ITO Vs Kirit Raojibhai Patel (ITAT Mumbai)
Sale of transferable development rights did not attract capital gains tax since the cost of acquisition for the same did not exist.
Held: AO held that transferable development rights (TDRs) arising out of an existing land was an immovable property, the transfer of such TDRs amounted to transfer of a long term capital asset, and hence assessee was liable to be taxed for the consideration received on them under the head “Capital gains.” Assessee had challenged the additions made to his income before CIT (A). CIT (A) held that the sale of TDRs was not chargeable to capital gain tax and deleted the additions made to the income on account of the same. AO filed an appeal against the order before the ITAT and contended that a capital asset under Section 2(14) included not only physical property but also rights, title or interest attached to it and, therefore, the consideration received by assessee for transfer of TDRs gave rise to capital gains that was chargeable to tax under Section 45. It was held that in CIT versus Shambhaji Nagar Cooperative Housing Society Ltd. (2014), the sum received on transfer of TDRs which did not have any cost of acquisition could not be charged to tax under the head “Capital gains”. A capital asset that was capable of having an acquisition cost would fall within the purview of Section 45, however an asset whose acquisition cost could not be conceived could not be taxed under Section 45. Following the same, it was concluded that the receipts against the sale of TDR were not chargeable to capital gain tax, and dismissed the appeal of the AO.
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