ITO WD 21(1)(1), MUMBAI v. ANILKUMAR MALHOTRA, MUMBAI

ITA 4798/MUM/2009 | 2006-2007
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 479819914 RSA 2009
Assessee PAN AAJPM7613E
Bench Mumbai
Appeal Number ITA 4798/MUM/2009
Duration Of Justice 9 month(s) 11 day(s)
Appellant ITO WD 21(1)(1), MUMBAI
Respondent ANILKUMAR MALHOTRA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 31-05-2010
Assessment Year 2006-2007
Appeal Filed On 19-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI T.R. SOOD AM AND SHRI V.DURGA RAO JM I.T.A.NO. 4798/MUM/2009 ASSESSMENT YEAR : 2006-07 THE INCOME-TAX OFFICER WARD-21(1)(1) MUMBAI VS. SHRI ANILKUMAR MALHOTRA 39 SWARNA 11 TH ROAD VITHAL NAGAR CHS JVPD SCHEME JUHU MUMBAI 400 049 PAN: AAJPM 7613 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESURSHI DWIVEDY RESPONDENT BY : SHRI SUJEETH S. KARKAL/PARAS S. SAV LA O R D E R PER T.R. SOOD AM: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED CIT(A) ERRED IN TREATING THE GAIN ARISI NG ON TRANSFER OF FSI/TDR RIGHTS TO BE ASSESSED AS CAPITA L GAIN U/S.45 OF THE I.T.ACT 1961. II) THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAFT TH AT AS PER THE DEVELOPMENT AGREEMENT: A) THE ASSESSEE HAS RETAINED THE BASI C FSI IN THE NEWLY DEVELOPED BUILDING THUS RESULTING IN NON-EXINGUISHMENT OF ANY RIGHT TO THE TITLE OR OWNERSHIP OF LAND. B) THE BUILDER HAS USED ADDITIONAL FS I BY PURCHASING TDR FROM THE OPEN MARKET AND SOLD THE CONSTRUCTED AREA TO OU TSIDE PEOPLE. C) IN VIEW OF THAT THE DECISION OF TH E BOMBAY HIGH COURT IS NOT SQUARELY APPLICABLE TO THE FACTS OF THE CASE AND MO REOVER THE LD.CIT(A) HAS NOT ANALYSED/COMPARED THE ISSUE WITH THE FACTS OF THE CASE IN HAND. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSEE BECAME CO-OWNER OF THE PROPERTY IN 1977 AND WAS HOLDING 5 SHARES OF THE SOCIETY. THE ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. P.R. INVESTMENT FOR DEVELOPMENT OF THE SAID PROPERTY (BUNGALOW) TO CONSTRUCT SEVEN STORIES BUILDING AS PER THE APPROVED PLANS. THE ASSESSEE RETAINED PROPORTIONAT E PORTION OF FSI IN THE SAID ITA NO.6433/M/08 M/S. GIRISH A. SONI 2 PLOT FOR THEIR OWN RESIDENTIAL ACCOMMODATION TO BE CONSTRUCTED BY THE DEVELOPER FOR A CONSIDERATION OF RS. 21 00 000/-. THE BALANCE FSI WAS UTILIZED BY THE DEVELOPER FOR CONSTRUCTION OF THE BUILDING. THE DEV ELOPER WAS AUTHORIZED TO USE THE TDR AS PER THE APPLICABLE LAW. BY THIS ARRANGEM ENT THE ASSESSEE HAD GIVEN DEVELOPMENT RIGHTS TO THE DEVELOPER FOR CONSTRUCTIO N OF THE PROPERTY. CAPITAL GAINS RECEIVED ON SUCH TRANSFER OF DEVELOPMENT RIGHTS WAS CLAIMED TO BE LONG TERM CAPITAL GAINS BY THE ASSESSEE. HOWEVER THE ASSESSI NG OFFICER WAS OF THE VIEW THAT ASSESSEE HAD NOT EXTINGUISHED HIS RIGHT TITLE AND INTEREST ION THE PROPERPTY IN ANY MANNER AND CONTINUED TO HOLD THE SAME ALONG WITH S HRI RAM KUMAR MALHOTRA AND ACCORDINGLY THE CONSIDERATION RECEIVED FOR TRANSFER OF DEVELOPMENT RIGHTS WAS HELD TO BE TAXABLE AS INCOME FROM OTHER SOURCES. 3. BEFORE THE CIT(A) IT WAS CLAIMED THAT DEVELOPMEN T RIGHTS OF A PROPERTY SHOULD ALSO BE COVERED BY THE DEFINITION OF CAPITA L ASSET. REFERENCE WAS MADE TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CHHEDA HOUSING DEVELOPMENT CORPORATION VS. BIBIJAN SHAIKH FARID & OTHERS 2007 (3) MHLJ 402 (BOM) WHEREIN IT WAS HELD THAT FSI/TDR ARE BENEFIT ARISING FROM THE LAND AND CONSEQUENTLY MUST BE HELD AS IMMOVABLE PROPERTY. I T WAS ARGUED THAT IMMOVABLE PROPERTY CONSIST OF BUNDLE OF RIGHTS AND FSI/TDR RI GHTS ARE ONE OF THE RIGHTS CONSIST IN A PROPERTY. THE LEARNED CIT(A) AFTER EXA MINING THESE SUBMISSIONS RELIED ON THE DECISION OF THE BOMBAY TRIBUNAL IN THE CASE OF SHAKTI INSULATED WIRES V. JCIT (87 ITD 56) WHEREIN THE TRIBUNAL HAS HELD THA T DEVELOPMENT RIGHTS ARE CAPITAL ASSETS. ACCORDINGLY THE ASSESSING OFFICER WAS DIRECTED TO TREAT THE TRANSFER OF FSI/TDR AS CAPITAL ASSET AND ACCORDINGLY THE REC EIPTS WERE TO BE TREATED AS CAPITAL GAINS. 4. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E RELIED ON THE ORDER OF THE ASSESSING OFFICER. ITA NO.6433/M/08 M/S. GIRISH A. SONI 3 5. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE TRIBUNAL HAS ALREADY HELD IN THE CASE OF ITO V. SH RI RAM KUMAR MALHOTRA (ITA NO. 4843/M/2009 DATED 14.05.2010) THAT SUCH RIGHTS ARE TO BE TAXED UNDER THE HEAD CAPITAL GAINS IN THE CASE OF CO-OWNER SHRI RAMKUM AR R. MALHOTRA. A COPY OF THE ORDER OF THE TRIBUNAL HAS BEEN FILED ON RECORD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT THE TRIBUNAL IN THE CASE OF CO-OWNER IN THE CASE OF ITO V. RAM KUMAR MALHOTRA(ITA NO. 4843/M/2009) HAS HELD THAT TRANSFER OF SUCH FSI /TDR RIGHT WOULD CONSTITUTE TRANSFER OF A CAPITAL ASSET. THE RELEVANT PORTION O F PARA 12 READS AS UNDER: SIMILAR VIEW HAS BEEN TAKEN BY THE CASE OF ITO VS. LOTIA COURT CO-OP. HSG. SOC. LTD. (2008) 112 DTR 396 JETHALAL D. MEHT A VS. DY.CIT 2 SOT 422 (MUM) AND MAHESHWAR PRAKASH 2 C.H.S. V. ITO 20 DTR 269 (MUM). THEREFORE FOLLOWING THE AFORESAID DECISIONS WE ARE OF THE OPINION THAT THE LD.CIT(A) WAS RIGHT IN ASSESSING T HE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. THEREFORE FOLLOWING THE ABOVE DECISION WE HOLD THAT THE LEARNED CIT(A) HAS CORRECTLY HELD THAT TRANSFER OF FSI/TDR RIGHT IS ASSESSABLE UNDER THE HEAD CAPITAL GAINS AND ACCORDINGLY WE CONFIRM HIS ORD ER. 8. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON 31 ST MAY 2010. SD. SD. (V. DURGA RAO) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 31 ST MAY 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT MUMBAI CITY -21 MUMBAI 4. THE CIT(A)-XXI MUMBAI 5. THE DR G BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI ITA NO.6433/M/08 M/S. GIRISH A. SONI 4 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 28.05.2010 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28.05.2010 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER