No Tax On Redevelopment Gains For Society and Members – ITAT Mumbai

The issue is whether the amount received by the society and its member on account of transferable development rights is taxable under capital gains. The issue in dispute is covered by the decision of the ITAT in the case of Jethalal v DCIT wherein it was held that transferable development rights granted by the Development Control Regulations for Greater Mumbai, 1991, qualifying for equivalent floor space index having no cost of acquisition, sale thereof does not give rise to taxable capital gains. Since the facts of the case under consideration is identical to that of the decision of the ITAT in the said case, the CIT(A) was justified in directing the AO not to charge capital gains tax on the compensation received by the assessee even on a protective basis. Amount received by the society and its member on account of transferable development rights is not taxable under capital gains.

ITA No. 2508/Mum/2010
Assessment Year: 1997- 98

ORDER

PER V. DURGA RAO, J.M.:

This appeal filed by the Revenue is directed against the order of CIT(A)- 35, Mumbai, passed on 08/01/2010 for the assessment year 1997-98 wherein the assessee has raised the following grounds of appeal:-

“1. The order of the CIT(A) is opposed to law and facts of the case.

2. The Ld. CIT(A) has erred in holding that the assessee was not holding any capital asset, ignoring the fact that the share of the assessee in the total FSI available to the CHS is the capital asset held by the assessee.

3. The ld. CIT(A) erred in holding that the capital asset has not been sold exchanged or relinquished, ignoring the fact the assessee’s share in the total FSI available to the CHS has been sold to the developer i.e. New India Construction Co. and the consideration of Rs. 5,87,565/- is towards the sale of this capital asset.