We have heard both sides at great length and with their assistance, we have perused the order passed by the Tribunal and that of the Commissioner and the Assessing Officer. The Assessing Officer has noted the basic facts and about which there is no dispute. What has been argued before the Assessing Officer is that with the promulgation of the Development Control Rules, 1991 (DCR), the Assessee Society acquired right of putting up additional construction through TDR. Instead of utilising this right itself, the Society decided to transfer the same to a Developer for a consideration. The Society transferred a valuable right, which is capital asset under section 2(14) of the Income Tax Act. The right created by the DCR attaches to the land owned by the Society which was acquired for a value. Its title or ownership of the plot enables the Society to consume this FSI/TDR. In such circumstances, this is a transfer of capital asset held by the Society, which is chargeable to tax.
Legislature contemplates that income chargeable under head “capital gains” has to be computed. The mode of computation is laid down by section 48,whereas by section 49, the cost with reference to certain modes of acquisition has been set out. For the purposes of both sections, the legislature has devised the scheme in section 55 and subsection (2) thereof clarifies that for the purposes of sections 48 and 49, “cost of acquisition” in relation to a capital asset, being goodwill of a business or a trade mark or brand name associated with a business or a right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carriage permits or loom hours has to be computed. In this case, the Assessee stated that nothing of these things would cover the sale of TDR and in the absence of a specific provision, the income shall be taken to be Nil.
Hon’ble Supreme Court in the case of Commissioner of Income Tax, Bangalore vs. B. C. Srinivasa Shetty (1981) 128 ITR 294 and the amendment to section 55(2) of the Income Tax Act and held that the Assessee did not incur any cost to acquire the leasehold rights and that if at all any cost had been incurred it was incapable of being ascertained. It was therefore held that since the capital gains could not be computed as envisaged in section 48 of the Income Tax Act, therefore, capital gains earned by the assessee, if any, was not exigible to tax.
Thus, the conclusion of the Hon’ble Supreme Court is that an asset 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. 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. It may be that subsection (2) of section 55 clause (a) having been amended, there is a stipulation with regard to the tenancy rights. However, even in the case of tenancy right, the view taken by the Hon’ble Supreme Court, after the provision was substituted w.e.f. 1st April, 1995, is as above. The further argument is that the tenancy rights now can be brought within the tax net and in the present case the asset or the benefit is attached to the property. It is capable of being transferred. All this may be true but as the Hon’ble Supreme Court holds it must be capable of being acquired at a cost or that has to be ascertainable. In the present case, additional FSI/TDR is generated by change in the D. C. Rules. A specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains. Therefore, the Tribunal was in no error in concluding that the TDR which was generated by the plot/property/land and came to be transferred under a document in favour of the purchaser would not result in the gains being assessed to capital gains. The factual backdrop is noted by the Tribunal in para 3 and thereafter the rival contentions. The Tribunal concluded and relying upon its order passed in two other cases that what the Assessee sold was TDR received as additional FSI as per the D. C. Regulations. It was not a case of sale of development rights already embedded in the land acquired and owned by the Assessee. The Tribunal’s conclusion and further to be found in para 11 is based on its view taken in the case of New Shailaja Cooperative Housing Society Ltd. The Tribunal has reproduced that conclusion. The Tribunal’s conclusion arrived at in the case of New Shailaja Cooperative Housing Society Ltd., is based on the Hon’ble Supreme Court’s decision in the case of B. C. Srinivasa Shetty (supra). The Tribunal concluded that the Assessee had not incurred any cost of acquisition in respect of the right which emanated from 1991 Rules, making the Assessee eligible to additional FSI. The land and building earlier in the possession of the Assessee continued to remain with it. Even after the ransfer of the right or the additional FSI, the position did not undergo any change. The Revenue could not point out any particular asset as specified in subsection (2) of section 55. The conclusion of the Tribunal is imminently possible and in the given facts. That is also possible in the light of the legal position as noted by language of section 55(2) and the Judgment of the Hon’ble Supreme Court, which is in the field.
We have made a reference to all these materials only because Mr. Malhotra tried to persuade us to conclude that this aspect is also specified in subsection (2) of section 55 and that is how the Tribunal’s view is vitiated by error of law apparent on the face of the record. We are not persuaded to hold so in the light of the above discussion. In such circumstances, the Tribunal’s order cannot be termed as perverse either. The Appeal does not raise any substantial question of law. It is dismissed, but without any order as to costs.
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