Smt. Sowmya Sathyan Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT) Bangalore heard an appeal filed by Smt. Sowmya Sathyan challenging the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Mysuru, for the assessment year 2014-15. The primary dispute revolved around the tax treatment of Transferable Development Rights (TDR) acquired by the assessee. The Assessing Officer (AO) had invoked Section 56(2)(vii)(b) of the Income Tax Act, treating Rs. 4.02 crores as deemed consideration based on the stamp duty value of the TDR transaction. The CIT(A) upheld this assessment, considering TDRs as immovable property subject to tax under the said section.
The appellant contended that TDRs do not fall within the definition of “immovable property” as outlined in Section 56(2)(vii)(b), which explicitly includes only “land or building or both.” The appellant further argued that TDRs merely grant additional Floor Space Index (FSI) rights and do not constitute a tangible immovable asset. Citing various judicial precedents, including CIT vs. Thiruvengadam Investments P. Ltd. (320 ITR 343) and Atul G. Puranik vs. ITO (11 ITR (Trib.) 120), the appellant maintained that the deemed taxation provision under Section 56(2)(vii)(b) could not be applied to TDR transactions. The appellant also challenged the applicability of Section 50C, which deems the stamp duty value as the sale consideration for computing capital gains but only applies to land or buildings.
