ABDON VALLABHDARES LEGAL HEIR OF MONA CECIL VALLADARES (DECD),MUMBAI vs. ITO 19(3)(3), MUMBAI

We have heard the parties and perused the record. The assessee inherited a property consisting of land and super structure in 1963. During the year under consideration the assessee sold development right of ground floor FSI measuring 128.95 square yards in companies named M/s. Golden Nest Builders Pvt. Ltd. and Mansrovar Est.Mg.Ser.Pvt. Ltd. for consideration of ` 35 lakhs. The assessee filed return of income and computed long term capital gain on the above said sale of development rights. The Assessing Officer enhanced the amount of long term capital gains by making certain adjustments. Before the Assessing Officer the assessee agreed for recomputation of capital gain.

Before the learned CIT(A), the assessee contended that ` 35 lakhs received on sale of development rights is not taxable as the same was not acquired but self generated. The learned CIT(A), however, did agree with the said contention of the assessee since the addition was made by the Assessing Officer on agreed basis. Accordingly, the learned CIT(A) dismissed the appeal before us.

Learned counsel appearing for the assessee submitted that the assessee had acquired development rights due to provisions of Development Control Regulations, 1991. He submitted that the Coordinate Bench has held in the case of Maheshwar Prakash-2 Co-op. Hsg. Society Ltd. Vs. ITO (2008) 24 SOT 366 has held that right to construct additional floor under Development Control Regulations, 1991 was acquired by the assessee without incurring any cost and hence it could not be said that the right acquired by the assessee did not fall within the ambit of section 45. Learned AR submitted that identical view was taken by the Coordinate Bench in the case of Lotia Court Co-op. Hsg. Society Ltd. (2008) 12 DTR (Mum) 396, Raj Ratan Palace Co.op. Hsg. Society Ltd. Vs. DCIT (ITA No. 674/Mum/2004 dated 25.2.2011.

Learned AR submitted that there is no estoppel against the provisions of law and hence acceptance of the assessee for assessment of capital gain before the Assessing Officer will not bound the assessee. In this regard learned AR placed reliance on the decision rendered by Hon'ble Supreme Court in the case of V. Mr. P. Firm, Muar (1965) 56 ITR 67.

On the contrary, learned Departmental Representative placed heavy reliance on the order passed by the learned CIT(A) and further submitted that the assessee has agreed for the assessment of capital gain.

Having heard the rival contentions, we find merit in the submissions made by learned AR. It is well settled proposition of law that there is estoppel against the provisions of law and hence acceptance of the assessee before the Assessing Officer for assessing long term capital gains on the amount received by way of sale of development rights would not bound upon the assessee. In the cases relied upon by learned AR, the Coordinate Benches are held that the development rights is acquired by the assessee under the Development Control Regulations and hence sale of development rights is not exigible for capital gain computation. Consistent with the view taken by the Coordinate Benches, we hold that the consideration received by the assessee on sale of development right which was acquired under Development Control Regulations is not assessable for capital gain tax. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the capital gain assessed by him.

In the result, appeal filed by the assessee is allowed. Order has been pronounced in the Court on 26.5.2017.