessee thereafter, entered into formerly agreement with West Coast on 28-09- 2001 to transfer the original FSI and permitting the assessee for receiving other TDR and FSI on this plot. In view of the above development agreement, the developer has to use original FSI and after receiving TDR and FSI from outside, additional floors to be constructed over the floors that were already in occupation of the assessee and his tenants. The assessee never allowed the developer to demolish and reconstruct the building owned by the assessee but allowed only additional floor, which were to be constructed on the already existing floors and which were in occupation and continue in occupation even when the construction activity was carried on. The consideration receivable by the assessee for the transfer was determined by clause VI of the development of developed on 28-09-2001 as under: -
Sl Particulars Area in Rate per Total (Rs.) No Sq. ft. sq. ft.
1. For permitting the developer to use already 1,200 2,500 30,00,000 available unconsumed FSI
2. For permitting the developer to use TDR FSI on 8,000 1,650 1,32,00,000 the land belonging to the assessee Total 1,62,00,000 These are undisputed facts.Page 6 of 18
ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza
5. As per MoU and development agreement dated 28-09-2010, the developer would pay a sum of Rs. 74 Lacs to the assessee on or before 15-08-2001 vide clause VI of the agreement, failing which assessee is entitled to receive interest @ 14% on the delayed payments. However, the developer paid only a sum of Rs. 30,00,000/- as against Rs. 74,00,000/- payable by the developer on or before 15-08-2001. The assessee then renegotiated the deal and developer agreed to modifying the terms of development agreement/MOU dated 28-10-2001, which is enclosed in assessee's paper book. This development agreement / MOU i.e. supplementary of schedule on the following conditions: -
a) For agreement only gives the developer a license to entered into the premises of the assessee;
b) The assessee shall have possessory rights over the newly built flats till the developer pays 75% of the agreed consideration.
c) Failure on the part of the developer to make the payment will result in termination of the agreement and upon termination,
i) Earnest money would be forfeited by the assessee;
ii) He can approach another developer for completion of construction of the building.
The assessee has filed a complete detail of payment receipt and compared the same to the schedule as per supplementary agreement and the details are as under: -
Page 7 of 18ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza Percentage Date of Cumulative of Total Amount Remarks/ Payment Schedule Payment Amount consideration received 18.08.2000 10,00,000 10,00,000 6.17 Payment at the time of MOU 21.09.2001 10,00,000 20,00,000 12.35 Payment made before entering into the 25.09.2001 10,00,000 30,00,000 18.52 Development Agreement 11.03.2002 5,00,000 35,00,000 21.6 Rs. 9,00,000 were to be paid by 31st 19.03.2002 4,00,000 39,00,000 24.07 Marc 2002 05.11.2002 5,00,000 44,00,000 27.16 Rs. 10,00,000 were to be paid by 15th 05.11.2002 5,00,000 48,00,000 30.25 November 2002 15.01.2003 2,50,000 51,50,000 31.79 Rs. 5,00,000 were to be paid by 15th Jan 15.01.2003 2,50,000 54,00,000 33.33 2003 05.02.2003 2,50,000 56,50,000 34.88 Rs. 5,00,000 were to be paid by 15th Feb 05.02.2003 2,50,000 59,00,000 36.42 2003 10.05.2003 2,50,000 61.50,000 37.96 Rs. 5,00,000 were to be paid by 15th May 14.05.2003 2,50,000 64,00,000 39.51 2003 12.06.2003 2.50,000 66,50,000 41.05 Rs. 5,00,000 were to be paid by 15th Jun 23.06.2003 2,50,000 69,00,000 42.59 2003 07.07.2003 2,50,000 71,50,000 44.14 07.07.2003 2,50,000 74,00,000 45.68 Rs. 15,00,000 were to be paid by 31st Jul 16.07.2003 5,00,000 79,00,000 48.77 2003 31.07.2003 5,00,000 84,00,000 51.85 28.08.2003 5,00,000 89,00,000 54.94 Rs. 10,00,000 were to be paid by 31st 28.08.2003 5,00,000 94,00,000 58.02 Aug 2003
06.09.2003 10,00,000 104,00,000 64.2 Rs. 20,00,000 were to be paid by 30th 06.09.2003 10,00,000 114,00,000 70.37 Sep 2003 23.10.2003 10,00,000 124,00,000 76.54 Rs. 20,00,000 were to be paid by 31st Oct 23.10.2003 10,00,000 134,00,000 92.72 2003. The 75% condition is met in this month 03.12.2003 5,00,000 139,00,000 85.8 Rs. 10,00,000 were to be paid by 30th 03.12.2003 5,00,000 144,00,000 88.89 Nov 2003. Later, Rs. 8,00,000 were to be 01.01.2004 4,00,000 148,00,000 91.36 paid by 31st Dec 2003. 01.01.2004 4,00,000 152,00,000 93.83 Subsequently, the remaining Rs.
10,00,000/- were to be paid by 30th Apr 2004.
From the above, it is seen that the condition of payment of 70% of the consideration by the developer was compiled during AY 2004-05 and accordingly, the assessee ceded possessory rights over the building to the developer during AY 2004-05. The assessee during the AY 2004-05 relevant to FY 2003-04 offered capital gains after indexing the cost of acquisition at Rs.84,76,234/-. The assessee adopted the cost of Page 8 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza acquisition based on fair market value as on 01-04-1981 at Rs. 77,23,766/- and applied the same to the consideration of 1.62 crore. The assessee also invested a sum of Rs. 20,00,000/- REC (Railway Electrification Corporation bonds on 09-08-2003 and made the claim in the revised statement of income before the AO during the assessment proceedings claiming deduction under section 54EC of the Act.
6. The AO during the course of assessment proceedings noticed that the assessee entered into agreement with West Coast International, the developer during FY 2001-02 relevant to AY 2002-03 and the AO assessed the capital gains at Rs. 84,76,234/- in AY 2004-05 on protective basis. The AO also reopened the assessment by issuing notice under section 148 read with section 147 of the Act for AY 2002-03 relevant to FY 2001-02 to make assessment on substantive basis. For this the AO relied on the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs CIT (2003) 260 ITR 491 (Bom). The AO relying on the decision of Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (Supra) observed that as per the payment schedule the transaction is entered into by assessee in AY 2002-03 and the relevant finding of the AO reads as under: -
"The second issue raised by the assessee is that there is a supplementary deed and as per this deed, the assessee will have right over the property only when he will pay 75% of the amount to the assessee. The supplementary deed has been prepare by the assessee on 28.10.2001, therefore, the right of the developer is started with the agreement. As per the payment schedule of the agreement deed, Rs 83 lacs has to be submitted by the assessee in the FY 2003-04 and Rs 29 lacs has to be given by the assessee in the AY 2002-03. Therefore, the transaction has been taken place Page 9 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza much earlier than in the FY 2003-04. It is also worthwhile to mention here that as per the information submitted by M/s West Coast International all the formalities for purchase of TDR has been done by him in the FY 2001-02. The assessee has tried to submit that the ratio of judgement of Chaturbhuj Kapadia is clearly distinguishable and does not apply to his case. His sincere efforts of trying to distinguish facts and findings of Chaturbhuj Kapadia from his case has been duly considered by the undersigned but it has been found that his efforts is in vain because the assessee was not able to appreciate in the right perspective the decision given by the Hon'ble Court."
7. Similarly, the AO reopened the assessment for the AY 2002-03 and same addition was repeated in AY 2002-03 what was made in AY 2004-05. Aggrieved, assessee preferred the appeal before CIT(A) who also confirmed the action of the AO by observing in Para 1.7 of his appellate order as under: -
"1.7 I have carefully gone through the assessment order, submissions made on behalf of the appellant and the facts of the case. In this case the date of agreement between the assessee and West Cost International is 28.9.2001 which falls in A.Y.2002-
03. Purchase of TDR by West Cost International from Romell Real Estate Pvt. Ltd is 8.10.2001. issue of development rights certificate is 4.6 2001, utilization from Mumbai Corporation of Greater Mumbai is 19.9.2001. Further it is also seen from the agreement that majority of the amount i.e. has been received before 31.3.2002 and only Page 10 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza Rs.44,00000/- has been received by the appellant after 31.3.2002 but before 15.11.2002. All these events clearly show that the transactions have taken place in the financial year relevant to A.Y.2002-03. The AO in his exhaustive assessment order has countered all the arguments of the appellant. I find considerable force in the arguments and conclusions of the A.O. that the long term capital gain of the appellant arising out of grant of development rights and transfer of FSI and other development potentials in property known as NEEFAM at Bandra is to be assessed in A.Y.2002- 03 and not in A.Y.2004-05. However, since the appellant has disclosed the long term capital gain in the AY 2004-05, the AO taxed the same on protective basis. This finding of the AO is accordingly upheld and the grounds of appeal are dismissed."
6. The assessee before CIT(A) also raised additional ground vide letter dated 10-05-2008 and the additional ground raised before CIT(A) reads as under: -
"The ld. JCIT erred in treating the consideration relating to permission granted for the use of TDR [Rs 1,32,00,000/-] as taxable. The JCIT ought to have appreciated that considering its nature, the same is capital receipt and does not give rise to any taxable capital gain and the same cannot be considered for taxation merely because the appellant has treated the same as taxable in the return of income.."
7. Before CIT(A), the assessee claimed that the permission granted for use of TDR / FSI and amount received on the same amounting to Rs.
Page 11 of 18ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza 1.32 crore is exempt because the same is capital receipt but does not given rise to any taxable capital gain because there is no cost to the same. The CIT(A) treated the TDR and FSI as capital asset and hold to be taxable as capital gain by observing in Para 5.6 and 5.7 as under: -
"5.6 Applying the above ratio to the facts of the TDRs, unlike self-generated goodwill, where it is not possible to determine the date of acquisition, in the case of TDRs the date of acquisition is clearly ascertainable, which is evidenced in the form of Development Right Certificate issued by the BMC. Further in B.C Snnvas Shettys case, it was held that the goodwill generated in newly commenced 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. Srinivasa Shelly is also directly not applicable to the TDRs and hence is distinguishable. Further, the A.O. has allowed cost of TDR at Rs.259000I- and therefore it correct to say that no cost is involved.
5.7 In view of the above discussion, t am of the considered view that the AO is quite justified in taxing the sale of TDR of Rs. 1,32,00,000/- as capital gain. Therefore, the action of the A.O. in this regard is accordingly confirmed. The additional ground of appeal is dismissed."
Aggrieved, now assessee is in appeal before Tribunal.
8. Before us, the learned Counsel for the assessee argued that the transfer of the right to develop utilised TDR and FSI does not given rise to capital gains as there is no cost of acquisition rights. According to him, during the year under consideration i.e. FY 2003-04 relevant to AY 2004- 05, the year under consideration the assessee transferred all its right to Page 12 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza development and utilizing TDR and FSI to West Coat International and through such transfer to developer has been allowed to carry out construction on top of the existing constructing of building by utilize of TDR which the developers purchase at own cost from other party. The assessee has received the total consideration for transfer amounting to Rs.1.32 crores
9. Whether in the given facts and circumstances of the case, such right is taxable as capital gains or not? The assessee before us brought the concept of TDR as introduced through the Development Control Regulations,1991 for the first time through Regulation 34 read with Appendix VIII therein. Regulation 34 reads as under:-
"34. Transfer of Development Rights-
In certain circumstances, the development potential of a plot of land may be separated from the land itself and may be made available to the owner of the land in the form of Transferable Development Rights (TDR). These Rights may he made available and be subject to the Regulations in Appendix VII hereto."
Clause 10 in Appendix VII to the DCR lays down the idea of decongesting the island city of Mumbai and hence states that the TDRS shall be utilized only northwards from the land on which they were generated, but not in the island city.
"10. Irrespective of the location of the land in which they originate DRCs shall not be used in the Island City. They may he used- (a) on any plot in the same ward as that in which they have originated (neither ward being in the Island city), or (b) on any plot lying to the north (wholly or partially) of the plot in which they have originated (but not in the Island city).
Page 13 of 18ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza
10. We find that this issue has been adjudicated upon by the Hon'ble Bombay High Court in the case of CIT v. Sambhaji Nagar Co-op. Hsg. Society Ltd [2015] 370 ITR 325 (Bom). It is held that the asset i.e. FSI/TDR is generated by change in the development control regulations. A specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains. The Court, referring to the decision of the Apex Court in CIT v. D. P. Sandu Bros Chembur P Ltd [2005] 273 ITR I (SC), held that all which is capable of acquisition at a cost would be included within the provisions pertaining to the head capital gains as opposed to assets in the acquisition of which no cost at all can be conceived. It has been held as under: -
"............the conclusion of the Hon'ble Supreme court is that an asset which is capable of acquisition at a cost would he included within the provisions pertaining to the head "Capital gains" as opposed to assets in the acquisition of which no cost at all can be conceived. In the present case as 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 Assessing Officer could have proceeded to levy and assess the gains derived as capital gains."
Thus, the Hon'ble Bombay High Court held that since the cost of acquisition of the rights being transferred cannot be determined, the amount is not liable to capital gains tax.
11. We also find that identical issue in the case before the ITAT Mumbai, the facts were identical to the present case. was in Jethalal D. Mehta Vs. DCIT (2005) 2 SOT 422 (Mumbai), held as under:
Page 14 of 18ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza "...the right assigned to the developer were the rights to receive and apply the transferable development rights, and those rig/its arose to the assessee by virtue of the introduction of DCR. Until the point of time those development regulations conic into existence, the assessee did not have right to receive and apply the transferable development rights. It was those rights on the assignment of which the assessee had received the impugned amount.
The person getting TDRs from the Government had to surrender the reserved plot but the person oil plot such TORs could be used, i.e., the assessee, did not do anything more than owning the 'receiving plot'.
The cost incurred by a third party for acquiring the TDR had nothing to do with the right to avail the said TDR on the assessee plot Similarly, the costs ofp1o:
and costs of construction were also not the cost of acquisition of those rights. What the assessee had transferred was not the plot or the building. but a right parting with which did not result in parting with land or building. The cost of obtaining Municipal Corporation 's approval for the building plan could also not be said to be the cost of acquisition of those rights as those rights did not arise by virtue of getting those approvals but by the virtue of a legal right independent thereof The law is trite, and there is no dispute on the said position, that when an asset has no cost of acquisition, the gains all or transfer of the same cannot he brought to tax. Thus, the receipts on sale of assignment of rights to Page 15 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza receive TDRs were not liable to tax ....'' [Emphasis supplied] And this order has been affirmed by the Hon'ble Bombay High Court in Income Tax Appeal No. 768 of 2009, dated 24.04.2015.
12. Similar view has been taken by the Mumbai Tribunal in the case of Maheshwar Prakash-2 Co-op. Hsg. Society Ltd v ITO [2009] 118 lTD 223 (Mumbai) wherein it was held as under: -
19. In the present case, she assessee society acquired the right to construct the additional floors by virtue of DCR, 1991 which could not be available to assessee oil of money. Prior to OCR, 1991, no society had any right to construct the additional floors. So it was not a tradable commodity.
Suddenly by virtue of DCR. 1991, she rig/it was conferred by the Government oil assessee. Such right exclusively belonged to the building owned by she society. It could not be transferred to any other building. Similarly, similar right belonging to other societies could not be purchased by assessee for the purpose of constructing additional floors in its own building. Therefore, such right had no inherent quality being available on expenditure of money and therefore, cost of such asset could not be envisaged. Hence, the view taken by its is fully justified by the decision of the Apex Court in the case of B.C. Shrinivasa Shetty (supra).. The decision of the Hon'ble Bombay High Court is not applicable to the facts of the present case.
20. In view of the above discussion, it is held that the right acquired by the assessee did not fall within the ambit of section 45 of the Act itself The Page 16 of 18 ITA No. 3000&3001/Mum/2011 (AY: 02-03, 04-05) Late Shri Lauriano Mendonca through Legal heir Mrs. Natalia D'souza amended provisions are also not applicable since such right is no: covered by any of the assets specified in section 55(2) (a) of the Act. Therefore, applying the decision of Apex Court in the case of B. C. Shrinivasa Shelly 'supra.) as ice/I as the decision of the co-ordinate Bench in the case of Jethalal D. Mebta (supra), the issue is decided in favour of the assessee. The order of the CIT('A) is, therefore, set aside and consequently, the Assessing Officer is directed to delete the addition of Rs. 42 lakhs from the total income."
13. In view of the above facts and circumstances and precedence cited supra, we respectfully following Hon'ble Bombay High Court in the case of Sambhaji Nagar Co-op. Hsg. Society Ltd (supra) hold that consideration received for permitting the developer to use TDR/FSI rights on the land belonging to the assessee is not taxable as capital gains. Accordingly, we allowed the issue of assessee appeals in both the years. However, in the given facts and circumstances, we are of the view that assessibility of these receipts falls in AY 2004-05 and not in AY 2002-03. Accordingly, both the appeals of the assessee are allowed.
14. In the result, the appeals of assessee are allowed.
Order pronounced in the open court on 04-08-2017.
Sd/- Sd/-
(G. MANJUNATHA) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated:04-08-2017
Sudip Sarkar /Sr.PS
Page 17 of 18
ITA No. 3000&3001/Mum/2011
(AY: 02-03, 04-05)
Late Shri Lauriano Mendonca
through Legal heir Mrs. Natalia D'souza Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Page 18 of 18